ITO (TDS) 3(5), MUMBAI v. WADHWA & ASSOCIATES REALTORS P.LTD, MUMBAI

ITA 695/MUM/2012 | 2008-2009
Pronouncement Date: 03-07-2013 | Result: Dismissed

Appeal Details

RSA Number 69519914 RSA 2012
Assessee PAN AAACW5273G
Bench Mumbai
Appeal Number ITA 695/MUM/2012
Duration Of Justice 1 year(s) 5 month(s)
Appellant ITO (TDS) 3(5), MUMBAI
Respondent WADHWA & ASSOCIATES REALTORS P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 03-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 03-07-2013
Date Of Final Hearing 19-06-2013
Next Hearing Date 19-06-2013
Assessment Year 2008-2009
Appeal Filed On 02-02-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI . . ! '#$% & '( BEFORE SHRI H.L. KARWA PRESIDENT AND SHRI N.K. BILLAIYA AM ./I.T.A. NO.695/MUM/2012 ( ) ) ) ) / ASSESSMENT YEAR : 2008-09 THE ITO (TDS) 3 (5) 10 TH FLOOR SMT. K.G. MITTAL AYURVEDIC HOSPITAL BLDG. CHARNI ROAD (W) MUMBAI-400 002 M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. 301 PLATINA PLOT C-59 G BLOCK BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051 C.O. NO. 06/MUM/2013 (ARISING OUT OF /I.T.A. NO.695/MUM/2012 ( ) ) ) ) / ASSESSMENT YEAR : 2008-09 M/S. WADHWA & ASSOCIATES REALTORS PVT. LTD. 301 PLATINA PLOT C-59 G BLOCK BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051 THE ITO (TDS) 3 (5) 10 TH FLOOR SMT. K.G. MITTAL AYURVEDIC HOSPITAL BLDG. CHARNI ROAD (W) MUMBAI-400 002 (* & ./ + ./PAN/GIR NO. : AAACW 5273G ( * /APPELLANT ) .. ( -.* / RESPONDENT ) * / / APPELLANT BY : ` SHRI PAVAN VED -.* 0 / /RESPONDENT BY : SHRI J.D. MISTRY SHRI A.T. JAIN & SHRI MAHESH RAJORA 0 12& / DATE OF HEARING :19.06.2013 34) 0 12& / DATE OF PRONOUNCEMENT : 03.07.2013 ' 5 / O R D E R ITA NO.695/M/12 & C.O. NO. 06/M/2013 2 PER N.K. BILLAIYA AM: THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-14 MUMBAI DT.21.11.2011 PERTAINING TO A.Y. 2008-09. 2. THE REVENUE HAS RAISED AS MANY AS 12 GROUNDS. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS THAT T HE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT THE PROVISI ONS OF SEC. 194-I ARE NOT APPLICABLE ON THE FACTS OF THE CASE. 3. THE IMPUGNED ASSESSMENT ORDER IS DT. 29.3.2011 PASSED U/S. 201(1) AND 201(1A) OF THE ACT. THE FACTS OF THE CASE SHOW THAT THE ASSESSEE HAS MADE PAYMENT OF LEASE PREMIUM TO M/S. MMRD LTD. AMO UNTING TO RS. 949.92 CRORES APPROXIMATELY DURING THE YEAR UNDER C ONSIDERATION. THIS LEASE PREMIUM WAS PAID FOR ALLOTMENT OF A PLOT OF LAND NAMELY C-59 IN G BLOCK OF BANDRA KURLA COMPLEX BANDRA (E) MUMB AI AS PER LEASE DEED DT. 22.11.2004 AND ALSO FOR ADDITIONAL FSI IN RESPECT OF THE SAID PLOT. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE WA S LIABLE TO DEDUCT TAX AS PER PROVISIONS OF SEC. 194-I OF THE ACT IN RESPE CT OF THE AFORESAID PAYMENT TO MMRD LTD AND AS THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE THE AO ISSUED SHOW CAUSE NOTICE DT. 21.2. 2011 TO THE ASSESSEE. THE ASSESSEE EXPLAINED THAT IT HAS ENTERED INTO A L EASE AGREEMENT WITH M/S. MMRD ON 22.11.2004. THE LAND UNDER QUESTION H AS BEEN GIVEN BY THE LESSER I.E. MMRD TO THE ASSESSEE ON LEASE AND F OR WHICH THE ASSESSEE HAS PAID THE PREMIUM AMOUNTING TO RS. 949.91 CRORES APPROXIMATELY. 3.1. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE IN THE LIGHT OF CERTAIN JUDICIAL DECISIONS THE AO ARRIVED AT TH E CONCLUSION THAT THE ITA NO.695/M/12 & C.O. NO. 06/M/2013 3 ASSESSEE WAS REQUIRED TO DEDUCT TAX U/S. 194-I AND PAY IT TO THE GOVERNMENT TREASURY WITHIN THE STIPULATED TIME AS R EQUIRED BY PROVISIONS OF CHAPTER XVII-B OF THE I.T. ACT AND AS THE ASSESS EE HAS NOT COMPLIED WITH THE PROVISIONS OF SEC. 194-I IT HAS COMMITTED DEFAULT WITHIN THE MEANING OF SEC. 201(1) OF THE ACT AND THEREFORE T HE ASSESSEE IS TREATED AS ASSESSEE IN DEFAULT AND ACCORDINGLY DIRECTED THE ASSESSEE TO MAKE PAYMENT OF INTEREST ALONGWITH TDS TOTALING TO RS. 314.26 CRORES. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE ASSESSEE EXPLAINED THAT THE PAYMENT REFERRED BY THE AO DOES NOT BEAR THE CHARACTER OF RENT MENTIONED IN SEC. 194-I AND THERE FORE THERE IS NO REQUIREMENT OF DEDUCTION OF TAX FROM SUCH PAYMENT M ADE TO MMRD. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAS MADE PA YMENT TO MMRD FOR A) FOR ADDITIONAL BUILT-UP AREA B) FOR GRANTING FREE OF FSI AREA OF RS. 4 CRORES. 5. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE NATURE OF TRANSACTION THE LD. CIT(A) OBSERVED THAT THE AMOUN T CHARGED BY MMRD AS LEASE PREMIUM IS EQUAL TO THE RATE PREVALENT AS PER STAMP DUTY RECOVERY FOR ACQUISITION OF THE COMMERCIAL PREMISES . THESE RATES ARE PRESCRIBED FOR TRANSFER OF PROPERTY AND NOT FOR THE USE AS LET OUT TENANTED PROPERTY. THE LD. CIT(A) FURTHER OBSERVED THAT EVE N THE ADDITIONAL FSI GIVEN FOR ADDITIONAL CHARGES AS PER READY RECKONER RATES ONLY. IT IS THE FINDING OF THE LD. CIT(A) THAT THE WHOLE TRANSACTIO N TOWARDS GRANT OF LEASEHOLD TRANSACTION RIGHTS TO THE ASSESSEE IS NOT HING BUT A TRANSACTION OF TRANSFER OF PROPERTY AND THE LEASE PREMIUM IS THE C ONSIDERATION 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 ITA NO.695/M/12 & C.O. NO. 06/M/2013 4 KARNATAKA HIGH COURT AND OBSERVED THAT BOTH THE DEC ISIONS PERTAIN TO THE SAME ISSUE I.E. WHETHER LEASE PREMIUM WAS A REVENUE OR A CAPITAL EXPENDITURE. THE LD. CIT(A) ALSO DISCUSSED THE DECI SION IN THE CASE OF RAJA BAHADUR KAMAKSHYA NARAIN SINGH OF RAMGARH V. C OMMISSIONER OF INCOME-TAX 11 ITR 513 PC WHEREIN IT HAS BEEN HELD T HAT THE PAYMENT WHICH UNDER THE LEASE IS EXIGIBLE BY THE LESSER MAY BE CLASSED UNDER 3 CATEGORIES (1) PREMIUM OR SALARY (2) THE MINIMUM RO YALTY AND (3) THE ROYALTY PER TON . THE SALAMY HAVE BEEN RIGHTLY TRE ATED 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. T HE LD. CIT(A) HAS ALSO CONSIDERED THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF MEMBER FOR THE BOARD OF AGRICULTURAL INCOME TAX AS SAM VS SINDHURANI CHAUDHRANI & ORS 32 ITR 169 WHEREIN IT HAS BEEN HEL D THAT SALAMI IS IN THE FORM OF A LUMP SUM NON RECURRING PAYMENT MADE B Y A PROSPECTIVE TENANT TO THE LANDLORD AS A CONSIDERATION AND IS PA ID ANTERIOR TO THE CONSTITUTION OF RELATIONSHIP OF LANDLORD AND TENANT IT IS NOT RENT WITHIN THE MEANING OF THE WORD USED IN THE DEFINITION OF AGRICULTURAL INCOME IN SECTION 291)(A) OF THE I.T. ACT. IT HAS ALL THE CH ARACTERISTICS OF A CAPITAL PAYMENT AND IT IS NOT REVENUE. THE LD. CIT(A) FURT HER DISCUSSED CERTAIN OTHER JUDICIAL DECISIONS AND IN PARTICULAR THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS K HIMLINE PUMPS LTD. 258 ITR 459 WHEREIN THE HONBLE JURISDICTIONAL HIG H COURT HAS HELD THAT AN AMOUNT OF RS. 45 LAKHS PAID BY THE ASSESSEE TO M/S. APVE LTD. FOR ACQUISITION OF LEASEHOLD LAND WAS A CAPITAL EXPENDI TURE AND HENCE THE SAME WAS NOT DEDUCTIBLE. THE LD. CIT(A) HAS FURTHE R CONSIDERED THE DECISION OF THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF JCIT VS MUKUND LTD. 106 ITD 231 WHEREIN THE ISSUE WAS WH ETHER THE PREMIUM PAID FOR ACQUIRING LEASEHOLD RIGHT IN LAND IS REVENUE OR CAPITAL . THE SPECIAL BENCH HAS HELD THAT THE SAME IS CAPITAL EXPENDITURE. ITA NO.695/M/12 & C.O. NO. 06/M/2013 5 5.2. THE LD. CIT(A) HAS DISTINGUISHED THE FACTS OF THE CASES RELIED UPON BY THE AO AT PAGE-53 PARA 5.39 OF HIS ORDER AN D AFTER DISTINGUISHING THE CASES CAME TO THE CONCLUSION THAT IN NONE OF T HESE CASES THE ISSUE OF LEASE PREMIUM AS IN THE CASE OF THE ASSESSEE VIS- -VIS RENT HAS BEEN CONSIDERED. AT PARA 5.41 OF HIS ORDER AT PAGE-54 THE LD. CIT(A) SAYS THAT I HAVE ALSO CONSIDERED THE OTHER CASES RELIED UPON THE AO. THESE CASES LAY DOWN GENERAL PRINCIPLES OF INTERPRETATION OF LA W. I FIND THAT NONE OF THE ABOVE CASES THE COURT HAS HELD THAT THE LEASE P REMIUM IN SIMILAR CIRCUMSTANCES IS IN THE NATURE OF ADVANCE RENT AND HENCE LIABLE FOR DEDUCTION OF TDS U/S. 1941 OF THE ACT. THE CASES R ELIED UPON BY THE AO ARE THUS DISTINGUISHABLE ON FACTS AND IN LAW AND TH E SAME CANNOT BE MADE APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE ISSUE RAISED IS COMPLETELY DIFFERENT. 5.3. THE LD. CIT(A) FINALLY CONSIDERED THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE OF INDIA LTD. IN ITA NOS. 1955/M/99 2181/M/99 4853/M/04 4485/M/04 4854/M/ 04 356/M/01AND 5850/M/00. AT PARA 5.45 OF HIS ORDER ON PAGE 57 THE LD. CIT(A) HAS GIVEN A COMPARATIVE CHART OF THE FACTS I N THE CASE OF THE ASSESSEE AND THAT IN THE CASE OF NSE AND AFTER COM PARING THE FACTS 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 C ASE OF NSE THE STAND OF THE DEPARTMENT AS WELL AS THE DECISION OF THE TRIBU NAL WAS THAT THE CONSIDERATION PAID FOR ACQUIRING LEASEHOLD RIGHTS I N LAND IS A CAPITAL EXPENDITURE AND NOT RENT. 5.4. THE LD. CIT(A) FINALLY CONCLUDED THAT THE AMOU NT PAID BY THE ASSESSEE IS LEASE PREMIUM FOR ACQUIRING LEASEHOLD R IGHTS AND ADDITIONAL ITA NO.695/M/12 & C.O. NO. 06/M/2013 6 FSI IN RESPECT OF THE LEASED PLOT AND THE SAME IS N OT 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. 6. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) REV ENUE IS BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 8. THE LD. SENIOR LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK AND THE JUDICIAL DECISIONS RELIED UPO N BY THE RIVAL PARTIES. THE ENTIRE GRIEVANCE REVOLVES AROUND THE PREMIUM PA ID BY THE ASSESSEE TO M/S. MMRDA LTD. FOR THE LEASEHOLD RIGHTS ACQUIRED B Y THE ASSESSEE THROUGH THE LEASE DEED DT. 22 ND NOVEMBER 2004. IT IS THE SAY OF THE REVENUE THAT THIS LEASE PREMIUM WAS LIABLE FOR DEDU CTION OF TAX AT SOURCE FAILING WHICH THE ASSESSEE IS TO BE TREATED AS ASSE SSEE IN DEFAULT. IT IS THE SAY OF THE ASSESSEE THAT SUCH LEASE PREMIUM IS IN T HE NATURE OF CAPITAL EXPENDITURE AND THEREFORE THERE IS NO QUESTION OF D EDUCTION OF TAX AT SOURCE. FURTHER THE SAID LEASE PREMIUM DOES NOT C OME WITHIN THE PURVIEW OF THE DEFINITION OF RENT AS PROVIDED U/S. 194-1 OF THE ACT. 10. WE HAVE CAREFULLY PERUSED THE LEASE DEED AS EXH IBITED FROM PAGE-1 TO 42 OF THE PAPER BOOK. A CAREFUL READING OF THE SAID LEASE DEED TRANSPIRES THAT THE PREMIUM IS NOT PAID UNDER A LEA SE BUT IS PAID AS A PRICE FOR OBTAINING THE LEASE HENCE IT PRECEDES THE GRAN T OF LEASE. THEREFORE BY ITA NO.695/M/12 & C.O. NO. 06/M/2013 7 ANY STRETCH OF IMAGINATION IT CANNOT BE EQUATED WI TH THE RENT WHICH IS PAID PERIODICALLY. A PERUSAL OF THE RECORDS FURTHE R SHOW THAT THE PAYMENT TO MMRD IS ALSO FOR ADDITIONAL BUILT UP ARE AND ALS O FOR GRANTING FREE OF FSI AREA SUCH PAYMENT CANNOT BE EQUATED TO RENT. IT IS ALSO SEEN THAT THE MMRD IN EXERCISE OF POWER U/S. 43 R.W. SEC. 37(1) OF THE MAHARASHTRA TOWN PLANNING ACT 1966 MRTP ACT AND OTHER POWERS ENABLING THE SAME HAS APPROVED THE PROPOSAL TO MODIFY REGULATION 4A(II) AND THEREBY INCREASED THE FSI OF THE ENTIRE G BLOCK OF BKC. THE DEVELOPMENT CONTROL REGULATIONS FOR BKC SPECIFY THE PERMISSIBLE FSI. PURSUANT TO SUCH PROVISIONS THE ASSESSEE BECAME ENTITLED FOR A DDITIONAL FSI AND HAS FURTHER ACQUIRED/PURCHASED THE ADDITIONAL BUILT UP AREA FOR CONSTRUCTION OF ADDITIONAL AREA ON THE AFORESAID PLOT. THUS THE AS SESSEE HAS MADE PAYMENT TO MMRD UNDER DEVELOPMENT CONTROL FOR ACQU IRING LEASEHOLD LAND AND ADDITIONAL BUILT UP AREA. THE DECISIONS O F THE TRIBUNAL IN THE CASE OF M/S. NATIONAL STOCK EXCHANGE (SUPRA) AND M UKUND LTD (SUPRA) HAVE BEEN WELL DISCUSSED BY THE LD. CIT(A) IS HIS O RDER. THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F KHIMLINE PUMPS LTD. (SUPRA) SQUARELY AND DIRECTLY APPLY ON THE FAC TS OF THE CASE WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT PAYMENT FOR ACQUIRING LEASEHOLD LAND IS A CAPITAL EXPENDITURE. CONSIDERI NG THE ENTIRE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS VIS --VIS PROVISIONS OF SEC. 194-1 DEFINITION OF RENT AS PROVIDED UNDER THE SAI D PROVISION WE DO NOT FIND ANY REASON TO TAMPER OR INTERFERE WITH THE FIN DINGS OF THE LD. CIT(A) WHICH WE CONFIRM. 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. C.O. NO. 06/MUM/2013 ITA NO.695/M/12 & C.O. NO. 06/M/2013 8 13. AS WE HAVE DECIDED THAT THE ASSESSEE IS NOT LIA BLE TO DEDUCT TAX AT SOURCE IN REVENUES APPEAL IN ITA NO. 695/M/2012 T HE CROSS OBJECTION RAISED BY THE ASSESSEE BECOME OTIOSE. 14. IN THE RESULT THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.07.2013 . ' 5 0 4) & 6 7'8 3.7.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT & '( / ACCOUNTANT MEMBER MUMBAI; 7' DATED 03.07.2013 . . ./ RJ SR. PS ' 5 ' 5 ' 5 ' 5 0 00 0 -1' -1' -1' -1' : ')1 : ')1 : ')1 : ')1 / COPY OF THE ORDER FORWARDED TO : 1. * / THE APPELLANT 2. -.* / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. '<9 -1 / DR ITAT MUMBAI 6. 9= > / GUARD FILE. ' 5 ' 5 ' 5 ' 5 / BY ORDER .'1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ (DY./ASSTT. REGISTRAR) / ITAT MUMBAI