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TMI Blog2016 (6) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Lessee (Mr. Vikram Singh Shah) to the lessor (CIDCO) was not in the nature of rent , as defined in the Explanation (i) to section 194I of the Act for the purpose of deduction of tax at source. (ii) On the facts and in the circumstances of the case and in law. the Ld,CIT(A) has erred in accepting the claim of the assessee that no tax was deductible under section 194I from the payment made by the assessee to CIDCO for acquisition of the plot of land on lease from CIDCO. (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not confirming the order of the Assessing Officer treating the assessee as an assessee in default u/s.201(1) in respect of the amount of tax which has not been deducted under section 194I from the payment made to CIDCO and levying interest under section 201(1A). (iv) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the definition or rent, as contained in section 194I and in resorting to interpretative reasoning whereas as per the settled principle of jurisprudence , this exercise is required only when the law is unclear. (v) On the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g lease hold rights for 60 years which is virtually an ownership and legal interest in the land in favour of the assessee. It was submitted by the assessee that Section 194I of the Act stipulate payment of rent for use of land , while in the instant case payment of Rs. 1,05,80,528/- is made to CIDCO for acquiring legal interest in the land in favour of the assessee. The A.O. considered the definition of rent as defined in section 194-I of the Act which as per the A.O. is of wider scope and the definition of rent given under explanation creates a legal fiction whereby almost anything and everything relating to payment in relation to the property transaction where there is a lease or rent is covered. The CIDCO has taken almost 95% of the total amount due on the plot of land even before entering into the lease deed and a nominal amount is taken annually in the form of lease rent. Thus as per the AO, the payment of premium is nothing but advance rent paid by the assessee for the use of land for a period of 60 years was the observation of the AO. The A.O. relied upon the decision of Hon'ble Karnataka High Court in the case of CIT v. H.M.T. Ltd., 203 ITR 820 (Kar.) wherein it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201(1) and 201(1A) of the Act, the assessee filed its first appeal before the learned CIT(A). 5. Before the learned CIT(A) the assessee submitted that the assessee along with his wife Mrs. Kavita Vikram Shah purchased a plot of land from CIDCO Ltd. vide an agreement to sell dated 24th November, 2009 for a total consideration of Rs. 1,05,45,789/-. The payment details are as under:- Name of the joint owners Relation Amount (Rs) Mr. Vikram Shah Appellant 55,35,395 Mrs. Kavita Shah wife 50,10,394 The agreement to sell dated 24-11-2009 was entered into with CIDCO and registered with the Sub-Registrar, Thane on 25th November, 2009 as per Index No. II. A copy of the agreement to sell is also enclosed which clearly shows that the total consideration of Rs. 1,05,45,789/- is lease premium for a period of 60 years. It was submitted by the assessee that during the first 4 years , the assessee was given license and authority to enter upon the land for the purposes of construction of building for residential purposes and after completion of the construction within the time period, legal interest in the land would be granted to the assessee. Thus, it was submitted that agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 55,36,395/- and balance was paid by his wife as per the agreement to lease dated 24th November, 2009 for acquiring ownership rights in plot of land for a period of 60 years together with yearly rent of Rs. 100/-. The learned CIT(A) observed that this issue has been decided in favour of the assessee by the Tribunal-Mumbai & Delhi and as such the assessee cannot be held as under default for levy of tax u/s 201/201(1A) of the Act, vide appellate order dated 17-02-2014 . 6. Aggrieved by the appellate orders dated 17-02-2014 of the learned CIT(A), the Revenue is in appeal before the Tribunal. 7. The ld. D.R. relied upon the orders of the AO. 8. The ld. Counsel for the assessee submitted that the assessee along with his wife has made payment of Rs. 1,05,80,528/- to CIDCO for acquisition of the property. The sale consideration was paid for 60 years acquisition of the title in the property. This issue is squarely covered in favour of the assesse by the decision of the ITAT in the cases of ITO (TDS) v. Navi Mumbai SEZ (P.) Ltd. [2014] 147 ITD 261(Mum.Trib.), decision of the Tribunal- Delhi bench in the case of ITO v. Indian Newspapers Society [2013] 37 taxmann.com 401 and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings: Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. Explanation.-For the purposes of this section,- (i) "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SPV) by CIDCO and Dronagiri Infrastructure Pvt Limited (DIPL) to develop and operate the Special Economic Zone at Navi Mumbai. Pursuant thereto assessee and CIDCO entered into Development Agreement and the assessee is required to make payment of lease premium in respect of the land which was being acquired by CIDCO and being allotted to assessee from time to time. As per Development Agreement, the assessee is to develop and market "NMSEZ". There is no dispute to the fact that the assessee has acquired leasehold right in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining infrastructure administrating and managing "SEZ". By virtue of said lease deed(s), the assessee has acquired the rights to determine, levy, collect, retain, utilize user charges fee for provision of services and /or tariffs in accordance with terms and conditions provided in the Development Agreement and the lease deed (s) entered into. Therefore, we agree with ld. CIT(A) that lease deed(s) and the Development Agreement have assigned to the assessee leasehold right which includes bundle of ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease is defined under section 105 of Transfer of Property Act, 1882 as "A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who , accepts the transfer on such terms. In the case of lease price is called the premium, and the money, share, service or any other thing to be rendered is called the rent; the transferor is called lessor and the transferee is called lessee. 21.1 Therefore, the above section brings out the distinction between price paid for a transfer of 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 called lease premium or salami. But the periodical payments made for the continuous enjoyment of the benefit under the lease are in the nature of rent. The Hon'ble Apex Court has held in the case of A.R. Krishnamurthy (supra) that lease of land is transferred of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its assets were sold under direction of Hon'ble High Court. The assessee company offered Rs. 75 lakhs of which the AO held that Rs. 45 lakhs related to acquisition of lease hold land. But that amount could not be deducted as it was capital expenditure. The Tribunal held it was capital expenditure, but without giving reasons, held that since benefit of the expenditure would be existed in 71 years, a proportionate amount relatable to each year viz Rs. 63,380/- might be allowed as deduction on account of payment of rent. On appeal to the Hon'ble High Court the Hon'ble Jurisdictional High Court agreed with the AO that Rs. 45 lakhs was a capital expenditure. Therefore the Tribunal could not direct the department to apportion the amount over a period of 71 years. Their Lordships held that in order to ascertain true character and purport of the payment the court has to go by the substance of transaction and not by manner in which the assessee allocates the items for accounting purposes. 21.2 We observe that in the case before us, there is a transfer of substantive interest of lessor for the leasehold land in favour of the assessee. That there is a conferment of right on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards grant of leasehold transaction rights to the assessee is nothing but a transaction of transfer of property and the lease premium is the consideration for the purchase of the said leasehold rights. The ld. CIT(A) went on to discuss the judicial decisions relied upon by the AO of Hon'ble Calcutta and Karnataka High Court and observed that both the decisions pertain to the same issue i.e. whether lease premium was a revenue or a capital expenditure. The ld. CIT(A) also discussed the decision in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax 11 ITR 513 PC wherein it has been held that the payment which under the lease is exigible by the lesser may be classed under 3 categories (1) Premium or salary (2) the minimum royalty and (3) the royalty per ton . The salami have been rightly treated as capital receipt. It is a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted both by the lease. The Ld. CIT(A) has also considered the decision of the Hon'ble Supreme Court in the case of Sindhurani Chaudhurani (supra) wherein it has been held that Salami is in the form of a lump sum non recurring pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s finally concluded that the facts of the case of the NSE are identical to the facts of the case of the assessee and observed that in the case of NSE, the stand of the department as well as the decision of the Tribunal was that the consideration paid for acquiring leasehold rights in land is a capital expenditure and not 'rent'. 5.4. The Ld. CIT(A) finally concluded that the amount paid by the assessee is lease premium for acquiring leasehold rights and additional FSI in respect of the leased plot and the same is not in the nature of rent as contemplated u/s. 194-1 of the Act. Accordingly, the assessee was not required to deduct tax at source u/s. 194-1 of the Act and deleted the demand raised by the assessee.' 21.4 Similar issue has come up before the Delhi Bench of the Tribunal in the case of The Indian News Papers Society (supra) and the Tribunal has held that the lease premium paid by the assessee to MMRDA does not fall under section 194-I of the Act and therefore the provisions of section 201(1) of the Act does not apply because the said lease premium was capital expenditure to acquire land on lease with substantial right to construct and cover the building c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also confirmed the decision of Hon'ble Madras High Court that even the alternate claim for proportionate deduction of the amount, paid during the period of lease is not admissible. Therefore, considering the reasons as mentioned hereinabove and the decisions of ITAT, Mumbai Bench (supra) wherein it has been held that single payment made for acquisition of right of lease to enjoy leasehold rights in the land granted to the assessee is a capital expenditure. Similarly, ITAT Delhi Bench (supra) has held that the lease premium paid by assessee to CIDCO is not in the nature of rent as contemplated u/s 194-I of the Act. Hence, we agree with ld. CIT(A) that the provisions of section 194-I of the Act to deduct TDS on the lease premium paid by the assessee is not attracted. In view of above, we uphold the order (s) of ld. CIT(A) to delete the demand raised by the AO u/s 201(1) and 201(1A) of the Act by rejecting the grounds of appeal taken by the department. Hence, the grounds of appeal taken by the department are rejected in all the appeals for the assessment years under consideration. 23. In the result, appeals of the department for assessment years 2006-07 to 2009-10 are dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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