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TMI Blog2016 (5) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per Kul Bharat, JM This appeal of the assessee is directed against the order of the ld. ld. CIT(A)-III, Jaipur dated 24-10-2014 pertaining to assessment year 2012-13 wherein the grounds raised by the assessee are as under:- 1. That on facts and circumstances of the case, the ld. CIT(A) grossly erred in holding that the assessee is liable to deduct at source (TDS) on payment of development charges, lease charges and other charges paid to RIICO. The payments are in nature of capital expenditure. The payments are made against purchase of land, as such the provisions of Section 194I are not applicable to assessee. Hence, the entire demand of ₹ 26,54,315/-desrves to be quashed. 2. That on facts and circumstances of the case the ld. CIT(A) erred in confirming the order of Addl. CIT in imposing tax liability8 of ₹ 20,91,094/- u/s 201(1) and interest of ₹ 5,63,221/- u/s 201(1A) of the I.T. Act, 1961. As such total tax and interest of ₹ 26,54,315/- has been imposed wrong, illegal and against the facts on record. 3. That during the year assessee has made total payment of ₹ 1,99,10,940/- to RIICO while ld. ACIT has grossly tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -One Lacs Seventy-three Thousand Six Hundred Only) paid by the lessee to the lessor as a premium and of the covenants and agreements on the part of the Lessee hereinafter contained, the Lessor doth hereby demise unto the Lessee all that piece of land together with all Rights easements and appurtenances thereto belonging to the Lessor to hold the land and premises hereinbefore expressed to be hereby demised unto the Lessee for the term of 80 years 5.2. Further as per clause 2(1) of the Lease Deed, at page 17 of PB the assessee is further permitted to sell and mortgage, assign, underlet or sublet or part with the possession of the premises or any part of there or any interest therein the demised with the previous consent of RIICO. 5.3. The aforesaid terms of the lease deed leaves no manner of doubt that the Development charges of ₹ 4.8796830/- along with interest was paid for acquisition of rights in the lease hold property rather than use of land. Therefore the provisions of section 194 I of the Act are not applicable in the case of the assessee. The purport of section 194 I of the Act is not to bring in its purview payments of any or every kind. Only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt. There may be circumstances where the parties may camouflage the real nature of the transaction by using clever phraseology. In some cases, the so-called premium is in fact advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the Court, having regard to the other c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease premium and the rent by laying down broad principles relating to the term lease premium/salami. The said principle are applicable in the case of the assessee in as much as the lease premium has been paid before the execution of the lease which is for a term of a long period of 80 years and there is no provision to treat the same as advance rent in the succeeding years. The relevant portion of the judgment is extracted herein below : 4. As was observed by apex Court in Board of Agrl. IT vs. Sindhurani Chaudharani (1957) 32 ITR 169 (SC) : TC 31R.278 and Chintamani Saran NathSah Deo vs. CIT (1961) 41 ITR 506 (SC) : TC 38R.l046. Indicia of Salami are : (i) its simple non-recurring character, and (ii) payment prior to creation of tenancy. It is the consideration paid by the tenant for being let into possession and can be neither rent nor revenue but it is capital receipt in the hands of the landlord. In the former case it was observed that Salami is a payment by a tenant as a price for parting by the landlord with the rights under the lease of the holiday as a consideration for what the landlord transfers to the tenant. The broad principle relating to term Salami are as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 1064 (Cal) : TC 38R.1092. Question whether a particular receipt like Salami can be regarded as revenue or capital cannot be decided in the abstract and each case has to be decided on its facts. 5. Rent is allowable as deduction under s. 30 of the Act. What is allowable is the rent paid or payable for the period during which the premises are used for the purposes of business. Sec. 105 of the Transfer of Property Act, 1882 (in short, T.P. Act) makes a distinction between rent and premium payable under a lease when the interest of the lessor is parted with for a price, the price paid is premium or Salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is capital and the latter is a revenue in nature. 5.9. Again in the case of ITO vs. Wadhwa Associates Realtors Pvt. Ltd. (2014) 146 ITD 0694 (Mum) similar issue arose before ITAT Mumbai Bench where it was held as under : 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for rent for the purpose of section 194-1 of the Act as it partakes all the characteristics of rent and whereas the assessee has contended that the assessee has obtained leasehold rights in the said leasehold lands on payment of lease premium and the said lease premium is not paid under a lease. Hence, it is a capital expenditure and not an advance rent. We observe that the main thrust of the AO to hold the premium paid by assessee to hold it as rent is on the definition of rent under section 194-1 of the Act that it creates a legal fiction and the lease deed(s) entered into contain various restrictive covenants. That the said payments in substance are for consideration for use of land under the lease deed(s), hence provisions of section 194-1 of the Act is attracted. 20. On the other hand, we observe that Government of Maharashtra appointed CIDCO as the nodal agency for setting up of Special Economic Zone at Navi Mumbai NMSEZ . That the assessee has been jointly promoted as a Special Purpose Vehicle (SPV) by CIDCO and Dronagiri Infrastructure Pvt Limited (DIPL) to develop and operate the Special Economic Zone at Navi Mumbai. Pursuant thereto assessee and CID CO entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. It was held that there was no material on record to suggest that the sum of ₹ 2.04 crores had been paid by way of advance rent nor there was any provision for its adjustment towards rent or for its re-payment to the assessee. It was held that the consideration paid by the assessee was capital expenditure and accordingly the issue was decided against the assessee. 5.11. In the aforesaid decision the ITAT has distinguished the decision in the case of Foxconn India Developers Pvt. Ltd. Vs ITO 492/2010 rendered by ITAT, Chennai Bench. The distinction is brought out in the decision of ITAT Mumbai Bench in the case of ITO vs Navi Mumbai SEZ Pvt. Ltd (supra) in the following paras of the decisions at para 22 which is reproduced herein below :- 22. During the course of hearing Id. DR submitted that the above decisions of ITAT, Delhi Bench and ITAT Mumbai Bench (supra) are distinguishable. Whereas the decision of ITAT,Chennai Bench in the case of Foxconn India Developers Pvt.Ltd (supra) should be considered and be followed. We observe that the said decision of ITAT has been consideredbytheId.CIT(A)in para 5.40 of the impugned order. On perusal of the said order o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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