Lease premium treated as capital expenditure, not rent, so TDS under section 194I did not apply.

Lease premium paid for acquiring leasehold rights was treated as capital expenditure and not as rent for TDS purposes under section 194I. The Tribunal, relying on prior judicial rulings, rejected the revenue's attempt to characterise the premium as advance rent and held that the payment was made to secure substantial rights in land, not for use of property as recurring rent. On that basis, the Tribunal also found no failure to deduct TDS under section 194I on the lease premium, and upheld the First Appellate Authority's view in favour of the assessee.

---

---

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

Analysis: The payment was for acquisition of leasehold rights in land for infrastructural development and was treated as capital in nature rather than as consideration for use of land in the nature of rent. The earlier decision in the assessee's own case on identical facts was followed, holding that section 194I is attracted only to income by way of rent and not to a capital payment made for obtaining leasehold rights with substantial interest in the land.

Conclusion: Lease premium was not rent, no tax was deductible at source under section 194I, and the assessee could not be treated as an assessee in default under section 201(1). The issue was decided in favour of the assessee.

---