Lease premium for additional FSI is not rent under TDS rules, so no deduction liability arises.

Lease premium and charges paid for allotment of additional FSI on a long-term lease were treated as not constituting rent under section 194-I of the Income-tax Act, 1961. On that basis, the payer had no obligation to deduct tax at source, and the consequential demand and interest under sections 201(1) and 201(1A) could not be sustained. The Tribunal followed its consistent earlier view that such premium is a capital or allotment-related payment rather than rent, with the result that the TDS disallowance was deleted and the assessee's position was upheld.

---

---

Issues: Whether payment of lease premium and charges for additional FSI made to MMRDA constituted rent within the meaning of section 194-I of the Income-tax Act, 1961, so as to require deduction of tax at source and attract liability under section 201(1) and section 201(1A).

Analysis: The payments were made towards lease premium and charges connected with allotment of additional built-up area and related amenities on a long-term lease basis. The Tribunal followed its earlier consistent view that such premium paid for additional FSI does not amount to rent for the purposes of section 194-I. Since the payment was not in the nature of rent, the assessee was not obliged to deduct tax at source, and the consequential demand and interest under section 201(1) and section 201(1A) could not survive.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Final Conclusion: The Revenue's appeal failed and the deletion of the TDS demand and interest was upheld.

Ratio Decidendi: A lease premium paid for allotment of additional FSI on a long-term lease is not rent under section 194-I, and no corresponding TDS liability under section 201 arises.

---