Lease premium for leasehold rights is not rent under section 194-I, so no TDS liability arises on such payment.

Lease premium paid as consideration for acquiring leasehold rights and additional FSI was treated as a price for obtaining development rights, not as a periodic payment for use of land. On that basis, it did not fall within the definition of rent under section 194-I, so the payer had no obligation to deduct tax at source. Consequently, liability as an assessee in default under sections 201(1) and 201(1A) could not be sustained.

---

---

Issues: Whether lease premium paid to CIDCO for acquiring leasehold rights and additional FSI is "rent" within the meaning of section 194-I of the Income-tax Act, 1961, and whether failure to deduct tax at source on such payment justified treatment of the payer as an assessee in default under sections 201(1) and 201(1A).

Analysis: The payment described as lease premium was examined in the context of the lease arrangement and the nature of the consideration. The decisive consideration was that the amount was paid as a price for obtaining leasehold rights and related development benefits, and not as a periodical payment for use of land. On that footing, the payment did not answer the statutory definition of rent under section 194-I. Since the sum was not rent, the obligation to deduct tax at source did not arise, and consequential liability under sections 201(1) and 201(1A) could not be sustained.

Conclusion: The issue was decided in favour of the assessee. Lease premium paid for acquiring leasehold rights and additional FSI was held not to be rent under section 194-I, and no TDS liability arose on that payment.

Ratio Decidendi: A payment made as lease premium for acquisition of leasehold rights is capital in nature and does not constitute rent under section 194-I; therefore, no deduction of tax at source is required on such payment.

---