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TMI Blog2013 (9) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area - Following decision of The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. [2013 (9) TMI 261 - ITAT MUMBAI] - payment for acquiring leasehold land is a capital expenditure - not liable for TDS u/s 194I - Decided against Revenue. - I.T.A. No. 686 , 687,688 to 691 /Mum/2012 - - - Dated:- 14-8-2013 - P. M. Jagtap and Sanjay Garg, JJ. For the Appellants : Shri J D Mistry, Shri A T Jain Shri Mahesh O Rajora For the Respondent : Shri Javed Akhtar ORDER:- PER : Bench These six appeals preferred by the Revenue against two separate orders passed by the ld. CIT(A)-14, Mumbai dated 21-11-2011 in the case of two assessees involve a common issue and the same therefore have been heard together and are being disposed of along with the cross objections filed by the assessees by this single consolidated order for the sake of convenience. 2. Although the Revenue has raised as many as 12 identical grounds in all the six appeals, the solitary issue ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s. Naman Developers Ltd. The assessee is required to make a payment due to the fact that he being provided additional usage and amenity by the MMRDA in addition to what specified in the Original Lease Agreement. This being the extension of the original agreement the payment being made for granting of additional facilities such payment bears the very character which was owned by the original character i.e. Rent. Further, assessee s pleas that the payment of premium is not for use of any land does not hold any water from the very fact that the area used for stair-case, lifts, and lobbies should be allowed free of FSI whereby the assessee has became entitled for usage of such FSI for his fruitful purpose in as much as on such additional FSI enabled assessee to construct additional structure. Thus in lieu of such additional entitlement the assessee was required to make additional payment to the MMRDA than fixed by the original Lease Deed. Such payment being additional payment than what was fixed by the MMRDA is a lease payment and therefore the assessee was required to adhered to the provisions of Sect. 194 I. The land under question in respect of which now the assessee has got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight is Rent and Rent only and nothing else. By calling it by some other name and nomenclature does not change its real character i.e. Rent. Therefore the sum so paid by the assessee is Rent and therefore squarely requires application of Sect. 194 I. At this juncture it is necessary to go through the explanation (i) to Sect. 194 I which provides defincation of word rent for the purpose of sect. 194-I. For sake of convenience and proper understanding the relevant part of explanation (i) to Sect. 194-I is reproduced hereinunder: (i) rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement 91 the use of (either separately or togener) any - (a) land; or (b) to (h) whether or not any or all of the above are owned by the payee The Assessee conveniently ignored to read the crux of the definition of rent provided in explanation (i) to section 194-I of the Income Tax Act, 1961. The definition has clearly mentioned that the payment made by whatever name called and for the use of gets covered by the provisions of Section 194-I of the Income Tax Act, 1961. As a result, by calling lease rent as lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1941 @ 22.66% Delay in payment in months Interest u/s 201(1A) @ 1% p.m. 13-06-2007 72,31,80,150 16,38,72,621 45 7,37,42,679 31-12-2008 4,00,00,000 90,64,000 27 24,47,280 TOTAL 76,31,80,150 17,29,36,621 7,61,89,959 4. Against the orders passed by the A.O. u/s 201(1)/201(1A) of the Act, both the assessees filed their appeals before the ld. CIT(A) and elaborate submissions were made on their behalf before the ld. CIT(A) in support of the stand that the lease premium paid to MMRDA not being in the nature of advance rent within the meaning of section 194-1 of the Act, these assessees were not liable to deduct tax at source and therefore they could not be treated as assessees in default u/s 201(1) 201(1A) of the Act. The said submissions made on behalf of the assessee before the ld. CIT(A), as summarized by him in his impugned orders were as under:- The payment made by the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that premium paid for acquiring the lease hold right constitutes a capital expenditure and not an advance payment of rent for the lease period. ix) Section 194-1 of the I.T. Act clearly provides that payment made by a person should be in the nature of an income by way of rent . This expression expressly requires that the receipt in the hands of the Lesser/owner must constitute the income by way of rent in the hands of the recipient. x) The definition of rent contained in explanation to section 194-I also clearly provides that the payment made must be for the use of land no where the definition of rent ropes in the consideration paid for acquiring leasehold right. The Appellant(lessee) reiterates its contention that the premium paid for acquiring leasehold right is not an income by way of rent of the recipient for use of land. xi) The various judgments relied upon by the Appellant (Lessee) in support of its contention clearly confirms the view that the premium paid for acquiring leasehold rights in land constitutes a consideration of capital nature and not an advance rent for use of the land over the lease period. On the plain reading of the lease a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefits granted to them under the lease. He also relied on the decision of Hon ble Supreme Court in the case of Member for the Board of Agricultural Income tax vs. Sindhurani Chaudhrani Ors, 32 ITR 169 (SC) wherein it was held that salami as a lumpsum non-recurring payment made by a prospective tenant to the landlord which is not in the nature of rent within the definition of agricultural income given in the Income Tax Act. It was held that such payment has all the characteristics of a capital payment and it is not revenue in nature. The ld. CIT(A) further relied on the decision of Hon ble Bombay High Court in the case of Commissioner of Income-tax v. Khimline Pumps Ltd. (2002) 258 ITR 459 wherein it was held that amount of ₹ 45 lacs paid by the assessee to M/s APVE Ltd. for acquisition of leasehold land was a capital expenditure. The ld. CIT(A) also referred to the decision of Special Bench of ITAT in the case of Mukund Ltd., 106 ITR 231 wherein it was held that the premium paid for acquiring leasehold right in land was a capital expenditure. The ld. CIT(A) then discussed the case laws relied upon by the A.O. in his orders and recorded a finding after such discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failing which the assessee is to be treated as assessee in default. It is the say of the assessee that such lease premium is in the nature of capital expenditure and therefore there is no question of deduction of tax at source. Further, the said lease premium does not come within the purview of the definition of rent as provided u/s. 194-1 of the Act. 10. We have carefully perused the lease deed as exhibited from page- 1 to 42 of the Paper Book. A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire G Block of BKC. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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