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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 ..... hat the assessees were allotted certain plots of land in the Bandra Kurla Complex on lease subject to payment of lease premium to MMRDA. In addition to such lease premium, the assessee made further payment of premium to MMRDA towards additional basement area and areas towards lifts, staircase & lift lobbies etc. during the years under consideration. According to the A.O., the assessees were required to deduct tax at source from the payment of lease premium made to MMRDA as per the provisions of section 194-1 of the Act and since no such tax was deducted by the assessees from the said payments, he issued notices to the assessees requiring them to show cause as to why they should not be treated as the assessees in default for their failure to deduct the tax at source from the payments of lease premium made to MMRDA The assessees filed their reply to show cause notices issued by the A.O. explaining their stand on the issue and after considering and discussing the same in detail, the A.O. held that the assessees were liable to deduct tax at source from the payment made to MMRDA on account of lease premium and treated them as the assessees in default for failure to do so for the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um was charged. This lump-sum payment made at the time of original allotment of Plot on Lease by the Leasee has been made to avoid recurring payment by installments to the Lessor. The payment so made is a Rent for enjoyment and occupancy of the impugned land. The one time payment does not change the character of this payment and therefore it squarely falls within the parameter of section 1941. However the TDS was not deductible on the impugned premium paid at the time of allotment of Plot of Land in respect of which now additional FSI is allotted was because the MMRDA was possessing Certificate u/s. 197 authorizing the payer (leasee) to make payment of lease premium without deduction of tax. However, this is not the situation now. The MMRDA is not having any such exemption certificate in possession hence the premium paid now for additional FST i.e. approval of permit areas counted towards stair-case, lift, lift lobbies, etc. claimed free of FSI for additional usage and amenity deserves deduction of tax u/s. 1941 of the I.T. Act. This inference also gathers support from the judicial pronouncements of Hon'ble Karnataka High Court in the case of CIT v/s HMT Limited - 203 ITR 820 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rent in the section itself" In the light of the facts of the case, statutory provisions of Sect. 194 I especially definition of Rent provided in explanation thereto and the case laws cited above the undersigned has no slightest hesitation in arriving at the conclusion that assessee was required to deduct tax u/s. 194 I and pay it to the Govt. Treasury within the stipulated time as required by provisions of chapter XVII B of the Income Tax Act. Admittedly assessee has not complied with the provisions of section 194 I and thereby chapter XVII B of the Income Tax Act by deducting the "TDS from the Lease Rent paid to the MMRDA and not paid it to the Government Treasury. As a result it has committed default within the meaning of section 201 (1) and thereby it is an assessee in default. Accordingly, assessee is treated as assessee in default and directed to make payment of interest u/s. 201 (1 A) along-with the TDS as worked out herein-under: In the case of Shree Naman Hotels Pvt. Ltd. Date of payment lease premium Amount of lease premium Rate of TDS u/s 1941 @ 22.66% Delay in payment in months Interest u/s 201(1A) @ 1% p.m. 23-10-2007 1,99,56,035 45,22,037 41 18,54,035 13- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The various clauses of the lease agreement which are referred by the AO in its submission before your Honour as restrictive clauses, are in fact regulatory clauses incorporated in the lease agreement for desired development of the leased area in a particular manner and a particular purpose as regulatory authority (MMRDA) provide complete infrastructure and give effect to the intention of the government to develop the area. viii) Karnataka High Court Judgement in the case of HMT Ltd. has been decided by the Hon'ble court on a finding of fact by the ITAT that the payment made by the Lessee constitutes an advance rent and hence the same shall be allowed as deduction u/s 3 7(1) of the I. T. Act. Moreover the various decisions of the Bombay High Court and the ITAT have clearly distinguished the HMT's case and its applicability to the premium paid for acquiring lease hold right. The Hon'ble ITAT Mumbai Special Bench, in the case of Mukund Ltd. has discussed in detail the judgement of HMT Ltd. and held that premium paid for acquiring the leasehold right does not constitute an advance rent. Hon'ble ITAT Mumbai, Speical Bench has followed the jurisdictional High Court's view in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees. In this regard, he noted that the lease premium charged by the MMRDA to the assessees was equal to the prevailing market rate for acquisition of commercial premises as per the valuation made for stamp duty purpose. He also noted that the rates so prescribed by the stamp duty authorities were for the acquisition of property and not for the use of let out property by the tenant. He further noted that even the additional premium was charged by the MMRDA to the assessee for the additional FSI as per the ready reckoner rate prescribed by the stamp duty authorities. The ld. CIT(A) held that the whole transaction involving grant of leasehold rights by the MMRDA to the assessees thus was nothing but the transaction of transfer of property and the lease premium agreed to be paid was the consideration for the acquisition of such leasehold rights in the property. In this regard, a reference was made by the ld. CIT(A) to the decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, (1943) 11 ITR 513 (PC) wherein it was held that the payment of salami under the lease agreement was a capital receipt being a single payment made for the acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01(1) & 201(1A) was cancelled by the ld. CIT(A). Aggrieved by the orders of the ld. CIT(A), the Revenue has preferred these appeals before the Tribunal. 6. We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. representatives of both the sides have agreed that the common issue involved in these six appeals of the Revenue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in the case of M/s Wadhwa & Associates Realtors Pvt. Ltd. vide order dated 3-7-2013 passed in ITA No. 695/Mum/2012 wherein a similar issue has been decided by the Tribunal in favour of the assessee for the following reasons given in para 9 & 10 of its order:- "9. We have considered the rival submissions, perused the order of the lower authorities and the material evidence brought on record in the form of paper Book and the judicial decisions relied upon by the rival parties. The entire grievance revolves around the premium paid by the assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the assessee through the lease deed dt. 22nd November, 2004. It is the say of the Revenue that this lease premium was lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as all the material facts relevant thereto are similar to the case of Wadhwa & Associates Realtors Pvt. Ltd. (supra) decided by the Tribunal, we respectfully follow the said decision of the co-ordinate Bench of this Tribunal and uphold the impugned orders of the ld. CIT(A) holding that the lease premium paid by the assessees to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, they were not liable to deduct tax at source from the said payment and hence could not be treated as the assessees in default u/s 201(1) & 201(1A) of the Act. The appeals filed by the Revenue are accordingly dismissed. 8. In their Cross objections, the assessees have raised a solitary identical ground which reads as under:- "The Commissioner of Income Tax (Appeals)-14, Mumbai [hereinafter referred to as CIT(A)] erred in not appreciating the fact that State Government and local authority have an overriding title on payment made to MMRDA and hence same does not require deduction of tax at source. The Appellant submits that on the facts and circumstances of the case of the Appellant no TDS is required to be deducted on premium paid to MMRDA". 9. As a result of our deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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