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TMI Blog2016 (4) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case to understand that the said amount could never constitute rent. To put it differently, a premium or rent irrespective of how they are treated, could be decided only after an agreement for lease is finalised. If an amount has to be determined even before an agreement for lease is finalised, the same would never form part of the rental income. It is this distinction that has been lost sight of by all the authorities. Therefore, question of law has to be answered in favour of the assessee. Whether the payment, which has eventually gone to the coffers of the Government, could be taken to be a payment made to somebody else, for the purpose of attracting the provisions of Section 194-I or not? - Held that:- On facts, there is no dispute that even at the time when the alienation was made by the Government, the amount determined by the parties was agreed to paid to the Government. We have extracted paragraph 5 of G.O.Ms.No.103 earlier. The method of determination of the amount and the method of choosing the lessee alone were left to TIDCO. But, TIDCO was obliged to retain only a sum of ₹ 50/- per sq.ft. and pass on the balance amount to the Government. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant/assessee and Mr.J.Narayanaswamy, learned Standing Counsel appearing for the respondent/revenue. 3. Since the facts out of which the above appeal arises are little peculiar, it is necessary for us to bring on record those facts for a complete understanding of the issues of law raised for our consideration. (a) Way back in the year 2001, the Government of Tamil Nadu identified a vast extent of land measuring about 40.19 acres, lying in Thiruvanmiyur as well as Kanagam villages of Mylapore-Triplicane and Mambalam-Guindy Taluks of the District of Chennai, for the development of Second Information Technology Park at Taramani, Chennai. This was done by a Government Order in G.O.Ms.No.455, Revenue dated 02.11.2001. (b) By another Government Order passed in G.O.Ms.No.165, Revenue dated 11.4.2003, the Government designated the Tamil Nadu Industrial Development Corporation as the custodian of the said land for the development of the Second IT Park in joint venture. Originally it was conceived that a part of the land would be allotted to a joint venture company and the remaining would be utilised by TIDCO by other joint venture projects. (c) Subsequently, a propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s proposal to implement the IT Parks (IT/ITES-SEZ in an area of 25.19 acres at Taramani behind TICEL Bio Park and IT/ITES-SEZ comprising IT Park and an International Convention Centre cum Hotel in an area of 25 acres at Taramani in front of TIDEL Park) through joint venture companies by selecting the joint venture through open competitive bidding process (Two part bid). The successive bidder who quotes the highest rate (H1) (above or equivalent to the upset price) will have to arrange for payment of bid amount for the entire land through JVC to TIDCO within a period of three months from the date of letter of award and amounts paid by the JVC is non refundable. The successful bidder shall also arrange for payment of an amount escalated at the rate of 12% (P.A or in proportion to the actual period) of the total bid amount through the JVC to TIDCO for the period from date of bid inviting expression or interest to date of payment of bid amount for the entire land. This amount is payable along with the bid amount. The lease deed in favour of the JVC will be executed only after full financial closure of within 60 days of payment of lease rent, whichever is later. In addition to the upfr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that by G.O.Ms.No.479, Revenue dated 24.8.2007, the Government of Tamil Nadu claimed to have alienated the entire extent of land, namely 25.27 acres in favour of TIDCO, the highest commercial offer made by Tata Realty Infrastructure Limited had to be in fact accepted only by the Government and not by TIDCO as seen from letter Ms.No.25, Industries dated 27.02.2008. By this letter dated 27.02.2008, the approval of the Government was conveyed to TIDCO to accept the highest commercial offer of what was indicated as Upfront land lease rent of ₹ 12,050/- . However, it was also indicated in the said letter that TIDCO was entitled to retain ₹ 50/- per sq.ft., but pay to the Government the rest of the amount working out to ₹ 1326.42 Crores collected from the consortium. (j) After receipt of the decision of the Government directing TIDCO to accept the offer made by the consortium, TIDCO issued the Letter Of Award dated 29.02.2008, in favour of Tata Realty and Infrastructure Limited, directing them to enter into a Joint Venture Agreement with TIDCO. It was indicated in the said letter also that the Upfront Land Lease Rent shall be non-refundable. (k) Pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r needed to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I. Aggrieved by the said order of remand passed by the Tribunal and contending that the lease deed always formed part of the records of the Assessing Officer as well as Commissioner of Income Tax (Appeals), the assessee has come up with the above appeals. 4. Before proceeding further, we must bring on record one important fact. If factually what the Tribunal stated in paragraph 12 of its order was correct, in the sense that the copy of the lease deed was not available before the Tribunal, the substantial questions of law raised before us may not arise for consideration. But, as seen from the order of the Assessing Officer as well as the order of the Commissioner of Income Tax (Appeals), the lease deed was very much available. Even the learned Standing Counsel for the Department is unable to deny this fact. The lease deed formed part of the Annexure to the order of assessment. Therefore, the Tribunal was in error in thinking that the lease deed was not available at all. 5. Once we find that the Tribunal did not address itself to the issue raised before them, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided, as seen from G.O.Ms.No.103 dated 24.4.2007, the operative portion of which we have already extracted earlier,is to permit TIDCO to implement the project through Joint Venture Companies by selecting the Joint Venture Partner through open competitive bidding process. In other words, the sequence of events that have taken place from G.O.Ms.No.455, Revenue dated 02.11.2001 up to G.O.Ms.No.479, Revenue, dated 24.8.2007 shows that the whole process comprised of two distinct steps. The first step was the identification of Joint Venture Partner and the birth of the Joint Venture Company. The second is the execution of the lease deed in favour of the Joint Venture Company. 11. Once the exercise undertaken by the Government and TIDCO is understood to have comprised of these two distinct and separate steps, the question that arises for consideration, can easily be answered. What happened in the open competitive bidding process that took place in November 2007 was the identification of a Joint Venture Partner. The selection of the Joint Venture Partner depended upon the quote that he was able to make. The amount of more than ₹ 1400 Crores, which was actually quoted in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the payment is understood in this clearcut fashion, then no doubt may be cast upon the nature of the payment. 16. Arguments were advanced across the Bar as to how one should distinguish a rent from a premium. Relying upon the definition of the expression premium contained in Halsbury's Laws of England, Mr.J.Narayanasamy, learned Standing Counsel for the Department submitted that premium represents a capitalised rent and hence, it may be different from the actual rent, but would nevertheless continue to be rent. 17. As we have pointed out earlier, it is not even necessary for us to get into a question whether what was paid was premium or rent. In a case where two existing entities enter into an agreement for the lease of a property, the question as to what was paid as premium and what was agreed to be paid as rent would arise. In this case, the original agreement was actually between the lessee and a company which agreed to have a joint venture with the lessor. It is only out of the said agreement that the lessor was born. The amount fixed, namely more than ₹ 1400 Crores, was to confer the benefit of entering into a joint venture with the lessor. Therefore, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(1)(a) of the Assam Agricultural Income Tax Act, 1939. 23. In Commissioner of Income Tax v. Panbari Tea Co. Ltd. [57 ITR 422 (SC)], the Supreme Court was concerned with the question as to whether the payment of premium fixed under a deed of lease, in instalments, would make it different from a revenue receipt instead of capital receipt at the hands of the recipient. Irrespective of the fact whether the premium fixed under the lease deed is paid in lumpsum or in instalments, the Supreme Court held that the distinction between rent and premium will not vanish. 24. In the Chief Controlling Revenue Authority v. S.M.Abdul Jammal [AIR 1970 Madras 288], a Full Bench of this Court was concerned with the question as to whether the cost of repairs, additions and improvement to be effected on the premises by the lessees would fall within premium or for money advanced in addition to rent received. The Full Bench took the view that the distinction between a premium and rent lies in the fact that premium is one paid in consideration of the conveyance implied in the lease and is quantified in lump. 25. In V.Srinivasan v. Sub Registrar [AIR 1985 Kar. 56], a Full Bench of the Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TIDCO, the benefit of which will spill over to joint venture company in the form of a 99 years lease. Therefore, the mistake of the Department lies in treating the transaction as having commenced from the date of the lease, namely 13.8.2008. The date on which the amount was quantified, the manner in which the amount was quantified and the method of selection of the Joint Venture Partner are the crucial determining factors in this case to understand that the said amount could never constitute rent. 32. To put it differently, a premium or rent irrespective of how they are treated, could be decided only after an agreement for lease is finalised. If an amount has to be determined even before an agreement for lease is finalised, the same would never form part of the rental income. It is this distinction that has been lost sight of by all the authori ties. Therefore, the second question of law has to be answered in favour of the assessee. 33. The third question of law is as to whether the payment, which has eventually gone to the coffers of the Government, could be taken to be a payment made to somebody else, for the purpose of attracting the provisions of Section 194-I or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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