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TMI Blog2017 (1) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... payment being lease premium of ₹ 11,43,36,405/- which was paid by the assessee to CIDCO in respect of Plot No. 5, Sector 2A, Koparkhairane, Taluka-Thane and we donot find any infirmity in the order of learned CIT(A) in ordering to delete the demand raised by the Revenue against the assessee u/s 201(1) and 201(1A) of the Act, which order of learned CIT(A) we affirm/sustain. - Decided in favour of assessee - I .T.A. No. 5196/Mum/2014 - - - Dated:- 9-11-2016 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri Vishwas Kumar Agarwal For The Assessee : None ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the Revenue, being ITA No. 5196/Mum/2014, is directed against the appellate order dated 25th June, 2014 passed by learned Commissioner of Income Tax (Appeals)- 14, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2011-12, the appellate proceedings before the learned CIT(A) arising from the order dated 18th March, 2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 201(1) 201(1A) of the Income-tax Act,1961 (Hereinafter called the Act ). 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee show causing why the assessee should not be treated as an assessee in default u/s 201 and 201(1A) of the Act for non deduction of tax at source (TDS)on lease rent (premium) paid to CIDCO. The assessee submitted that the payments were made towards acquisition of plot/land for the purpose of development from CIDCO and the land was not taken on rent. It was submitted that the payment was made towards cost of land i.e. cost of acquiring leasehold rights in the land and not as rent for use of land, for which lease agreement is for a period of 60 years , no tax is to be deducted at source on payment of purchase consideration as it is not a case of payment of any rent which could attract tax deduction at source. It was observed by the AO from the submissions made by the assessee, that it is not clear who made the payments to CIDCO. Thus, the AO held that the lease premium of ₹ 11,43,36,405/- was paid by the assessee to CIDCO in respect of Plot No. 5, Sector 2A, Koparkhairane, Taluka-Thane. Thus, the AO by referring to provisions of Section 194-I of the Act held that the payment made by the assessee is on account of use of land and rights related thereto for a given perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the land is not subjected to any tax deduction at source and therefore the assessee was not required to deduct any tax on the amount paid to CIDCO for buying the land. It was submitted that the premium paid for acquiring the leasehold rights from CIDCO for a long period is not in the nature of rent and also is not in the nature of advance rent but it is for acquiring the capital asset being leasehold rights in the land and the rent payable is separately provided in the lease deed which is ₹ 100/- per day, therefore, the assessee prayed that appeal may be allowed and the demand raised by the A.O. be deleted. The ld. CIT(A) after perusing the order u/s 201(1)/201(1A) of the Act held that the premium was not paid under any lease but payments were made for acquiring the land . No TDS was deducted by the assessee as it was considered as a payment for acquisition of land rights and not as payment of rent for the use of land. It was held that the amount charged as lease premium by CIDCO is equal to the rate prevalent as per stamp duty ready reckoner, hence, the premium paid to CIDCO is capital in nature and the same cannot be considered as rent liable for TDS u/s 194-I of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Shah Group Builders Limited in ITA no. 4523/Mum/2012 order dated 14.08.2013(supra) wherein it is held that the same is not in the nature of rent as contemplated u/s 194-I of the Act and hence there is no requirement of deduction of tax at source on the same. We have also gone through the recent CBDT Circular No. 35/2016 [F No. 275/29/2015-IT (B)] dated 13th October, 2016 wherein the Board has accepted the decision of the Hon ble High Courts viz. Hon ble Delhi High Court decision in the case of The Indian Newspaper Society (ITA no. 918 and 920/2015 ) and Hon ble Chennai High Court decision in Foxconn Developer Limited (Tax case Appeal No. 801/2013) , whereby the Board has accepted that no TDS is deductible u/s 194-I of the Act on payment made towards lease premium or one-time upfront lease charges , which are not adjustable against periodic rent , paid or payable for the acquisition of long-term leasehold rights over land or any other property . The CBDT Circular No. 35/2016 [F No. 275/29/2015-IT (B)] dated 13th October, 2016 is reproduced below:- CIRCULAR 0.35/2016 [F. 0.27S/29/2015-IT (B)] SECTION 194-I OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - RENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issue of whether or not TDS under section 194-I of the Act is to be made on lump sum lease premium or one-time upfront lease charges paid for allotment of land or any other property on long-term lease basis is now settled in favour of the assessee. 6. In view of the above, it is clarified that lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights over land or any other property are not payments in the nature of rent within the meaning of section 194-I of the Act. Therefore, such payments are not liable for TDS under section 194-I of the Act. Thus, in view of the afore-stated circular of the CBDT following decisions of Hon ble High Courts holding that no tax is deductible at source u/s 194-I of the Act on lump sum lease premium or one-time upfront lease charges, which are not adjustable against periodic rent, paid or payable for acquisition of long-term leasehold rights ..... X X X X Extracts X X X X X X X X Extracts X X X X
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