Lease premium for long-term land rights is not rent, so no TDS obligation arises under income-tax rules.

Lump-sum lease premium paid for acquiring long-term leasehold rights in land was treated as consideration for transfer of an interest in property, not as rent. Applying the distinction between premium and rent under section 105 of the Transfer of Property Act and prior coordinate bench rulings, the Tribunal held that such payment falls outside section 194I of the Income-tax Act. As no tax deduction at source was required, the default provisions under sections 201(1) and 201(1A) did not apply, and the Revenue's appeal was rejected.

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Issues: Whether lease premium paid for acquiring leasehold rights in land was rent within the meaning of section 194I of the Income-tax Act, 1961 so as to require deduction of tax at source, and whether the assessee was liable to be treated as an assessee in default under sections 201(1) and 201(1A).

Analysis: The payment was made as a lump sum premium for acquiring leasehold rights over land for a long term, with only a nominal annual rent. The Tribunal applied the distinction between premium and rent drawn in section 105 of the Transfer of Property Act, 1882, and followed earlier coordinate bench decisions holding that a premium paid for acquisition of leasehold rights is consideration for transfer of an interest in property and not payment for mere use of land. The Tribunal held that such premium is capital in nature and does not fall within the definition of rent in section 194I. As the payment was not rent, no obligation to deduct tax at source arose and the default provisions under sections 201(1) and 201(1A) were not attracted.

Conclusion: The lease premium was not liable for TDS under section 194I, and the assessee could not be treated as an assessee in default under sections 201(1) and 201(1A). The Revenue's appeal was rejected.

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