TaxTMI 
TaxTMI 
2016 (4) TMI 674
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....d TDS statement for the second quarter and whether the answer to this question would depend upon the nature and contents of the revised TDS statement filed for the second quarter? (ii) Whether an upfront payment made by a person for winning a long term lease for a period of 99 years could be treated as rent liable for TDS under Section 1941-I or not? and (iii) Whether on the facts and circumstances of the case and in law, the payment of Rs. 1,412 Crores representing market value of land collected by TIDCO at the behest of the Government and immediately paid to the Government on the basis of various orders of the Government instructing TIDCO to collect and pay even before the execution of the lease deed, was, in essence, a payment to the Government, being the real owner thereof and consequently, the appellant was not liable to withhold tax from the captioned payment in terms of Section 196 of the Act?" 2. Heard Mr.Arvind P.Datar, learned senior counsel appearing for the appellant/assessee and Mr.J.Narayanaswamy, learned Standing Counsel appearing for the respondent/revenue. 3. Since the facts out of which the above appeal arises are little peculiar, it is necessary for us to bri....
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....that the JVC can only sub-lease/rent the built up area." (d) As could be seen from the operative portion of G.O.Ms.No.103, TIDCO was required by the Government to implement the project through joint venture companies by selecting the partner through open competitive bidding process. The procedure and mode of payment of rent and the execution of the lease deed, etc. in favour of the joint venture company was left to be decided by TIDCO, as per the decision taken in their Board in its 419th meeting held on 16.10.2006, the contents of which were extracted in paragraph 5 of G.O.Ms.No.103. Since the questions raised in this case, may have to be decided on the facts out of which the legal issues originated, it is necessary to extract paragraph 5 of G.O.Ms.No.103, as follows: "5. The Board of TIDCO, at its 419th meeting held on 16.10.2006, considered the above matter and resolved to send proposals to Government for approval of TIDCO's proposal to implement the IT Parks (IT/ITES-SEZ in an area of 25.19 acres at Taramani behind TICEL Bio Park and IT/ITES-SEZ comprising IT Park and an International Convention Centre cum Hotel in an area of 25 acres at Taramani in front of TIDEL P....
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....G.O.Ms.No.103, TIDCO floated a tender. The request for proposal floated on 08.6.2007 together with addendum issued on 22.11.2007, showed that qualified bidders were entitled to take the documents on or before 12.11.2007. The last date for receipt of written enquiries was fixed as 16.11.2007. The pre-bid meeting was scheduled to be held on 22.11.2007, the last date for submission of bids was fixed as 13.12.2007, the opening of the first cover was to be by 11.15 hours and the opening of the second cover was to be by 17.00 hours on 13.12.2007. (h) The RFP document issued by TIDCO indicated the Reserve Price per sq.ft. of land as Rs. 12,000/-. This amount of Rs. 12,000/- was arrived at, on the basis of the guideline value available with the registration department. (i) A company by name Tata Reality Infrastructure Limited, became the highest bidder by quoting a rate of Rs. 12,050/- per sq.ft. Despite the fact that by G.O.Ms.No.479, Revenue dated 24.8.2007, the Government of Tamil Nadu claimed to have alienated the entire extent of land, namely 25.27 acres in favour of TIDCO, the highest commercial offer made by Tata Realty Infrastructure Limited had to be in fact accepted only by the....
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.... amount of Rs. 1407,29,29,960/-. A penalty was also levied. (o) Aggrieved by the said order, Joint Venture Company, which is the assessee in this case, filed a first appeal before the Commissioner of Income Tax (Appeals). By an order dated 28.02.2014, the Commissioner of Income Tax (Appeals) dismissed the appeal, concurring with the views of the Assessing Officer. The assessee's further appeal to the Income Tax Appellate Tribunal was allowed and the matter remitted back to the Assessing Officer. The order of remand was passed by the Tribunal on the short ground that the copy of the lease agreement entered into between the assessee and TIDCO was not available before them and therefore, they were unable to arrive at a finding of fact as to whether it was an advance payment of rent or the cost of acquisition of land. The Tribunal took the view that the matter needed to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I. Aggrieved by the said order of remand passed by the Tribunal and contending that the lease deed always formed part of the records of the Assessing Officer as well as Commissioner of Income Tax (Appeals), the a....
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....he use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee; " 9. It must be noted that the definition is an exhaustive definition and not an inclusive definition as seen from the usage of the words "means". To constitute a rent within the meaning of Section 194-I, there must be a payment by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement. In addition, such payment should be for the use of any land, building, etc. 10. What has happened in the case on hand, as seen from the narration of facts that we have given earlier, that the Government originally decided to make TIDCO as a mere custodian of a land of larger extent of about 40.19 acres. Subsequently, the Government decided, as seen from G.O.Ms.No.103 dated 24.4.2007, the operative portion of which we have already extracted earlier,is to permit TIDCO to implement the project through Joint Venture Companies by selecting the Joint Venture Partner through open competitive bidding process. In other words, the sequence of events that have taken place from G.O.Ms.No....
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....hich was not the lessee, as the lessee was yet to be born, for the purpose of becoming a Joint Venture Partner with TIDCO and to create a new entity, which will eventually become the lessee. If we treat, as contended by the Revenue, this amount as part of the rent, it would result in a proposition that on behalf of a company yet to be born, one of the spouses which was supposed to give birth had already agreed upon the commitment. 15. Therefore, in essence, what was offered by the joint venture partner, namely Tata Realty Infrastructure Limited, in the bidding that took place in February 2008 and what was paid on 27.5.2008 by the Joint Venture Company was actually a consideration for bagging the contract to have a joint venture and for getting the right of 99 years lease conferred upon the Joint Venture Company. If the payment is understood in this clearcut fashion, then no doubt may be cast upon the nature of the payment. 16. Arguments were advanced across the Bar as to how one should distinguish a rent from a premium. Relying upon the definition of the expression premium contained in Halsbury's Laws of England, Mr.J.Narayanasamy, learned Standing Counsel for the Department ....
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....ty Act, the learned senior counsel for the appellant/ assessee also submitted that this distinction was incorporated into Chapter XX-C of the Income Tax Act under Section 269-UA and that therefore, the income tax law also recognised the distinction between the two. 22. Relying upon the decision of the Patna High Court in Raja Shiva Prasad Singh v. King Emperor [AIR 1924 Patna 679], the learned senior counsel contended that a salami which is like a premium was always understood as not part of the rent. A similar view was taken by the Supreme Court in Board of Agricultural Income Tax v. Sindhurani [AIR 1957 SC 729], where the Supreme Court indicated that salami is not rent and it could not be called revenue within the meaning of the word used in the definition of agricultural income under Section 2(1)(a) of the Assam Agricultural Income Tax Act, 1939. 23. In Commissioner of Income Tax v. Panbari Tea Co. Ltd. [57 ITR 422 (SC)], the Supreme Court was concerned with the question as to whether the payment of premium fixed under a deed of lease, in instalments, would make it different from a revenue receipt instead of capital receipt at the hands of the recipient. Irrespective of the fa....
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....e. 30. As we have pointed out earlier, the question in this case arises at the very threshold, as to why was a payment of more than Rs. 1400 Crores made by the assessee and what was the method adopted by the parties to fix such an amount as payable to the lessor. 31. As we have indicated earlier, though the amount of Rs. 1412 Crores was paid actually by the lessee to the lessor, it was not paid merely for the purpose of retaining the lease for a period of 99 years. The amount paid was actually determined in an open competitive bidding that took place even before the Joint Venture Company was born. Tata Realty and Infrastructure Limited, which was the Joint Venture Partner, offered this amount for getting the benefit of entering into a Joint Venture Agreement with TIDCO, the benefit of which will spill over to joint venture company in the form of a 99 years lease. Therefore, the mistake of the Department lies in treating the transaction as having commenced from the date of the lease, namely 13.8.2008. The date on which the amount was quantified, the manner in which the amount was quantified and the method of selection of the Joint Venture Partner are the crucial determining factor....