2014 (1) TMI 1497 - AT - Income Tax

Lease premium not rent for tax, no TDS duty: Tribunal decision on Revenue appeal

The Tribunal dismissed the Revenue's appeal, ruling that the lease premium paid to CIDCO was not considered rent under section 194-I of the Income Tax ... Liability to deduct TDS u/s 194I of the Act - Whether the assessee is required to deduct tax at source from the payment of lease premium made to CIDCO during the years under consideration u/s 194I of the Act – Held that:- The decision in The ITO (TDS) 3 (5), Versus M/s. Wadhwa & Associates Realtors Pvt. Ltd. [2013 (9) TMI 261 - ITAT MUMBAI] followed - The payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent - payment for acquiring leasehold land is a capital expenditure - the lease premium paid by the assessee to MMRDA not being in the nature of rent as contemplated in section 194-I of the Act, the assessee was not liable to deduct tax at source from the said payment and hence could not be treated as the assessee in default u/s 201(1) & 201(1A) of the Act – Decided against Revenue. Issues:Whether the assessee is required to deduct tax at source from the payment of lease premium made to CIDCO under section 194-1 of the Income Tax Act, 1961.Analysis:The appeal was filed by the Revenue against the order passed by the ld. CIT(A) for the assessment year 2008-09, raising the issue of whether the assessee should have deducted tax at source from the lease premium paid to CIDCO. The A.O. held the assessee liable for not deducting tax, citing that the payment constituted rent under section 194-I. The A.O. emphasized that the one-time lump-sum payment did not change the character of rent, supported by judicial pronouncements. The ld. CIT(A), after considering submissions and a remand report, held that the premium paid was not rent under section 194-I, cancelling the demand against the assessee. The Revenue appealed to the Tribunal.The Tribunal noted a similar issue in another case where it was held in favor of the assessee, emphasizing that the premium paid for leasehold rights did not fall under the definition of rent in section 194-I. The Tribunal referred to the lease deed, determining that the premium was paid as a price for obtaining the lease, preceding the grant of lease, and not periodic rent. The Tribunal also considered additional built-up area and FSI granted, concluding that the payment was for acquiring leasehold land and additional built-up area, constituting capital expenditure. Relying on previous decisions and legal provisions, the Tribunal upheld the ld. CIT(A)'s decision, dismissing the Revenue's appeal.Therefore, the Tribunal dismissed the Revenue's appeal, holding that the lease premium paid to CIDCO was not in the nature of rent as per section 194-I, and the assessee was not required to deduct tax at source, thus not treated as the assessee in default under section 201(1) & 201(1A) of the Act.