TaxTMI 
TaxTMI 
2015 (11) TMI 1377
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.... further ignoring the definition of rent as contained in the said section resorting to interpretative reasoning. On the other hand, the ld. counsel for the assessee, Shri V. Mohan, defended the conclusion arrived at in the impugned order by contending that the impugned issue is covered by the decision of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. vs Income Tax (ITA No.738 to 741/Mum/2012), ITO(TDS) vs Wadhwa and Associates Realtors (P) Ltd. (2013) 36 taxman.com 526 (Mumbai Trib.) and ITO vs Indian Newspaper Society (2013) 144 ITD 668 (Del.). This factual matrix wax not controverted by the Revenue. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 16/08/2013 in the case of M/s Navi Mumbai SEZ Pvt. Ltd. for ready reference and analysis:- "The department has filed these appeals for Assessment Years 2006-07 to 2009- 10 against separate orders of ld. CIT(A) all dated 24.11.2011. In all these appeals, the facts and the issue involved is common. Hence, we have heard these appeals together and dispose off the....
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....r this purpose, the assesseecompany has been jointly promoted as a Special Purpose Vehicle (SPV) by CIDCO and Dronagiri Infrastructure Pvt Limited (DIPL) to develop and operate the Special Economic Zone at Navi Mumbai. iv) As per Development Agreement between the assessee and CIDCO, the assessee is required to make payment of lease premium in respect of the land which is being acquired by CIDCO and being allotted to the assessee from time to time. v) As per Development Agreement, the assessee is authorized to develop and market the NMSEZ. Accordingly, assessee-company 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, in respect of land allotted to it and the relevant lease deed(s) executed. vi) By virtue of said lease deed(s), assessee has acquired lease hold rights in the land for the purpose of developing, designing, planning, financing, marketing, developing necessary infrastructure, providing necessary services, operating and maintaining infrastructure administrating and managing "SEZ". Assessee ha....
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....s in favour of lessee permanently. It was also contended that rent as defined in section 194- I of the Act, envisages such payments only for use of land or building, without there being any corresponding acquisition of larger rights in the said leasehold plots. Hence, the lease premium paid to CIDCO Ltd. for acquisition of leasehold land is clearly distinct from rent. On behalf of assessee, a reference was made to section 105 of the Transfer of Property Act, 1882 and submitted that rent is defined to mean money paid periodically or onspecified occasion to the transferor of land. Relying on the decision of the Hon'ble Apex Court in the case of A.R.Krishnamurthy V/s CIT (176 ITR 417) it was submitted that there is a difference between rent and premium and if what is paid is the cost of acquisition of right in a property known as leasehold right, it is not rent but a premium which is a capital for the recipient. On behalf of the assessee it was also submitted that section 2(14) of the Act also recognizes leasehold interest as a separate, distinct and independent right in an immovable property capable of being transferred for a consideration. Thus the payment made by the lessee to the ....
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....67 Taxmann 506 (Kar) and decision of the Hon'ble Andhra Pradesh High Court in the case of Krishna Oberoi V/s Union of India 123 Taxmann 709 has held that the lease premium paid by the assessee is in the character of rent as per extended definition contained under section 194-I of the Act. Therefore, the assessee has committed default within the meaning of section 201(1) of the Act by not deducting the tax at source u/s 194-I of the Act on payment of 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. AO has further stated that the assessee is also liable to pay interest u/s 201(1A) of the Act. Accordingly, AO has stated the tax and interest liability of the assessee for the assessment years under consideration as under : Assessment Year Section 201(1) Section 201(1A) Total 2006-07 8,49,75,000 5,86,32,750 14,36,07,750 2007-08 212,29,50,187 1,01,90,16,048 3,14,19,66,235 2008-09 2,34,21,65,994 1,00,33,40,347 3,34,55,06,341 2009-10 33,26,96,202 10,37,80,071 43,64,76,273 7....
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....mmovable property as transfer of right to enjoy the property, made a certain time in consideration of a price. The Section further distinguishes between Lease Premium and Rent. Rent is defined u/s 105 of the Transfer of Property Act, 1882 to mean money paid periodically or on specified occasion to the transferor of land. Premium on the other hand means a consideration of a price paid for transfer of a right to enjoy the property. Thus, there is a difference between rent and premium. Premium is not paid for the use of land. When the interest of the Lessor is parted with for a price, the price paid is called lease premium. But, the periodical payments made for the continuous enjoyment of the benefit under the lease is in the nature of rent. The aforesaid view has also been endorsed by the Supreme Court in its decision in the case of A.R. Krishnamurthy v/s CIT reported -176 ITR 417. The Supreme Court in the case of A. R Krishnamurthy V/s OT (supra) has held that if what is paid is the cost of acquisition of right in a property known as leasehold rights it is not rent but a premium which is a capital receipt for the recipient. Consequently, Section 2(14) of t....
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....aim write-off of the lease premium on proportionate basis. In the case of JCIT Special Range 23 v/s National Stock Exchange of India, Hon'ble ITAT, Mumbai in ITA No. 1955/M/99, 2181/M/99, 4853/M/04, 4485/M/04, 4854/M/04, 356/M/01, 5850/M/00 upheld the AO's contention that lease premium is capital in nature and cannot be allowed on proportionate basis over the period of lease. 2. Revenue's stand that premium of Rs. 62,500 in addition to increased rent for converting temporary lease into a long term one, for a period of 30 years payable in installments where lease agreement provided for lessor to take back possession in certain contingencies was not advance rent and was capital expenditure which was confirmed by the Hon'ble Bombay High Court in the case of Commissioner of Income-tax v. Project Automobiles (1983) 15 Taxman 227 (Bom.). 3. When the assessee claimed that cost of land paid to the liquidator for the lease land from MIDC should be allowed to be considered for 71 years of lease period on a proportionate basis; the Dept rejected the claim of the assessee which was upheld by the Hon'ble High Court of Bombay in the case of CIT V/s Khimline Pumps Ltd [258 ITR 4....
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....f Panchkote V/s Crown SIR DAWSON MILLER KT, K.C., CJ. AND FOSTER. J. (1924) 1 ITC 384 (Pat). Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the lndian Income-tax Act, 1922) - Income - Chargeable as - Assessee received certain amount by way of salami or premium for grant of leases of mineral rights Oil portion of his estate - Besides, certain rent and royalties were also paid by lessees of mining leases upon coal raised - Whether in view of fact that a lump sum paid under name of salami for grant of lease, was more in nature of an out and out sale of property, sum so received by assessee was in nosense income within meaning of Act - Held, yes - Whether, however, annual rent and royalty received from lessees on quantity of coal extracted was income chargeable to tax - Held, yes. 3. Decision of Calcutta High Court in the case of Commissioner of Income-tax v. Purnendu Mullick [1979] 116 ITR 591 (CAL.) Section 4 of Income-tax Act; 1961 - Income - Chargeable as - Assessment year 1964-65 - Assessee, on executing a lease deed in respect of certain premises in favour of a company, received a lump sum amount besides monthly rent - Assessee claimed that....
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.... the deductee. It was submittedthat it is not necessary that capital expenditure in the hands of one party is also a capital receipt in the hands of other party. AO in the written submissions also submitted that the lease agreement signed by CIDCO with the assessee contains various restrictive covenants which do not give any absolute right to the land but reduced it to a rental arrangement for use of the land. Ld. CIT(A) has stated that the AO also cited the cases, the details of which he has mentioned in para 5.9 of the impugned order (s) 8.3 Ld. CIT(A) has further stated that AO vide letter dated 2.11.2011 furnished supplementary arguments for all the assessment years under consideration and stated that as the premium is nothing but advance lease rent and referred the decision of Hon'ble Apex Court in the case of Agarwal Chambers of Commerce V/s Ganpat Rai Hiralal, reported in 33 ITR 245 wherein it has been held that persons who are responsible for deduction of tax at source are not concerned with the ultimate result of the assessment. 8.4 Ld. CIT(A) has stated in para 5.11 of the impugned order (s) that a copy of written submission filed by AO was provided to t....
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....us clauses of the lease agreement which are referred by the AO in its submission before your Honour as restrictive clauses, are in fact regulatory clauses incorporated in the lease agreement for desired development of the leased area in a particular manner and a particular purpose as regulatory authority provides complete infrastructure and give effect to the intention of the government to develop the area. viii) Karnataka High Court Judgement in the case of HMT Ltd. has been decided by the Hon'ble court on a finding of fact by the ITAT that the payment made by the Lessee constitutes an advance rent and hence the same shall be allowed as deduction u/s 37( 1) of the 1. T. Act. Moreover the various decisions of the Bombay High Court and the 1TAT have clearly distinguished the HMT's case and its applicability to the premium paid for acquiring lease hold right. The Hon'ble ITAT Mumbai Special Bench in the case of Mukund Ltd. has discussed in detail the judgement of HMT Ltd. and held that premium paid for acquiring the leasehold right does not constitute an advance rent. Hon'ble ITAT Mumbai, Special Bench has followed the jurisdictional High Court's view in ....
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....an advance rent within the meaning of section 194-I of the I. T. Act and the order passed by the AO u/s 201/201(1A) shall be vacated" 9. Ld. CIT(A) has stated that he has considered AO's order, submissions as well as the assessee's submissions and rejoinder. He has stated that he has studied the Development Agreement and the Lease deed(s) executed between the assessee and the CIDCO as well. Ld. CIT(A) has stated in para 5.17 of the impugned order that from the analysis of Development Agreement and lease deed(s) entered into between the assessee and CIDCO, written submissions of the assessee and the assessing officer and the assessment order and various other related documents following facts emerge: "i. The Government of Maharashtra through a resolution dated 18.03.1970 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 Develop....
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....he appellant rights to develop, construct and dispose off residential and commercial spaces as per terms and conditions provided therein. ix. The appellant is also entitled to grant sub-leases in respect of the portions of the demised (leased) land, in accordance with the applicable law, and as per the provisions of the lease deed. x. Similarly, the lease deed(s) also grant the appellant power to assign its rights, title or interest or create a security interest in respect of its rights, 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 purpose ofobtaining finance. xi. The appellant has also acquired sole rights for marketing of the NMSEZ and the industrial/ commercial projects to potential tenants." 10. In view of above, ld. CIT(A) has stated that the assessee has been allotted land for a period of 60 years on the payment of lease premium. That the lease deed(s) and the Development Agreement, assigns to the assessee lease hold rights which includes a bundle of rights, some of which are outlined above. Assessee made payment of lease premium ....
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....redited 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. 11. Ld.CIT(A) vide paras 5.20 to 5.28 has held that lease premium paid by the assessee under lease is paid for obtaining the lease and it cannot be equated with the rent. We consider it necessary to reproduce paras 5.20 to 5.28 of the impugned order(s) of ld. CIT(A) which are as under : "5.20 This section thus requires that a person who is responsible for paying to a resident come by way of rent" "for the use of" land etc. shall at the time of credit or payment of such income deduct tax at source at required rate. Although this meaning is very wide so as to include all types of transactions which fall in this category, still the legislature has intentionally included the words "for the use of' so that the meaning of the rent" is not interpreted beyond its meaning in common parlance. In common parlance, rent is a consideration paid by a tenant to the land lord in respect of ....
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....d 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 not be called 'use' of property by the tenant; rather it would be exploitation of the property by virtue of certain rights, which would be over and above the rights of a tenant (which are for mere use of the property may be with certain modifications). In the case of the appellant, the rights are not mere use of the property (land) by the appellant itself; rather the rights are for exploitation of the property by developing and constructing residential/ commercial spaces as well as industrial projects and/or provide infrastructure for such projects and selling such spaces at a profit. This transaction therefore cannot be stretched beyond its meaning and it cannot be categorized as a transaction which is in-between a landlord and a tenant. This is so because the appellant is not bound to use the property itself and hence consideration paid is not rent within the meaning of explanation below section 194-I. The appellant has thus acquired a capital right to develop the land and exploit the same. ....
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....ided 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 consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who , accepts the transfer on such terms. In the case of lease, price is called the premium, and the money, share, service or other thing to be rendered is called the rent; the transferors is called the lessor and the transferee is called the lessee". 5.27 The section therefore brings out the distinction between a price paid for a transfer of 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. It would, therefore transpire that a premium is not paid under a lease, but is paid as....
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....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" within the meaning of that Act." 5.32 Similarly in the case of Chintamani Saran Nath Sah Deo V/s Commissioner of Income-tax [1961] 41 ITR 506 (SC) the Supreme Court held that : "Held, on the facts, that the licence was not merely a grant for the use of the capital of the assessee but it was really a grant of a right to a portion of the capital in the shape of a general right to the capital asset. The amounts received by the assessee were capital receipts and were not assessable to income-tax" 5.33 The matter was again considered by the Hon'ble Supreme Court in the case of Commissioner of Income-tax V/s Panbari Tea Co. Ltd.(1965) 57 ITR 422 (SC). In this judgment, the Supreme Court has considered various decisions available on the issue and held that since there was a transfer of substantive interest of lessor in estates in favour of the lesse....
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....ntention 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 lakhs paid by the assessee to M/s APVE Ltd (which was being wound up) for acquisition of leasehold land was a capital expenditure and hence the same was not deductible. The appellate tribunal could not have directed the Department to apportion the amount over a period of 71 years. In this case, a plot of land measuring 20,300 square metres in district Thane was leased out by MIDC to a company known as APV Equipments Ltd for a period of 95 years, commencing from August 1965 on a payment of rent of Rs. 1 (per year) and in consideration of payment of Rs. 1,62,400/- as premium. At the end of the lease, the lessee was to quietly deliver to the lessor the land. The lessee was also entitled to remove any buildings, erections or structures put up by the lessee on the land. Under the lease, it was furthe....
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....cific 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 MIDC for acquisition of the premises. We are aware that mere use of the word "premium" in the agreement dated 5-3-1992 shall not make the character of the amount of Rs. 2.04 crores paid to MIDC as "premium", if the combine reading of the agreement leads to some other conclusion. In this case, not only the word "premium" has been used in all relevant terms of the agreement dated 5-3-1992 with Government concern MIDC, but also considering the terms of the agreement dated 5-3-1992 as a whole it is clear that the amount of Rs. 2.04 crores was paid as "premium" for acquisition of leasehold rights in the premises. The clause 5(b)( i) of the said agreement dated 5-3-1992 provides that in case of termination of lease, the "premium" is non-refundable. It provides that in case the ....
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....ct 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 lessee for the use of land or buildings demised to him. Further in the case of United Airlines V/s CIT (supra), it was held that the term "rent" has a wider meaning and it includes agreement or arrangement for use of land. The AO has also referred to the decision in the case of CIT V/s Reebok India Co.(supra), wherein the security deposit was considered as rent in the facts of the given case. Similar is the case of Smt. Bisakha Sarkar (supra), where also, a bank (namely Bank of India) was the tenant of a property, which was jointly owned by 4 persons, the landlords made a claim that no tax is deductible because their individual share of rent is belong the deductible limit. Hon'ble High Court held that it was a jointly owned property and hence the landlords we....
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.... 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 the land or leasehold right in land. The lease was for the whole undertaking which was to be used by the assessee itself. The facts of this case do not suggest that the assessee was also entitled to exploit the land through reconstruction and sale of the property thereafter. Hence the facts in this case are totally different from the facts of the case of the appellant where the lease is in respect of the land for exploitation of (he same through construction of buildings and sale thereof. Hence, this decision does not support the finding of the AO in the case of the appellant. 5.43 The AO has further relied upon Karnataka High Court Judgement in the case of CIT vs. HMT l.td. 203 ITR 820 wherein the said Hon'ble High ....
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....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 of lease hold land of Rs. 7,75,736/- is made on account of lease premium paid in respect of lease hold land acquired from BMRDA amounting to Rs. 90.60 crores which is amortized over a lease period of 80 years with effect from 07.03 1995. The claim for write off was for the period from 7.3.1995 to 31.3.1995 on proportionate basis. Thus, the assessee in is computation of total income claimed the lease premium paid to BMRDA as revenue expenditure i.e. "rent". However the AO in that case did not accept the contention of the assessee and disallowed Rs. 7,75,736/- treating the payment of lease premium as capital expenditure. On appeal by the assessee the CIT(A) confirmed the stand taken by the A....
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...."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 of Foxconn India Developer (P) Ltd V/s ITO (2012)53 SOT 213( Chennai) wherein it is held that upfront charges paid by the assessee for lease of land for a period of 99 years to CIDCO Ltd. under the lease agreement was covered u/s 194-I of the Act. Hence, assessee was obliged to deduct tax at source. Since assessee having notdeducted such tax at source, it was held that rigors of section 201(1) and 201(1A) are attracted. 15. On the other hand, ld. AR strongly supported the order(s) of ld. CIT(A). Ld. AR submitted that the premium is paid for obtaining the lease of land. Therefore, the said premium was paid for acquiring leasehold rights and not for use o....
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....said 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. Therefore, the said decisions are not applicable to consider the question as to whether lease premium paid by the assessee to acquire lease land could be considered as rent u/s 194-I of the Act or not. 17. We have carefully considered the submissions of the ld. Representatives of the parties, orders of the authorities below and the cases relied upon (supra). We have also carefully considered the provisions of section 194-I which deal with the provisions for deduction of income Tax at source from income by way of rent. The Explanation (i) to section 194-I of the Act defines the expression "rent". It is worthwhile and relevant to state section 1....
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....hall 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 within the meaning of section 194-I of the Act or not. AO has stated that the said payment made by assessee under lease agreements qualifies for rent for the purpose of section 194-I of the Act as it partakes all the characteristics of rent and whereas the assessee has contended that the assessee has obtained leasehold rights in the said leasehold lands on payment of lease premium and the said lease premium is not paid under a lease. Hence, it is a capital expenditure and not an advance rent. We observe that the main thrust of the AO to....
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....and 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 conferred on the assessee on lease hold rights in 99 years against lump sum payment of the premium was of an enduring nature. It was held that there was no material on record to suggest that the sum of Rs. 2.04 crores had been paid by way of advance rent nor there was any provision for its adjustment towards rent or for its re-payment to the assessee. It was held that the consideration paid by the assessee was capital expenditure and accordingly the issue was decided against the assessee. 21. In the case before u....
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.... 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 Court stated that rent is allowable as deduction u/s 30 of the Act. It is stated that section 105 of the Transfer of Property Act, 1882 also make a distinction between the rent and premium payable under lease. When the interest of the lessor is charged with for a price, the price paid is premium or salami but the periodical payment made for the continuous enjoyment of the benefits under lease are in the nature of rent. Their Lordships held that formal is capital and later is revenue in nature. A simi....
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....evelop 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 is nothing but a transaction of transfer of property and the lease premium is the consideration for the purchase of said leasehold rights. It is relevant to state that the Tribunal in the above order has also considered the decision of the Hon'ble Calcutta High Court, and the decision of Karnataka High Court (supra) on which the AO has placed reliance . We consider it prudent to state para 5 of the said order of the Tribunal which reads as under : "5. After considerin....
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....ld 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 the assessee vis-à-vis 'rent' has been considered. At para 5.41 of his order at page-54, the Ld. CIT(A) says that "I have also considered the other cases relied upon the AO. These cases lay down general principles of interpretation of Law. I find that 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 re....
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....t 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. (supra) squarely apply wherein it has been held that the premium paid for acquiring lease hold right in land is a capital expenditure. The Special Bench decided the issue after considering the various judgments of the Hon'ble Jurisdictional High Court, Hon'ble Apex Court, various decisions of the Tribunal as discussed hereinabove which have distinguished between the lease premium and rent under the Income Tax Act. ....