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TMI Blog2023 (9) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... d by CBDT after the orders passed u/s 201(1) and 201(1A) in the present appeals and the conditions laid down in the Circular have not been examined in any of the cases before us, therefore we deem it appropriate to remand this issue of deduction of tax u/s 194-I on the additional premium paid by the assessee to the file of AO for de novo adjudication in light of the CBDT Circular No. 35/2016 dated 13/10/2016. Accordingly, the order passed by the CIT(A) for the assessment years 2008-09, 2010-11, and 2011-12 to this extent is set aside. As a result, the appeals by the Revenue for the assessment years 2008-09, 2010-11, and 2011-12 are allowed for statistical purposes. Deduction of tax at source u/s 194-A on the interest paid by the assessee on delayed payment of additional premium - As in the exercise of the power conferred by the aforesaid provision, the Central Government vide Notification No. S.O.3489 dated 22/10/1970, inter-alia, notified any corporation established by a Central, State, or Provincial Act for the purpose of section 194A(3)(iii)(f) - Since MMRDA has been established under the Mumbai Metropolitan Region Development Authority Act, 1974, therefore we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated in the said agreement. As per clause 7 of the aforesaid agreement, the annual ground rent payable to MMRDA is as under:- (i) First 3 years of lease Nil (ii) From 4th year to 20th year of lease - 1% of the Lease Premium (iii) From 21st year to 50th year of lease - 2% of the Lease Premium (iv) From 51st year to the end of the lease - 3% of the Lease Premium 4. As per clause 3(B) of the Agreement, the assessee was required to complete the construction of the building on this plot within a period of 4 years. However, due to certain difficulties, the assessee could not comply with this time limit, and therefore, sought an extension of time from MMRDA. After a lot of correspondence and representations made by the assessee, MMRDA granted an extension of time on charging an additional premium at 10% of the total lease premium per year for the first 3 years, and thereafter at 15% of the total lease premium per year. Accordingly, on 15/03/2008, the assessee paid an additional premium of Rs. 20,52,99,027 to MMRDA for the extension of 4 years from 04/07/2004 to 03/07/2008, along with interest of Rs. 6,57,73,942 for delayed payments. 5. Vide order dated 30/03/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of arguments learned Counsel submitted that irrespective of the controversy raised, the assessee being fully covered by the provisions of section 194A(3)(iii)(f) is not liable to deduct tax at source as it is exempt under the provisions aforesaid. I find from the record that this submission has not been made before the bench and obviously could not be considered by the Hon'ble Members, who decided the case. However, it is an important question of law that has been raised by the learned Counsel for the assessee. The facts entitling the assessee for exemption can be established by the assessee before the Tribunal on the material on record. In the circumstances, the case is sent back to the division Bench with the direction that the submission of the assessee with respect to the exemption claimed u/s 194A(3)(iii)(f) be considered. Needless to say, both the parties will be given dequate opportunity to establish their respective case. The case be put up before Division Bench for further proceedings. 8. Accordingly, these appeals are listed before us in view of directions of the Hon ble Third Member vide aforesaid order. We also find that the assessee filed misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f) of the Act. 11. On the other hand, the learned Departmental Representative ( learned DR ) vehemently relied upon the orders passed by the AO. 12. We have considered the submissions of both sides and perused the material available on record. In the present case, there is no dispute among the parties regarding the basic facts as noted above. The only dispute is whether the additional premium paid by the assessee to MMRDA is in the nature of rent within the meaning of section 194-I of the Act. Further, whether the interest paid by the assessee on delayed payment of additional premium is liable to TDS under section 194-A of the Act. On the first issue, the Revenue is in appeal before us. While, on the second issue, the assessee has filed the appeal for the assessment year 2000-09. 13. At the outset, we find that CBDT vide Circular No. 35/2016 dated 13/10/2016, observed as under:- CIRCULAR NO.35/2016 [F.NO.275/29/2015-IT (B)], DATED 13-10-2016 Section 194-1 of the Income-tax Act, 1961 (the Act) requires that tax be deducted at source at the prescribed rates from payment of any income by way of rent. For the purposes of this section, rent has been defined as any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 194-1 of the Act. Therefore, such payments are not liable for TDS under section 194-1 of the Act. 14. Thus, in terms of the aforesaid circular, the 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 of the property were considered to be not in the nature of rent within the meaning of section 194-I of the Act. We find that in the present case, it is undisputed that the assessee agreed to pay a lease premium of Rs. 45,62,20,060 for the 80 years lease as per the agreement to lease dated 04/07/2000 entered into with MMRDA. Further, for the grant of extension of time for construction of the building, the assessee was liable to pay an additional premium. Since the aforesaid Circular has been issued by CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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