Lease premium for leasehold rights was not rent, so no TDS obligation arose and default demand could not survive.

Lease premium paid for leasehold land and additional built-up area was characterised as a price for obtaining leasehold rights, not as a periodic payment for use of land. On that basis, it did not fall within the statutory meaning of rent under section 194-I, so no obligation to deduct tax at source arose. As the amount was not rent, the consequential demand under section 201(1) and section 201(1A) could not be sustained, and the assessee could not be treated as an assessee in default.

---

---

Issues: Whether lease premium paid to MMRDA for leasehold land and additional built-up area was liable for deduction of tax at source as rent under section 194-I of the Income-tax Act, 1961, and whether failure to deduct tax could justify treating the assessee as in default under section 201(1) and section 201(1A).

Analysis: The payment was found to be a premium for obtaining leasehold rights and for acquiring additional built-up area, payable as a price for the grant of lease and not as a periodic payment for use of land. On that basis, it was held not to answer the statutory meaning of rent under section 194-I. Since the payment did not constitute rent, the obligation to deduct tax at source did not arise, and the consequential demand under section 201(1) and section 201(1A) could not survive.

Conclusion: The lease premium was not exigible to tax deduction at source as rent, and the assessee could not be treated as an assessee in default.

---