TaxTMI 
TaxTMI 
TaxTMI 
2013 (8) TMI 598
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..... 3. The relevant facts are that assessee has paid lease premium of Rs.50 crores in assessment year 2006-07, Rs.946.06 crores in assessment year 2007-08, Rs.1033.61 crores in assessment year 2008-09 and Rs.146.82 crores in assessment year 2009-10 to CIDCO in order to acquire various lands lying at Navi Mumbai from CIDCO on lease basis. The relevant undisputed facts relating to above lands are summarised in the orders of authorities below and we state the same relating to assessment year 2006-07 as under : i) The Government of Maharashtra through resolution dated 18.3.1970 decided that a subsidiary company of the State Industrial Investment Corporation of Maharashtra Ltd. Should be entrusted the task of development of trans-Thana and trans-harbour areas in Uran, Panvel and Thana with a view to decongest and provide relief to Mumbai City and also to ensure the integrated development of the region along with its industrial development. Later, City and Industrial Development Corporation of Maharashtra Ltd (CIDCO) was created and established under the Companies Act, 1956 and was designated as new town development authority for this task. ii) That government decided that privately own....
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....e deed(s) ix) That the lease deed also grants the assessee power to assign its right, title or interest or create a security interest in respect of its right, either fully or in parts thereof in favour of the lenders including granting of step-in-rights in the event of default under the financing agreement for the purposes of obtaining fiancé. x) That the assessee has also acquired sole rights for marketing of the NMSEZ and the industrial/commercial projects to potential tenants 4. In respect of above payments made by assessee to CIDCO towards lease premium, the AO stated that no deduction of TDS has been made by assessee for any of such payments. That payments/crediting of lease premium falls within the ambit of section 194-I of the Act. The AO issued show cause notice as to why the assessee should not be treated as an assessee in default u/s 201(1) and 201(1A) of the Act for not deducting tax u/s 194-I of the Act of lease premium paid by it to CIDCO for all the assessment years under consideration i.e. A.Ys.2006-07 to 2009-10. 5. On behalf of the assessee it was submitted that pre- dominant objective for the payment of lease premium under lease deed(s) is acquisition o....
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.... said payment was made for obtaining leasehold rights. The assessee also stated that the basic motive for making payment of lease payment for the lease deed is towards transfer of larger interest/ and lease hold rights by CIDCO in the leasehold plots and not just for its use as envisaged u/s 194-I of the Act. Therefore, there was no default for not deducting TDS as question of deduction of TDS on the said payment does not arise. It was also stated before the AO that the lease premium paid are capital receipts in the hands of CIDCO and are completely distinguished from rent. Hence, applicability of section 194-I is not applicable. 6. AO did not agree with the submissions of assessee and after considering the definition of rent under section 194-I of the Act in the light of Explanation(i) thereof stated that definition of "rent" creates a legal fiction , whereby almost anything and everything payment in relation to the property under lease transactions qualify for rent for the purposes of Section 194-I of the Act. Hence lease premium partakes of the character of rent. AO has further stated that there are various restrictive clauses in the lease agreement which negates the assessee's....
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.... maintenance of infrastructure administration and management of the "NMSEZ" along-with the rights to determine, levy, collect, retain and utilize the user charges, fees for provision of services and/or tariffs in accordance with the terms therein. On behalf of the assessee it was contended that rent as defined in section 194-I of the Act is essentially a payment only for the use of any land or building. However, the predominant objective for payment of lease premium under the lease deed(s) is acquisition of leasehold rights in the said leasehold plots and not for the use of the plots. Lease premium are consideration for purchase of larger interest in the said leasehold plots which comprises of bundle of rights including but not limited to right of possession, right of long term enjoyment, right of development by way of construction of building thereon, right to sale constructed premises on ownership basis, right to collect and appropriate the sale proceeds, etc. That grant of lease by CIDCO in favour of assessee is a capital assets. Hence the consideration received by CIDCO is a capital receipt and not income by way of rent. The ld. CIT(A) has also stated that assessee further subm....
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.... in the hands of lessee as Rent for the purpose of deduction of tax u/s 194-I The above contention seems very absurd and authority can not take separate stand for treating a payment made by appellant. The basic motive for making payment of Lease Premium under the Lease Deed is towards transfer of larger interest/ right (leasehold right) by CIDCO to us in the said leasehold plots arid not just for its use as envisaged under section 194-I of the Income-tax Art. 1961. Taking into account the above referred discussion, payments made towards lease premium for acquisition of land and hence are not rent for the purpose of TDS u/s 194-I of the Income Tax Act. Thus, question of deduction of TDS on above payment will not arise." 8.1 It is also observed on perusal of order of ld. CIT(A) that assessee also referred clauses (v) and (vi) of sub-section (47) of section 2 and section 269UA(d) of the Income Tax Act and stated that lease of land is considered as an immovable property and the lease premium paid to CIDCO is consideration for transfer of immovable property which is taxable under section 45 as capital gains on sale of capital assets. Therefore, in the hands of purchaser consideratio....
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....s in the case of the assessee. 6. The Pune Tribunal upheld the stand of the revenue in the case of Devi Construction Co. [IT Appeal No. 1769(Pune)] that the expenditure claimed by the assessee-company was capital in nature. In the aforesaid judgments various courts have confirmed the Dept's view that lease premium is a capital expenditure. Therefore, when it comes to a deductibility of TDS on such payment, the Department cannot take a stand that it is a revenue expenditure. Therefore, TDS is deductable u/ s.194-I. Further in the following cases lease premium received has been held as a capital receipt and not in the nature of advance rent." 1. Decision of Supreme Court in the case of Commissioner of Income-tax V/s Panbari Tea Co. Ltd. OF INDIA (1965) 57 ITR 422 (SC). Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922J - Income - Chargeable as - Assessment year 1952-53- Assessee company leased out tea estates along with machinery and buildings and received premium -ITO made assessment treating premium as a revenue receipt - Whether since, there was a transfer of substantive interest of lessor in estates to lessee and a confermen....
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....ued as Income by way of Rent for the purposes of s.194-I. If at all, it is Income by way of Capital gains in the hands of MMRDA and accordingly it is not liable to deduction of tax at source" 8.2 L.d CIT(A) forwarded the written submissions of the assessee to the AO for his comments. Ld. CIT(A) has stated that the AO submitted his detailed parawise comments on the submissions of the assessee vide letter dated 19.10.2011. That AO in his submission reiterated the stand that the amended definition of "rent" contained in section 194-I of the Act w.e.f. 13.7.2007 is very wide and comprehensive and covers "any payment by whatever name called under any lease, sub-lease, tenancy or other agreement or arrangement" and leaves no scope for any interpretation. That all the payments under the lease by whatever name called are rent within the meaning of section 194-I of the Act. AO has stated that one has to look at substance and not the form of the transaction while considering the provision of law. The AO also placed reliance on the decision of the Hon'ble Calcutta High Court in the case of Braithwaite and Co. India Ltd, 111 ITR 542 and Karnataka High Court Judgment in the case of CIT V/s HMT....
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....lauses in lease deed(s) do not in any manner convert a premium for leasehold right into an advance rent for use of land. Ld. CIT(A) has stated that the assessee summarises the submissions and the same have been stated at pages 28 to 30 of the impugned order(s) of ld.CIT(A) as under : "To summaries the submissions, the Appellant respectfully submits that : i) The payment made by the Appellant (Lessee) to the CIDCO Lesser is for acquiring the right in the lease premises and not an advance rent for use of the lease premises over a period of 60 years; ii) The lease premium has been paid for getting possession of the lease property before the lease agreement is entered into. iii) The Appellant (Lessee) has a right to own and transfer the lease property for a consideration subject to compliance of conditions stipulated in the lease agreement. iv) The lease property under the agreement can be inherited or succeeded by the legal heir or successor; v) The clauses in the lease agreement refer to the payment made by the Appellant (Lessee) as a premium being consideration for acquiring the lease hold property. None of the clauses in the lease agreement refers to the premium paid by the a....
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....arly confirms the view that the premium paid for acquiring leasehold rights in land constitutes a consideration of capital nature and not an advance rent for use of the land over the lease period. On the plain reading of the lease agreement the prevailing facts of the case and taking a wholistic view of facts and circumstances of the case and the position in law, such lease premium paid can not be considered to be a rent within the meaning of section 194-I. The Appellant once again submits that its submission concerning lease premium paid is fully supported by various judicial pronouncements which are discussed in detail by the Hon'ble ITAT special bench, Mumbai in the case of Mukund Ltd. xii) Recently the Hon'ble ITAT, Mumbai had an occasion to consider similar issue wherein the lease premium paid by National Stock Exchange of India Ltd. to MMRDA for acquiring leasehold right in land at Bandra Kurla Complex was claimed to be a deductible advance rent over the lease period. The Hon'ble ITAT following Mukund Ltd's case and clearly held that such payment of lease premium constitutes a capital expenditure for acquiring lease hold right and not an advance rent for a lease period. In ....
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....reement between the appellant and CIDCO, the appellant is required to make payment of lease premium in respect of the land which is being acquired by CIDCO and being allotted to the appellant from time to time. v. As per this Development Agreement, the appellant is authorized to develop and market the NMSEZ. vi. During the current year, the appellant was allotted 450 hectares of land as described in para 5.2 above for an aggregate amount of lease premium of Rs.285.87 crores, vide lease deed dated 16.3.2006. Out of this amount, an amount of Rs.50 crores has been paid by the appellant in the current year. vii. By virtue of the said lease deed(s), the appellant has acquired leasehold right in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining the infrastructure, administering and managing the SEZ. The appellant also has acquired the rights to determine, levy, collect. retain and utilize the user charges, fees for provision of services and / or tariffs in accordance with the terms land conditions provided in the Development Agreement and the lease deed(s). vi....
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....uring the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred and eighty thousand rupees] : [Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section.] Explanation.--For the purposes of this section,-- [(i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately 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, i....
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....ery, etc. under an arrangement which is similar to a transaction between a landlord and a tenant. However in many cases, a lease transaction may not necessarily be similar or identical to the transaction between a landlord and a tenant; and instead it may indicate a sale transaction in the sense that certain more valuable rights in the prooperty are transferred. As per legal understanding of the terms, the transaction in which "licence" ' is granted to the transferee for use of the property is more often likely to be to the transaction between a landlord and a tenant whereas in a 'lease' transaction pertaining to an immovable property, it may not be so very often. Therefore, in my opinion, although the meaning of term 'rent' used in the above section is very wide, still cannot be applied to all and any of the transactions out of context indiscriminately. 5.22 Therefore, if the tenant/ lessee/ licensee of the property uses the property for his own purpose or employs it for his own benefit, the consideration paid would be 'rent'. However, if the property is exploited in a manner that its identity does not remain the same and thereafter it is sold for a profit, I'm afraid, it would n....
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....s right of development and exploitation of land to the appellant and these rights are therefore capital in nature. 5.25 I do agree with the Ld. Addl CIT and the AO that the TDS provisions are a separate code in themselves. I also agree that it is not desirable or permissible to pick out a word or sentence from the judgement of a Court divorced from the context of the question under consideration and treat it to be the complete law declared by the Court (refer CIT Vs. Sun Engineering (supra)]. However, everything would depend upon the facts of each case and the facts of the cases cited as well as the context in which the cited decisions have been delivered. - 198 ITR 297(SC) 5.26 Although the term 'rent' has been defined in the above section of the Act. other terms like 'lease', 'lease premium', 'lessor' and 'lessee' etc. have not been defined in the Act. It may be useful to refer to the meaning of these terms as provided in the Transfer of Property Act, 1882. Section 105 of the Transfer of Property Act defines the term lease as "A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consid....
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....receipt. It was a single payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties were on a different footing." 5.31 In the Member for the Board of Agricultural Income Tax Assam V/s Sindhurani Chaudhrani and ors, 32 ITR 169, the Hon'ble Supreme Characterized a lease premium (salami) as a lumpsum non-recurring payment. It has been held : "Where salami is in the form of a lumpsum-non- recurring payment made by a prospective tenant to the landlord as a consideration for the settlement of agricultural land and parting with certain rights of the land in the land in favour of the prospective tenants, and is paid anterior to the constitution of relationship of landlord and tenant, it is not "rent" within the meaning of the word used in the definition of "agricultural income" in section 2(1)(a) of the Assam Agricultural Income Tax Act, 1939. It has all the characteristics of a capital payment and it is not revenue. It is, therefore, not "agricultural income" with....
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.... This section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt." 5.35 The Court further observed that : "in some cases, the so-called premium is in fact advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of the parties." After considering various facts and provisions of law, the Supreme Court, while approving the order of High Cout held that the receipt of premium is capital receipt and not revenue receipt. 5.36 Hon'ble Bombay High Court in the case of Khimline Pumps Ltd., 258 ITR 459 have on the basis of identical facts and circumstances held that, an amount of Rs.45 l....
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....censee for the allotment of 50 acres of land in Kalva Industrial Area. The plea of the assessee that the lease agreement was not entered into till date and hence, the status of the assessee is that of a licensee only, makes no difference, since on page-2 of the agreement of the assessee- company with MIDC dated 5-3-1992, it is specifically mentioned that the licensee shall be deemed to be bare licensee only of the premises at the same rent and subject to same terms as if the lease had been actually executed. A reading of the agreement dated 5-3-1992 entered into with MIDC clearly shows that the amount of Rs. 2.04 crores were paid by the assessee-company to MIDC as "Premium" or "Salami" for the acquisition of the premises of lease for a period of 99 years. In reply to a specific query from the Bench, the Ld. Counsel for the assessee submitted that the cost of boundary walls on this 50 acres of land was capitalized in the account books of the assessee and depreciation was claimed by the assessee. The action of the Assessing Officer in allowing proportionate rent in the subsequent assessment years 1995-96 and 1996-97, shall not alter the character of the amount paid by the assessee to....
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....e of R.K.Palshikar, 172 ITR 311 Hon'ble Supreme Court held that the premium received for grant of lease of a plot of land for 99 years is chargeable as "capital gains" as the assessee had transferred an asset of enduring nature viz right of possession and enjoyment of the property. Thus various judgments delivered by the Courts and Tribunals brings out a distinction between the lease premium and rent under the Income tax laws which are also in line with the principles of general law laid down under Transfer of Property Act. 5.39 The AO has cited cases where the term 'rent' was given wide meaning as envisaged in section 194-I of the Act and in view of the facts and the circumstances of the case. In all these cases, the decision given is not at all in conflict with the discussion and the finding arrived at paras 5.20 to 5.22 above. In the case of Krishna Oberoi V/s Union of India (supra), the amount paid for use and occupation of hotel rooms was considered as rent within the meaning of section 194-I of the Act. It was held that there was no weighty or sound reason to limit the meaning of work "rent" occurring in explanation to section 194-I only to the payment made by a tenant or le....
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....Law. I find that in none of the above cases the court has held that the lease premium in similar circumstances is in the nature of advance rent and hence liable for deduction of TDS u/s 194-I of the Act. The cases relied upon by the AO are thus distinguishable on facts and in law and the same cannot be made applicable to the facts of the present case where the issue raised is completely different. I therefore do not find any merit in the submission of the AO so far as the case laws cited by him are concerned. 5.42 The AO has cited the decision of Calcutta High Court in the case of Braithwaite & Co India Ltd, 111 ITR 542 where the assessee had taken on lease, a whole undertaking for 99 years on payment of rent of Rs.4 lakhs per annum from Angus Co Ltd The assessee claimed the same as the revenue expenditure in its income tax return which was not accepted by the AO, who held that the above arrangement was in effect a sale of the undertaking to the assessee. On these facts, Hon'ble High Court held that the assessee is entitled for deduction of rent, which was held to be revenue expenditure It is evident from the facts of this case that what was taken on lease by the assessee was not ....
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....cision of non-jurisdictional High Courts is not binding. 5.44 Since the principles laid down in all the cases are similar, I have not discussed all the decisions cited by the two sides and have quoted only a few landmark judgments so as to avoid repetition (It may be noted that the decision of Calcutta High Court in the case of Purnendu Mulick 116 ITR 591 and Patna High Court in the case of Sri Sri Raja Shiva Prasad Singh of Jharia & Raja Jyoti Prasad Singh Deo of 1 ITC 384 (all supra) are also noteworthy]. However, it is worthwhile to note that similar issue came up very recently before the Hon'ble ITAT, Mumbai in the case of M/s National Stock Exchange of India Limited in ITA Nos. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00. The facts of this case are that The Bombay Metropolitan Region Development Authority (BMRDA) [Now known as Mumbai Regional Development Authority i.e MMRDA] had given on lease a plot of land in G-Block of the Bandra Kurla Complex to National Stock Exchange for a total lease premium of Rs.90.60 crores for a period of 80 years. The assessee in its computation of total income had given a note explaining that a claim for write off o....
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....ssment years under consideration are deleted by him. Hence these appeals by the department before the Tribunal. 14. Ld. DR while supporting the order(s) of the AO submitted that assessee acquired right to use land for a period of 60 years under lease deed(s) entered into between the assessee and the CIDCO. That the assessee has not acquired the ownership right for the land. Thus, the AO had rightly treated so called lease premium as rent. Hence the said lease premium paid by the assessee to CIDCO is covered within the meaning of rent as per section 194-I of the Act. He submitted that the definition of rent provided u/s 194-I of the Act is extensive and the word "any payment" implies that it would include all sorts of payments made under any agreement/arrangement. He submitted that the assessee made the lump sum payment for use of land for a period of 60 years and therefore, it is a rent under section 194-I of the Act. He submitted that such lumpsum premium paid by the assessee is an advance rent and therefore, the assessee was required to deduct tax at source u/s 194-I of the Act. Ld. DR submitted that a similar issue was considered by the Chennai Bench of the Tribunal in the case....
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....the similar issue on identical facts and held that consideration paid for acquiring leasehold rights in land is a capital expenditure and not rent. Ld. AR submitted that the said decision of M/s National Stock Exchange of India (supra) and of Mumbai Bench of the Tribunal are considered by ld. CIT(A) in paragraph 5.44 of the impugned order(s) and also by the Tribunal in its decision in the case of M/s Wadhwa and Associates Realtors Pvt Ltd. (supra) to hold that provisions of section 194-I do not apply to the payment for acquiring leasehold land as it is a capital expenditure. Ld. AR submitted that issue is squarely covered in favour of the assessee by aforesaid decisions of the Tribunal which have been decided by following the decisions of the Hon'ble Apex Court and the decisions of jurisdictional High Court as well as other High Courts(supra). Therefore, the decision of the ld. CIT(A) is right and the same may be confirmed. 16. Ld. DR in his rejoinder submitted that the said decisions relied upon by the ld. AR (supra) are distinguishable as the same have been decided on the issue as to whether payment made by the assessee under lease agreement is a capital expenditure or not. Ther....
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....ing (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.]" 18. On perusal of the explanation, we agree with the ld. DR that the word "rent" as defined u/s 194-I has a wide meaning than the rent in common parlance. 19. In the case before us, the assessee has entered in to lease agreements with CIDCO for acquisition of leasehold rights in the land to develop and operate the Special Economic Zone at Navi Mumbai. Assessee has paid premium for demised lease land. The question before us is as to whether the said lease premium paid by the assessee to CIDCO to acquire leasehold rights for 60 years under the lease deed(s) is liable for deduction of tax at source being rent withi....
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....ase deed(s) for the demised land to acquire entire rights of the land for a period of 60 years. Therefore, we are of the considered view that the said payment of lease premium is a payment for acquisition of leasehold land and not merely for use of land. The assessee has made payment for entering into lease agreements to acquire lease hold rights in the land for a period of 60 years and not under a lease. Similar issue came up before the Special Bench ITAT Mumbai in the case of Mukund Ltd. (supra). The assessee acquired a land on lease for a period of 99 years from the Maharashtra Industrial Development Corporation (MIDC) and paid Rs.2.04 crores as premium of leasehold land and apart from fixing annual rent at Rs.1 per annum. The assessee claimed that the said premium on leasehold land is a revenue expenditure, which was disallowed by the AO holding it as a capital in nature. Ld. CIT(A) held that the premium cannot be treated as capital expenditure as the assessee did not acquire ownership of land. It was held that it was an expenditure relatable to 99 years and should be allowed on proportionate basis. However, on further appeal to the Tribunal, the Tribunal held that the benefit ....
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.... transfer of title in favour of the lessee though the lessor has the right of reversion after the period of lease terminates. It was held that grant of mining lease at a premium is a capital asset. The Hon'ble Delhi High Court also brought out the difference between the amount payable for acquiring lease hold rights as premium and the amount which would be payable for use of assets as rent in Bharat Steel Tubes Ltd V/s CIT (2001) 252 ITR 622(Del). Their Lordships have held that when the premium is paid at the beginning of the mining lease for a long period, ordinarily represents the purchase of an out and out sale of the property and the sum received is capital and not income, but rent or royalty paid periodically is income. It was held that the principle is the same, whether the premium is for a simple lease of land or for a lease of mineral rights. Therefore, when the interest of the lessee is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. That the former is capital and the later is revenue in nature. Their Lordships of the Hon'ble Delhi High Cou....
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..... CIT(A) of Raja Bahadur Kamakhya Narain Singh of Ramgarh (supra) and the case of the Hon'ble Apex Court in the case of Panbari Tea Co. Ltd. OF INDIA (supra) squarely apply to the facts of the case before us that the lease premium paid by the assessee to CIDCO for acquiring leasehold land is capital expenditure to acquire capital asset and not for the use of land. Therefore, we agree with ld. AR that the lease premium paid by the assessee for acquiring leasehold land with a right to develop and market, NMSEZ, cannot be said to be an advance payment of rent. Accordingly, premium paid by the assessee for acquiring leasehold land under the lease deed(s) entered into, although with restrictive covenants is a capital expenditure, and it does not fall within the ambit of rent under section 194-I of the Act. 21.3 We observe that similar issue has also been considered recently by the Mumbai Bench of Tribunal vide order dated 3.7.2013 (supra) in the case of M/s Wadhwa and Associates Realtors Pvt Ltd.(supra) and the Tribunal vide para 5 of the said order has held that the ld. CIT(A) is justified to hold that the whole transaction towards grant of leasehold transaction right to the assessee ....
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....and tenant, it is not "rent" within the meaning of the word used in the definition of "agricultural income" in section 2(1)(a) of the I.T. Act. It has all the characteristics of a capital payment and it is not revenue. The Ld. CIT(A) further discussed certain other judicial decisions and in particular the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs Khimline Pumps Ltd., 258 ITR 459 wherein the Hon'ble Jurisdictional High Court has held that an amount of Rs. 45 lakhs paid by the assessee to M/s. APVE Ltd., for acquisition of leasehold land was a capital expenditure and hence the same was not deductible. The Ld. CIT(A) has further considered the decision of the Special Bench of Mumbai Tribunal in the case of JCIT Vs Mukund Ltd. 106 ITD 231 wherein the issue was whether the premium paid for acquiring leasehold right in land is revenue or capital . The Special Bench has held that the same is capital expenditure. 5.2. The Ld. CIT(A) has distinguished the facts of the cases relied upon by the AO at page-53 para 5.39 of his order and after distinguishing the cases came to the conclusion that in none of these cases, the issue of 'lease premium as in the case of ....
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....f ITAT, Chennai Bench in the case of Foxconn India Developers Pvt.Ltd (supra) should be considered and be followed . We observe that the said decision of ITAT has been considered by the ld. CIT(A) in para 5.40 of the impugned order. On perusal of the said order of ITAT, Chennai Bench, we observe that in the said order of Chennai Bench only the provisions of section 194-I has been considered in respect of upfront charges paid in respect of lease of land for a period of 99 years. On perusal of the facts of the case, it is observed that the assessee had already entered into lease agreements and the said payment was made to SIPCOT Ltd under lease agreement. Therefore, the said payment is for lease or use of land and accordingly the payment could not be said to have been made for acquiring leasehold land and hence, it is observed that the Chennai Bench has held that the payment by the assessee company to CIDCO is rent u/s 194-I of the Act. Therefore, we are of the considered view that the above decision of ITAT Chennai Bench (supra) relied upon by ld. DR is not applicable to the case before us. On the other hand, the Special Bench Decision of ITAT, Mumbai in the case of Mukund Ltd. (sup....