TaxTMI 
TaxTMI 
2012 (8) TMI 416
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.... Assessee had taken on lease a land of 151.85 acres for a period of 99 years from M/s SIPCOT Ltd., which is a company incorporated by the Government of Tamil Nadu under Companies Act, 1956. An amount of Rs. 28.41 Crores was paid by the assessee-company to M/s SIPCOT Ltd. as upfront charges for the lease. M/s SIPCOT Ltd. is the nodal agency for development of land for SEZ at Sriperumbudur. As per the allotment letter dated 11.1.2007 of M/s SIPCOT and the lease deed entered by the assessee with M/s SIPCOT Ltd. dated 30.4.2008, the annual lease rent was Rs. 1 per year for 98 years and Rs. 2 for the 99th year. Such amounts were also paid in advance. The upfront fee was non-refundable. Such upfront fee consisted of Rs. 27.092 Crores, non-refundable upfront charges and Rs.1.3215 Crores being payment towards provision of water and pipeline upto the boundary limit. Assessing Officer was of the opinion that such amounts paid came within the definition of "rent" as per the Explanation to Section 194-I of the Act. According to him, assessee was bound to deduct tax at source at the rate of 20%, which it had not done. A.O. also noted that M/s SIPCOT Ltd. though owned by Tamil Nadu Government, w....
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.... nature of the payment towards upfront fee was nothing but rent. According to ld. CIT(Appeals), per year rent was infinitesimally small and therefore, the huge amount paid as upfront fee was only rent advance. As per ld. CIT(Appeals), such payment obviated the problems for M/s SIPCOT Ltd. in collecting the rent annually. Therefore, he held that A.O. was justified in applying Section 194-I of the Act and holding that assessee had failed to deduct tax at source as stipulated under the said Section. However, ld. CIT(Appeals) noted that M/s SIPCOT Ltd. had included upfront charges received by it as well as water connection charges as a part of its income and paid tax thereon. Therefore, according to him, TDS could not be recovered from the assessee though assessee was one in default, in view of the decision of Hon'ble Apex Court in the case of Hindustan Coca Cola Beverages (P.) Ltd. (supra). Ld. CIT(Appeals) thus confirmed the order of the A.O., but, nevertheless, held that payee having paid the tax, no TDS can be recovered from the assessee. However, according to him, interest under Section 201(1A) of the Act could be levied on the assessee in respect of tax deductible at source on su....
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....and shown accordingly in its balance sheet. There is also no dispute that the amount was shown by M/s SIPCOT Ltd. as part of its business revenue falling under the head "income from business" and M/s SIPCOT Ltd. had paid advance tax on its business income on due dates. Ld. CIT(Appeals) has reproduced portion of letters of M/s SIPCOT Ltd. and this is once again reproduced hereunder by us, for brevity:- "i. The upfront charges paid by your company has been treated as "deemed Sale" and accounted as 'income from Area Development Activity' as detailed below: a. Rs.1050 lakhs paid for 100 acres of land allotted on 11.1.2007 relating to the fin. Year 2006-07 (Asst. Yr.: 2007-08) b. Rs. 1659.20 lakhs paid for 51.85 acres of land in SEZ area allotted on 10.4.2007 relating to the Fin. Yr: 2007-08 (Asst. Yr.: 08-09) is accounted in that year. ii. The water connection charges collected of Rs.132.15 lakhs on 22.2.08 has been treated as Misc. Income during the year 2007-08 (a.Yr: 2008-09)" "Please refer our letter 1st cited confirming that your company's payment of Rs. 1050 lakhs for allotment of 100 acres of land on 11.1.2007 was accoun....
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....arately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) Fittings, whether or not any or all of the above are owned by the payee; (ii) where any income is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. 9. What the assessee had paid to M/s SIPCOT Ltd. was under a lease agreement. One of the arguments taken by learned A.R. was that the lease agreement was dated after the end of the relevant previous year and hence the payments made ought not be considered as pursuant to the lease agreement. However, in our opinion, this is not relevant. Reason being that payments were effected during the relevant previous year and it is an accepted position tha....