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TMI Blog2016 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai has erred in confirming short deduction of TDS of Rs. 61,500 on payment of Rs. 300,000 to Suzlon Energy Ltd, made towards acquiring sub-lease rights of 5 Bigha land at Baramsar,Jaisalmer, Rajasthan for 19 years. The Appellant Company humbly submits that the Payment of Rs. 300,000 being consideration for acquiring sub-lease rights the land is Lease Premium and Capital Expenditure and is not covered by Explanation (i) to Section 194-I. Hence the demand for short(non) deduction of TDS may please be cancelled. Ground 2 The Hon' CIT (A)-14,Mumbai has erred in confirming short deduction of TDS of Rs. 61,500 on payment of Rs. 300,000 to Suzlon Developers Pvt. Ltd, made for sharing infrastructure facility at village Baramsar,Jaisalmer, Rajasthan for wind turbine generator. The Appellant Company humbly submits that One-time payment of Rs. 3,00,000/- towards Sharing Infrastructure Facilities for Windmill for its lifetime is not covered by Explanation(i) to Section 194-I and hence the demand towards short(non) deduction of TDS of Rs. 61,500 may please be deleted. Ground 3 The Hon' CIT (A)-14, Mumbai has erred in confirming levy of interest u/s 201 (lA) of Rs. 124,038 on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to Suzlon Developers Pvt. Ltd. on account of 'sharing infrastructure facility' at Village Baramsar, to run and maintain wind mill in the wind mill field developed by Suzlon Developers Private Limited. The assessee was issued show cause notice asking it to show cause as to why it should not be held as an assessee in default in respect of the above said defaults. In reply, the assessee submitted that the entire wind mill field at village Baramsar, Dist. Jaisalmer (Rajasthan) was developed by Suzlon Developers Pvt, Ltd. to construct, run and maintain its thousands of wind Mills installed in the said wind mill field at Jaisalmer. The amount paid by the company was towards its contribution for undivided undetermined common infrastructure facility to be utilized during the life time of the said wind mill. As this amount was paid as contribution for the common pool raised /created for the development of wind mill and to provide common facilities permanently for years, no tax was required to be deducted at source on such contribution. It was further submitted that M/s Suzlon Developer Private Limited is merely collection and disbursement facilitator whereas the actual development of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a onetime payment being consideration/premium for acquiring the said right for 19 years. The assessee submitted that as against the payments made by the assessee, the lease rent always is a recurring expense which is required to be paid either monthly or yearly to continue the lease rights year after year, but the amount of Rs. 3 lacs is not covered by and cannot be held as rent for the purpose of section 194-I of the Act and hence prayer was made to learned CIT(A) to delete the TDS demand of Rs. 61,500/-. It was further submitted that payment of Rs. 3 lacs to M/s Suzlon Developers Pvt. Ltd. was made towards charges for sharing of infrastructure facility at village Baramsar, Jaisalmer (Rajastan] for Wind Turbine Generator. It was submitted that Suzlon Developers Private Limited has developed windmill Farm at Village Baramsar, Jaisalmer, Rajasthan . In the said wind mill farm, Suzlan Energy Ltd. Has installed thousands of windmill for its various customers as long term turn-key project. It was submitted that the assessee company was one of the customers for whom Suzlon Energy Ltd. installed one windmill during financial year 2003-04. As a part of the windmill Turn-Key project the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 years . The ld. Counsel submitted that further payment of Rs. 3 lacs was paid to Suzlon Developers Private Limited towards common infrastructure facilities at Wind Mill farm in village Baramsar, Jaisalmer. It is submitted that the assessee acquired the Wind Mill for a consideration of Rs. 1.36 crores including the payment of Rs. 3 lacs to M/s Suzlon Energy Limited towards premium for acquiring sublease rights of 5 Bigha land for 19 years which is further extendable for 11 years. It was submitted that the said payment of Rs. 3 lacs to Suzlon Energy Limited is in-fact lease premium paid for acquiring land for 19 years and is not paid for use of land which could be brought within ambit of definition of Rent for the purposes of Section 194-I of the Act as per explanation(i) to Section 194-I of the Act defining 'Rent' as was applicable for assessment year 2004-05.It was submitted that as part of the windmill Turn- Key project the company paid Rs. 3 lacs to Suzlon Developers Pvt. Ltd. as its share of the undivided common infrastructure facilities throughout the life of the Windmill which does not attract any provisions for tax deduction at source. It was submitted that section 194-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2012 21-08-2013 5 The ITO (OSD)(TDS) Range 2 v. M/s Navi Mumbai SEZ P. Ltd.. ITA no. 738 to 741/Mum/2012 16-08-2013 6 M/s Foxconn India Developer (P) Ltd. V. The Income Tax Officer, TDS Ward -II(3) (2016) 239 taxman 513(Mad. HC) 04-04-2016 It is submitted that decision of the tribunal in the case of Foxconn relied upon by the authorities below has been reversed by the Hon'ble Madras High Court in 239 taxman 513(Mad.HC)(supra). With respect to ground No. 2, it is submitted that the definition of Rent has been amended by the Taxation Laws (Amendment) Act,2006 w.e.f. 13th July, 2006 for the purposes of section 194-I of the Act. It is an old case relevant to assessment year 2004-05 and governed by pre-amended definition of 'Rent' in explanation(i) to Section 194-I of the Act. It was submitted that in preamended definition plant and machinery and equipments were not covered by the definition of 'Rent' u/s 194-I of the Act and hence payment of Rs. 3 lacs for sharing common infrastructure facilities cannot be brought within ambit of Section 194-I of the Act and at best ,without prejudice, it could be covered u/s 194-C of the Act being contractual payments. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Hon'ble Bombay High Court in the case of Benett Coleman & Company Limited v. ITO (1986) 157 ITR 812(Bom.) and the case of CIT v. Prem Nath Motors (2002) 120 Taxman 584(Del.). With respect to delay in passing the order u/s 201(1A) of the Act as contended by the learned counsel for the assessee, it was submitted by learned DR that this facts need to be verified from the records and the matter may be remanded to the AO to find out when the assessee submitted its replies to the queries raised by the AO. 9. We have considered the rival contentions and also perused the material available on record including case laws relied upon by both the parties. We have observed that the assessee is in the business of generation of power. The assessee had given contract to Suzlon Energy Limited to supply, install, commission and operate Wind Turbine Generation J38(Windmill) in Wind Farm situated at Village Baramsar , Tehsil and District Jaisalmer, Rajasthan for total consideration of Rs. 1,36,50,000/- . We have observed that the assessee has made payment of Rs. 3 lacs to M/s Suzlon Energy P. Ltd. which was included in the afore-stated total payment of Rs. 1,36,50,000/-, for acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease of Suzlon Eneregy Private Limited and hence this payment of Rs. 3,00,000/- by the assessee to Suzlon Energy Private limited is not merely payment of ' Rent' for use of land.. Further we have observed that there is no provision in the sublease deed dated 12-08-2004 that this payment of Rs. 3 lacs is adjustable against yearly rent . Hence in our considered view this up-front one time payment of sub-lease charges of Rs. 3 lacs paid to Suzlon Energy Private Limited towards sub-lease of land for 19 years cannot be said to be paid for use of land to bring within the ambit and mandate of provisions of Section 194-I of the Act for deducting tax at source. We have observed that the issue is covered by the decision of the Tribunal in the case of Wadhwa & Associates Realtors Pvt. Ltd.(supra) and also decision of Hon'ble Madras High Court in the case of Foxconn India Deeveoper Private Limited (supra) as well other decisions relied upon by the assessee as detailed in preceding para's albeit in the said decisions the Court/tribunal were concerned with up-front lease premium paid for acquisition of land on long term lease basis while in the instant case land is acquired for setting up wind m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said land were in effect transferred to the lessee for 80 years and since there was no provision in lease agreement for adjustment of premium amount paid against annual rent payable, the payment of lease premium was a capital expense not requiring deduction of tax at source under section 194-I of the Act. 4. Further, in the case Foxconn India Developer Limited (Tax Case Appeal No. 801/2013), the Hon'ble Chennai High Court held that the one-time non-refundable upfront charges paid by the assessee for the acquisition of leasehold rights over an immovable property for 99 years could not be taken to constitute rental income in the hands of the lessor, obliging the lessee to deduct tax at source under section 194-I of the Act and that in such a situation the lease assumes the character of "deemed sale". The Hon'ble Chennai High Court has also in the cases of Tril Infopark Limited (Tax Case Appeal No. 882/2015) ruled that TDS was not deductible on payments of lump sum lease premium by the company for acquiring a long term lease of 99 years. 5. In all the aforesaid cases, the Department has accepted the decisions of the High Courts and has not filed an SLP. Therefore, the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project the company paid Rs. 3 lacs to Suzlon Developers Pvt. Ltd. as its share to the undivided common infrastructure facilities to be enjoyed throughout the life of the Windmill. It is also the claim of the assessee,without prejudice, that said payment at best could be covered u/s 194C of the Act It is also the claim of the assessee that Suzlon Developers Pvt. Limited i.e. the payee has no tax dues payable as it had paid its entire tax liability for the assessment year 2004-05 hence no taxes can be determined/recovered from the assessee in view of the Hon'ble Supreme court judgment in the case of CIT v. Hindustan Coco Cola Beverage Pvt Ltd., (2007)293ITR226(SC). In our considered view, these common infrastructure facilities as detailed above require rendering of services associated with these infrastructure facilities for availing these infrastructure facilities which are in the nature of payment to contractor for carrying out the work associated with the utilization of these common infrastructure facilities. These are payments hich are contractual payment for provision of various common infrastructure facilities by Suzlon Developers Private Limited to the assessee and is covere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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