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TMI Blog2013 (9) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... MMRDA in four installments - it is a lease premium for acquiring land with right to construct a commercial building although with certain restrictions, but it is a capital expenditure not falling within the ambit of section 194-I of the Act - Decided against Revenue. Payment made to MMRDA - Held that:- When the payment made to MMDC is capital in nature then there is no question of applying S.194(1) to it. Hence assessee is not liable to deduct TDS - Decided against Revenue. - ITA No. 5207/Del/2012, ITA No. 5208/Del/2012 - - - Dated:- 20-6-2013 - Shri J. S. Reddy And Shri Chandra Mohan Garg,JJ. For the Appellant : Shri Sanjeev M. Shah Ramesh Vora For the Respondent : Shri A. K. Mishra, C.I.T. DR ORDER Per Chandra Mohan Garg, Judicial Member These appeals have been filed against the order of Commissioner of Income Tax(A)-XXX, New Delhi dated 27.7.2012 in Appeal No.312/2012- 13 for AY 2008-09 and Appeal No. 311/12-13 for AY 2010-11, both dated 27.07.2012. It is pertinent to mention that the impugned orders have been passed deciding the appeals of the assessee which were filed against the order of the Assessing Officer u/s 201(1)/201(1A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 which was paid on 27.12.2005 and 18.02.2008. The assessee entered into a development agreement dated 14.02.2008 with Orbit Enterprises to develop this land on the terms and conditions agreed upon in the agreement. Subsequently, the assessee executed a lease deed dated 09.04.2008 with MMRDA commencing from 01.04.2008 postulating payment of annual rent of ₹ 1 per sq. meter per annum which was calculated at ₹ 10,415 per year. The MMRDA subsequently granted Floor Space Index (FSI) to the assessee by virtue of which the assessee enabled to build additional built up area of 20,830 sq mtr on the commercial building already sanctioned for the assessee. The revenue carried out a survey u/s 133A of the Act on the premises of MMRDA to verify tax deduction at source compliance. 5. Subsequently, the ITO (TDS)-3(4), Mumbai wrote a letter dated 16.03.2011 to the assessee addressed to the Mumbai address as to why TDS has not been deducted on the lease premium payments to MMRDA. In response, the assessee vide its letter dated 29.03.2011 challenged the jurisdiction of Mumbai TDS Officer and explained that the lease premium cannot be subjected to tax deduction at source u/s 194-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced his reliance on the judgment in the case of Hope Textiles vs UOI 205 ITR 508(SC). 8. From the impugned order we observe that the Commissioner of Income Tax(A) has decided the issue in favour of the assessee which reads as under:- I have considered the AO's impugned order, arguments of the Appellant and the1 provisions of Section 201. It is undisputed that the statement envisaged in Section 200 for the last quarter of the financial year 2007- 08 i.e. 31.03.2008 was lodged on 13.06.2008 implying the financial year 2008-09 and thus there can be no doubt that clause (i) of Section 201 (3) would apply to the facts and circumstances of the Appellant. In the premises, the period of limitation of two years shall run from 01.04.2009 and end on 31.03.2011, whereas the impugned order has been passed on 29.03.2012 well beyond the cut off date. Therefore, I have no hesitation in holding that the impugned order is barred by the period of limitation as per in Section 201(3)(i). I concur with the submission of the Appellant that Bombay High Court 's order dated 09.11.2011 cannot be construed as extending the period of limitation inasmuch as the Apex Court in the pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement entered into between MMRDA and the assessee company was bearing some restrictive clauses which show that the MMRDA did not transfer all perpetual rights to the assessee in the land. The DR finally contended that in the case of Commissioner of Income Tax vs Reebok Company 163 Taxman 61 (Del) it was held that as per the facts and circumstances of the case, even a security deposit under lease agreement can be tantamount to advance rent, hence TDS deduction is required to be made. 11. After careful consideration of the above submissions, contentions and legal propositions of both the parties in the light of factual matrix of present case, we observe that it is argued on behalf of the assessee that the MMRDA in its computation of income has not included the lease premium received in computing the total income because it was further payable to the Government of Maharashtra. From the impugned order, we observe that the issue involved in this ground has been decided in favour of the assessee with following observations and findings:- I have considered the written submission of AR s and gone through various arguments canvassed by the learned counsel of the appellant as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle enjoyed by the Appellant in the Bandra land in consideration ofRs.88,52,75,000/- disbursed to MMRDA. vi) In addition, clause 1 of the operative portion of the lease agreement dated 09.04.2008 read with the recitals thereof unequivocally covenants that in consideration of the payment of ₹ 88,52,75,000/- by the Appellant, MMRDA, the lessor, demises the Bandra plot to the Appellant together with all the rights, easements and appurtenances and the like for 80 years commencing from 09.04.2008. In light of the above discussion read with the lease agreement dated 09.04.2008, the conclusion is irresistible that Appellant by tendering the amount ₹ 88,52,75,0001- acquired the right, title and interest in the Bandra land demised by MMRDA, the lessor. In the result, I hold that all the yardsticks as judicially held in the foregoing rulings relied upon by the learned counsel for terming the sum of ₹ 88,52,75,000/- as lease premium are fulfilled in the Appellant's case. Moreover, in A. R. KRISHANAMURTHY v. CIT 176 ITR 417 (SC), the transfer of leasehold rights even for temporary period of 10 years has been held to give rise to chargeable capital gains where the Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the Assessee in the cases listed on page no.9 above, copies of which are placed on record by the Appellant wherein facts are identical and all the seven cases pertain to the land leased by MMRDA in the same or adjoining area which is fortified by the plan appearing at page no.- 44 and 59 of the lease deed dated 09.04.2008 [G block-page 43 of the factual paper book.] 12. In view of above observations, we clearly observe that the Commissioner of Income Tax(A) has also dealt with other cases pertaining to the land leased by MMRDA in the same or adjoining area and has held that the impugned deposit of lease premium does not constitute advance rent but it is a lease premium for acquiring land with right to construct a commercial building although with certain restrictions, but it is a capital expenditure not falling within the ambit of section 194-I of the Act. We also observe that the payment of lease premium was not to be made on periodical basis but it was one time payment to acquire the land with right to construct a commercial complex thereon and the lease premium was paid to MMRDA in four installments, therefore, we are unable to see any perversity, infirmity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of TDS Officer/Assessing Officer that the assessee was liable to deduct TDS on payment of lease premium to MMRDA. At this point, we place reliance on the judgment of Hon ble jurisdictional High Court of Delhi in the case of Krishak Bharati Cooperative Ltd. vs DCIT (2013) 350 ITR 24 (Del) wherein their lordships held that for premium on acquisition of lease hold rights in the land, lease for 90 years with substantial interest in the land, then lease premium constituted capital expenditure. 16. In view of discussions made hereinabove, we are not in agreement with the findings of the Assessing Officer and we decline to hold that the Commissioner of Income Tax(A) has erred in not treating the assessee as assessee in default within the meaning of section 201(1) of the Income Tax Act for non-deduction of TDS on payment of lease premium to MMRDA. At the cost of repetition, it is worthwhile to mention that for invoking the provisions of section 201(1) of the Act, this is a pre-condition that the person should be required to deduct any sum in accordance with the provisions of this Act and he does not deduct, or does not pay or after deduction fails to pay the whole or in part of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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