TaxTMI 
TaxTMI 
TaxTMI 
2013 (8) TMI 923
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....f the said plot of land allotted to it by MMRDA subject to further payment of premium. M/s Satnam Realtors Pvt. Ltd. subsequently merged with the assessee company w.e.f. 1-4-2009 and consequently payment on account of lease premium in respect of plot of land allotted originally to M/s Satnam Realtors Pvt. Ltd. was made by the assessee to MMRDA. According to the A.O., the assessee was required to deduct tax at source from the payment of lease premium made to MMRDA as per the provisions of section 194-I of the Act and since no such tax was deducted by the assessee from the said payments, he issued notice to the assessee requiring it to show cause as to why it should not be treated as the assessee in default for its failure to deduct the tax at source from the payment of lease premium made to MMRDA. The assessee filed its reply to show cause notice issued by the A.O. making elaborate submissions in support of its case on the issue which as summarized by the A.O. in his orders passed u/s 201(1) and 201(1A) of the Act were as under: "(i) That no tax has been deducted at source on the lease premium upfront by it to MMRDA/ CIDCO as it was considered a payment for acquisition of land dev....
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....payment by whatever name called made by it to MMRDA under the lease for the use of land. Since, it has not been done, the T.D.S. default has occurred. (v) On facts and circumstances it is clear that all payments made by the assessee to the MMRDA are for using the land and rights related to use of land. There is no right to land. This is conclusively proved by restrictive clauses putting encumbrance on the assessee." 5. Against the order passed by the A.O. u/s 201(1)/201(1A) of the Act, the assessee filed its appeal before the ld. CIT(A) and elaborate submissions were made on its behalf before the ld. CIT(A) in support of the stand that the lease premium paid to MMRDA not being in the nature of advance rent within the meaning of section 194-1 of the Act, the assessee was not liable to deduct tax at source and therefore it could not be treated as assessee in default u/s 201(1) & 201(1A) of the Act. The said submissions as summarized by the ld. CIT(A) in his impugned order were as under:- "i) The payment made by the Appellant (Lessee) to the MMRDA 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 80 year....
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....f the I. T. Act clearly provides that payment made by a person should be in the nature of "an income by way of rent". This expression expressly requires that the receipt in. the hands of the Lesser/owner must constitute the income by way of rent in the hands of the recipient. x) The definition of rent contained in explanation to section 194-I also clearly provides that the payment made must be "for the use of .......... land" no where the definition of rent ropes in the consideration paid for acquiring leasehold right. The Appellant (lessee) reiterates its contention that the premium paid for acquiring leasehold right is not "an income by way of rent" of the recipient for use of land. xi) The various judgments relied upon by the Appellant(Lessee) in support of its contention clearly 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 premium paid can not be considered....
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....s observed that a similar issue involved in the case of Shree Naman Hotels Pvt. & Shree Naman Developers Ltd. has been decided by the Tribunal in favour of the assessee vide an order dated 14-08-2013 passed in ITA No. 688 to 691/Mum/2012 by following the decision of the co-ordinate Bench rendered in the case of M/s Wadhwa & Associates Realtors Pvt. Ltd. vide order dated 3-7-2013 passed in ITA No. 695/Mum/2012. In the case of M/s Wadhwa & Associates Realtors Pvt. Ltd. (supra), a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in para 9 to 10 of its order dated 3-7-2013 (supra):- "9. We have considered the rival submissions, perused the order of the lower authorities and the material evidence brought on record in the form of paper Book and the judicial decisions relied upon by the rival parties. The entire grievance revolves around the premium paid by the assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the assessee through the lease deed dt. 22nd November, 2004. It is the say of the Revenue that this lease premium was liable for deduction of tax at source failing which the assessee is to be treated as assessee in ....