Lease premium for leasehold rights is not rent under section 194-I, so no TDS or default consequence follows.

A lump-sum lease premium paid for acquiring leasehold rights and additional development entitlement was treated as consideration for acquisition of capital rights, not as a periodic payment for use of land or building. On that basis, it did not fall within the statutory definition of rent under section 194-I of the Income-tax Act and no tax deduction at source was required. Consequently, the payer could not be treated as an assessee in default under sections 201(1) and 201(1A).

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Issues: Whether lease premium paid to MMRDA for acquiring leasehold rights and additional FSI constituted rent requiring deduction of tax at source under section 194-I of the Income-tax Act, 1961, and consequentially whether the assessee could be treated as in default under section 201(1) and section 201(1A).

Analysis: The premium was held to be consideration for obtaining leasehold rights and additional development entitlement, not a periodic payment for use of land or building. The payment preceded and facilitated the grant of leasehold rights and was treated as a price for acquisition of such rights. Following the earlier co-ordinate Bench view on similar facts, the Tribunal accepted that such payment was in the nature of capital expenditure and did not fall within the statutory definition of rent under section 194-I.

Conclusion: The lease premium was not liable for tax deduction at source under section 194-I, and the assessee could not be treated as an assessee in default under section 201(1) and section 201(1A).

Ratio Decidendi: A lump-sum premium paid for acquiring leasehold rights and associated development entitlement is not rent within section 194-I and therefore does not attract TDS.

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