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TMI Blog2021 (1) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... . Parul Garg, Sr. DR Assessee By : Shri Ranjan Chopra, CA ORDER Per Anadee Nath Misshra, AM (A) The aforementioned appeal by Revenue and Cross Objection ( C.O. , for short) by Assessee are hereby disposed off through this Consolidated Order. Grounds taken in the Appeal and Cross Objection are as under: ITA No.- 116/Del/2017 1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in holding that the assessee's case is squarely covered by the CBVDT's Circular No. 35/2016 dated 13/10/2016 without demonstrating that the assessee has fulfilled all the conditions mentioned in para 6 of the Circular No. 35/2016? 2. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in allowing relief following the order dated 10/12/2015 of the Hon'ble Bombay High Court in the case of assessee (ITA No. 918/2015 and ITA No. 920/2015) without demonstarating the factual similarity in these cases? 2.1 Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in allowing relief following the order dated 10/12/2015 of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law with that obtaining in current Assessment Year 2012- 13; b) above judicial precedent is accepted by Central Board of Direct Taxes (CBDT) vide Circular no 35/2016 dated 13.10.2016 and hence revenue did not prefer Special Leave Petition (SLP) to Apex Court and thus in the light of above, Respondent- Assessee's case is squarely covered by same. Aforesaid Circular is binding on department and with utmost respect, it does not lie in mouth of department to argue against such beneficial circulars much less file an appeal; c) subsequently once again jurisdictional Delhi High Court in Respondent-Assessee's own case rejected departmental appeal no ITA 575 of 2016 for preceding assessment year adjudicating identical issue in favour of Respondent-Assessee vide judgment dated 08.08.2016 following its own earlier pronouncement dated 10.12.2015 cited in point (a) supra; and d) Honourable Tribunal's detailed orders dated 20,06.2013 and for preceding assessment years totally cover controversies in present appeal whose reasoning, rationale, findings, conclusions and holdings are approved by jurisdictional Delhi Court through aforementioned pronouncements. 2. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions of the deductor assessee were not found satisfactory by the then A.O. and was treated as an assessee in default. As the same ground is raised by the assessee company in the year under consideration i.e. F.Y. 2011-12, therefore, following the reasoning given for the F.Y. 2007-08, 2009-10 and 2010-11 the ground of the assessee for the F.Y. 2011-12 is also rejected it is held that TDS was required to be deducted by the assessee company u/s 1941 of I.Tax Act on the lease premium of ₹ 13,81,17,243/- paid to MMRDA towards additional Premium for additional built up area. (B.1) Aggrieved, the Assessee filed appeal before the Ld. CIT(A). In the impugned appellate order dated 28.10.2016, Ld. CIT(A) held that the assessee was not liable to deduct tax U/s 194I of I.T. Act in respect of aforesaid ₹ 13,81,17,243/- paid to MMRDA. The relevant portion of the order of Ld. CIT(A) is reproduced as under: 4. Decision in Appeal; 4.1 I have gone through order u/s 201(1)/201(1A) of the I. T. Act, 1961 dated 27.03.2014 and also carefully considered the submissions, decision relied upon and the CBDT Circular No. 35/2016 dated 13.10.2016 on applicability of TDS provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any income by way of rent. For the purposes of this section, rent has defined as any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or machinery or plant or equipment or furniture or fittings. 2. The issue of whether or not TDS under section 194-1 of the Act is applicable on lump sum lease premium or one-time upfront lease charges paid by an assessee for acquiring long-term leashold rights for land or any other property has been examined by CBDT in view of representations received in this regard. 3. The Board has taken note of the fact that in the case of The Indian Newspaper Society (ITA No. 918 920/2015), the Hon ble Delhi High Court has ruled that lease premium paid by the assessee for acquiring a plot of land on an 80 years lease was in the nature of capital expense not falling within the ambit of Section 194-1 of the Act. In this case, the court reasoned that since all the rights easements and appurtenances in respect of the said land were in effect transferred to the lessee for 80 years and since there was no provision/m lease agreement for adjustment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection in support of the aforesaid impugned appellate order dated 28.10.2016 of the Ld. CIT(A). (C.1) Perusal of the grounds taken in Revenue s appeal and in C.O filed by the Assessee shows that all the grounds are related to whether the assessee was liable to deduct tax at source U/s 194I of I.T. Act in respect of the aforesaid lease premium amounting to ₹ 13,81,17,243/- paid to MMRDA. For the sake of convenience all the grounds raised in the Revenue s appeal as well as in the Assessee s C.O. are disposed off together. (C.2) At the time of hearing before us, the learned Senior Departmental Representative ( Ld. Sr. DR , for short) strongly relied on the order dated 27.03.2014 of the AO passed U/s 201(1)/201(1A) of I.T. Act. She also read out the relevant portions from the order of the AO to draw our attention. The Ld. Authorized Representative ( Ld. AR , for shot) for the assessee stated that the issue in dispute is squarely covered in favour of the assessee by orders of the Co-ordinate Benches of Income Tax Appellate Tribunal, Delhi ( ITAT , for short) in assessee s own case for Assessment Year 2011-12(vide order dated 27.01.2014 in ITA No. 4660/Del/2013) and for Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained that the lease premium cannot be subjected to tax deduction at source under section 194-1 of the Act. The Mumbai TDS Officer, vide its order dated March 29,2011 for the assessment year 2008-09 held that the assessee is in default under section 20If 1 A) of the Act read with section 194-1 of the Act. Subsequently, this order was quashed by the High Court of Bombay and the issue was left open for the appropriate competent authority to initiate TDS proceedings keeping in view the law of limitation. Later, the Income-tax Officer (TDS)- 50(1), Delhi, issued a notice dated February 9, 2012 in respect of proceedings under section 201/201(1 A) calling for details and documents in relation to the assessment year 2010-11, In reply, it was argued on behalf of the assessee that it was not exigible to deduct tax at source under section 194-1 on the lease premium paid to the Mumbai Metropolitan Regional Development Authority and consequently, the assessee cannot be deemed as assessee-in-default. The TDS Officer vide order dated March 30, 2012 rejected all the contentions of the assessee and proceeded to saddle the demand of ₹ 8,39,81,641 under section 201(1) of the Act. ₹ 6,58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1, 2009 and end on March 31, 2011. whereas the impugned order has been passed on March 29,2012 well beyond the cut-off date. Therefore, I have no hesitation in holding that the impugned order m burred by the period of limitation as per in section 201(3)(i). I concur with the submission of the appellant that Bombay High Court's order dated November 9,2011 cannot be construed us extending the period of limitation inasmuch as the apex court in the pronouncement quoted supra has categorically laid down that the judiciary is not competent to extend the .statutory prescribed period limitation. The Assessing Office s reliance on clause (ii) of sub-section (3) of section 201 and on clause (ii) of the Explanation to section 1.53 is of no avail of and cannot, assist the Assessing Officer to save the impugned order from the taint of crossing the period of limitation. In the result, I allow the plea of limitation raised by the appellant and therefore, ground Nos. 2 and 3 are allowed ' 9. After careful consideration of the contentions and submissions both parties in this regard, at the outset, we observe that as per facts recorded by the Commissioner of Income-tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven a security deposit under lease agreement can be tantamount to advance rent, hence TDS deduction is required to be made. 11. After careful consideration of the above submissions, contentions and legal propositions of both the parties in the light of factual matrix of present case, we observe that it is argued on behalf of the assessee that the Mumbai Metropolitan Regional Development Authority in its computation of income has not included the lease premium received in computing the total income because it was further payable to the Government of Maharashtra. From the impugned order, we observe that the issue involved in this ground has been decided in favour of the assessee with following observations and findings:- I have considered the written submission of Authorized Representative s and gone through various arguments canvassed by the learned counsel of the appellant as also taken into account the objections of the Assessing Officer as mentioned in the impugned order. i) It is well settled that premium and rent have distinct and separate connotations in law as enshrined in Section 105 of the Transfer of Property Act, 1882. The essence of premium lies in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of₹ 88,52,75,000/- disbursed to Mumbai Metropolitan Regional Development Authority. vi) In addition, clause 1 of the operative portion of the lease agreement dated 09.04.2008 read with the recitals thereof unequivocally covenants that in consideration of the payment of ₹ 88,52,75,000/- by the Appellant, Mumbai Metropolitan Regional Development Authority, the lessor, demises the Bandra plot to the Appellant together with all the rights, easements and appurtenances and the like for 80 years commencing from 09.04.2008. In light of the above discussion read with the lease agreement dated 09.04.2008, the conclusion is irresistible that Appellant by tendering the amount ₹ 88,52,75,0001- acquired the right, title and interest in the Bandra land demised by Mumbai Metropolitan Regional Development Authority, the lessor. In the result, I hold that all the yardsticks as judicially held in the foregoing rulings relied upon by the learned counsel for terming the sum of ₹ 88,52,75,000/- as lease premium are fulfilled in the Appellant's case. Moreover, in A. R. KRISHANAMURTHY v. CIT 176 ITR 417 (SC), the transfer of leasehold rights even for temp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsoever, much less to substantiate the same. In that view of the matter, I hold that the impugned sum does not constitute advance rent, but lease premium for capital expenditure not falling within the operative realm of Section 194-1 of the Act. I am strengthened in my view by the orders passed by CIT(A)-14, Mumbai in favour of the Assessee in the cases listed on page no.9 above, copies of which are placed on record by the Appellant wherein facts are identical and all the seven cases pertain to the land leased by MMRDA in the same or adjoining area which is fortified by the plan appearing at page no.- 44 and 59 of the lease deed dated 09.04.2008 [G block-page 43 of the factual paper book.] 12. In view of above observations, we clearly observe that the Commissioner of Income Tax(A) has also dealt with other cases pertaining to the land leased by Mumbai Metropolitan Regional Development Authority in the same or adjoining area and has held that the impugned deposit of lease premium does not constitute advance rent but it is a lease premium for acquiring land with right to construct a commercial building although with certain restrictions, but it is a capital expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndu undivided family, who is responsible for paying any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, shall deduct income-tax thereon at the rate prescribed therein. Since in the present case, we have held that the lease premium paid by the assessee was capital in nature and was not rent, therefore, we are unable to approve the findings of TDS Officer/Assessing Officer that the assessee was liable to deduct TDS on payment of lease premium to MMRDA. At this point, we place reliance on the judgment of Hon ble jurisdictional High Court of Delhi in the case of Krishak Bharati Cooperative Ltd. vs DCIT (2013) 350 ITR 24 (Del)/[2012] 23 taxmann.com 265/10 Taxman 123 wherein their lordships held that for premium on acquisition of lease hold rights in the land, lease for 90 years with substantial interest in the land, then lease premium constituted capital expenditure. 16. In view of discussions made hereinabove, we are not in agreement with the findings of the Assessing Officer and we decline to hold that the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be determined as rent as postulated in section 194I and hence he held that the assessee was not liable to deduction of tax at source and thus cannot be treated as assessee in default under section 201 of the I.T. Act. 5. Against the above order the Revenue is in appeal before us. 6. We have heard both the counsel and perused the records. Ld. Counsel of the assessee at the out set submitted that the issue involved is squarely covered in favour of the assessee by the decision of the Tribunal in assessee s own case in ITA No. 5207/Del/2012 (A.Y. 2007-08) and in ITA No. 5208/Del/2012 for asstt. year 2009-10 vide order dated 20.6.2013. In the said order the Tribunal had referred to the CIT(A) s order and affirmed the same by holding as under:- Para 12. In view of above observations, we clearly observe that the Commissioner of Income Tax(A) has also dealt with other cases pertaining to the land leased by MMRDA in the same or adjoining area and has held that the impugned deposit of lease premium does not constitute advance rent but it is a lease premium for acquiring land with right to construct a commercial building although with certain restrictions, but it is a cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T has taken note of order of Hon ble Delhi High Court in assessee s own case. The relevant portion of the aforesaid CBDT Circular dated 13-10- 2016 is also reproduced below for ready reference: 2. The issue of whether or not TDS under section 194-1 of the Act is applicable on 'lump sum-lease premium' or 'one-time upfront lease charges paid by an assesses for acquiring long-term leasehold rights for land or any other property has been examined by CBDT in view of representations received in this regard. 3. The Board has taken note of the fact that in the case of The Indian Newspaper Society (ITA Nos. 918 920/2015) the Hon'ble Delhi High Court has ailed that lease premium paid by the assessee for acquiring a plot of land on an 80 years lease was in the nature of capital expense not falling within the ambit of section I94-I of the Act. In this case, the court reasoned that since all the rights easements and appurtenances in respect of 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 capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (C.2.1) of this order. Revenue has not been able to show any distinguishing facts and circumstances pertaining to the present appeal before us (A.Y. 2012-13) to distinguish the facts of the present appeal from facts in F.Y. 2007-08 (Assessment Year 2008-09), F.Y. 2009-10 (Assessment Year 2010-11) and F.Y. 2010-11 (Assessment Year 2011-12). We also find that the issue in dispute is already decided in favour of the assessee by aforesaid CBDT Circular dated 13-10-2016. We also find that in the impugned appellate order dated 28.10.2016, the Ld. CIT(A) has decided the issue in favour of the assessee after considering the decision of Hon ble Jurisdictional High Court in assessee s own case as referred in aforesaid CBDT Circular dated 13-10-2016. It is well settled that circulars of CBDT which are beneficial to the assessee are binding on Revenue authorities. Whether in proceedings U/s 201(1)/201(1A) of I.T. Act before the AO; or in the course of appellate proceedings either before Ld. CIT(A) or in ITAT, Revenue has failed to bring any distinguishing facts and circumstances of this year to light as compared with facts and circumstances in aforesaid years in F.Y. 2007-08 (Assessment Ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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