Income Tax Appellate Tribunal - Pune
Nemichand Bhandari Associates,, vs Department Of Income Tax on 12 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.191/PN/2014
(Assessment Year : 2012-13)
Income Tax Officer,
(TDS)-2, Pune. .... Appellant
Vs.
M/s Nemichand Bhandari Associates,
10-B Mangalwar Peth,
Narpargiri Chowk,
Pune - 411 011.
PAN : AAPFM5535K .... Respondent
Department by : Shri D. S. Kothari
Assessee by : None
Date of hearing : 07-01-2015
Date of pronouncement : 12-01-2015
ORDER
PER G. S. PANNU, AM
The captioned appeal by the Revenue is directed against an order of the Commissioner of Income Tax (Appeals)-V, Pune dated 30.10.2013 which, in turn, has arisen from an order dated 22.11.2012 passed by the Assessing Officer u/s 201(1)/201(1A) of the Income-tax Act, 1961 (in short "the Act") pertaining to the assessment year 2012-13.
2. In this appeal, Revenue has raised the following Grounds of Appeal :-
"1. The learned Commissioner of Income Tax (Appeals) erred in deleting the demand raised of Rs.1,26,39,632/- u/s 201(1)/201(1A) of the Income Tax Act, 1961 in respect of lease premium payment paid to Pimpri Chinchwad New Township Development Authority (PCNTDA).
2. The learned Commissioner of Income Tax (Appeals) erred in considering the fact that the premium paid to PCNTDA is upfront payment as pre-condition for entering into lease agreement.
3. The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the deed entered into by the deductor with PCNTDA was not a transfer deed but a lease deed and explanation to section 194-I clearly stipulates that any payment by whatever name called under any lease deed/agreement is to be taken as rent for TDS purpose."2 ITA No.191/PN/2014
3. At the time of hearing, none appeared and nor any adjournment was sought on behalf of the respondent-assessee inspite of notice for hearing and the Ld. Departmental Representative appeared on behalf of the appellant-
Revenue. Therefore, having regard to the rule 25 of the Appellate Tribunal Rules, 1963, the appeal is being disposed-off after hearing the appellant on merits and ex-parte qua the assessee-respondent.
4. In sum and substance, the solitary dispute in this appeal is in relation to the stand of the Assessing Officer that assessee was liable to deduct tax at source on payments made to Pimpri Chinchwad New Township Development Authority (PCNTDA) on lease premium paid for a land taken on lease for 99 years. As per the Assessing Officer, assessee having failed to deduct the tax u/s 194-I of the Act was to be treated as an assessee in default in terms of section 201(1)/201(1A) of the Act. The CIT(A) has disagreed with the Assessing Officer on this aspect on the ground that the payment of lease premium to PCNTDA in terms of the lease deed for land did not amount to 'rent' within the meaning of section 194-I of the Act. In coming to such conclusion, he has relied upon the decision of the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ (P.) Ltd. in ITA No.738 to 7741/Mum/2012 dated 12.08.2013. Against such a decision of the CIT(A), Revenue is in appeal before us.
5. Before us, it was conceded by the Ld. Departmental Representative that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of ITO vs. Camp Education Society vide ITA No.2134/PN/2013 dated 27.10.2014 and the relevant portion of the order reads as under :-
"6. We have heard the rival contentions and perused the record. The assessee was an educational society registered under section 12A of the Act. The assessee was running various schools and colleges in the city of 3 ITA No.191/PN/2014 Pune. During the year under consideration, in order to establish another school in Pimpri Chinchwad area, the assessee in reply to an advertisement by PCNTDA, applied for a plot on leasehold basis. As per the Bid document, where the Bid quoted by a party accepted, the said party was required to pay the quoted amount i.e. the premium within 3 months of the letter of allotment. In case such premium was not paid within period of 3 months, 25% of the Tender deposit was to be fortified and balance amount was to be refunded without any interest. The Tender document stated that the Tender was for the purpose of sale of reserved plots and as per the document full premium was to be paid to PCNTDA and lease agreement would be entered with the party. The assessee entered into a lease agreement with PCNTDA for 99 years and the lease rent was Rs.100/- per annum for the period of 99 years. The assessee accordingly, deposited the premium amount of Rs.2,20,24,860/-. After receiving the premium amount, the licenser i.e. PCNTDA agreed to execute Lease Deed to convey / transfer / assign the leasehold rights. The Lease Deed authorizes the assessee to build / construct any building on the said plot of land. The case of the assessee was that the payment of premium was a pre-condition for obtaining the lease rights and it was only after payment of the lease premium, the lease agreement was entered into and bundle of rights were obtained by the assessee.
7. The Assessing Officer held the assessee to be default in respect of the TDS payable on such lease rent payment to PCNTDA. Reliance was placed on the ratio laid down by the Chennai Bench of the Tribunal in Fox Conn India Developer (P) Ltd. (supra). The assessee was held to be in default for non-deduction of tax on source under section 194I of the Act on the lease premium paid to PCNTDA and demand under section 201(1) of the Act was raised and interest under section 201(1A) of the Act was charged, raising a demand of Rs.22,90,585/-.
8. The CIT(A) vide para 8 referred to the preliminary clauses of the agreement entered into between assessee and PCNTDA and pointed out that the lease premium finds mention in the Lease Deed but the said payment of lease premium was a pre-condition for entering into lease agreement. The CIT(A) thus, held that same was not under the lease deed and the payment of lease premium falls outside the purview of definition of rent as specified in section 194I of the Act. The CIT(A) further observed from the ratio laid down in the case of Fox Conn India Developer (P) Ltd. (supra) was distinguishable on the facts as in that case issue in question was upfront payment and not lease premium. Further, upfront payment was part of consideration for acquiring leasehold rights unlike the present case where payment of lease premium was pre-condition for entering into lease agreement and therefore the facts of the case were clearly distinguishable. Further reliance was placed on the series of decisions, under which such similar payment of lease premium was held to be not subject to deduction of tax at source under section 194I of the Act.
9. We find that similar issue of payment of lease premium arose before the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ (P) Ltd. in ITA Nos.738 to 740/Mum/2012 for assessment years 2006-07 to 2009- 10, wherein the Tribunal in its order dated 12.08.2013, held that lease premium paid by the assessee to the City and Industrial Development Corporation of Maharashtra Ltd. (CIDCO) for acquiring development and leasehold rights for a period of 60 years, was not required to be subject to deduction at source under section 194I of the Act. Further another Bench of the Mumbai Tribunal in the case of M/s. Wadhwa Associates in ITA No.695/Mum/2012, vide order dated 03.07.2013, held that TDS was not 4 ITA No.191/PN/2014 required to be deducted under section 194I of the Act in respect of payment of lease premium to M/s. MMRD Ltd.
10. In view of above said facts and circumstances, wherein the lease premium was paid to PCNTDA by the assessee as a pre-condition for entering into a lease agreement, the same cannot be said to have been paid consequent to the lease agreement executed between the parties. Further, the CIT(A) has given a finding that stamp duty had been paid on the market value of the plot represented by the lease premium, which has not been controverted by the learned Departmental Representative for the Revenue. Relying upon the ratio laid down by the Mumbai Bench of the Tribunal in three different cases, we uphold the order of CIT(A) in holding that the lease premium paid by the assessee is outside the purview of section 194I of the Act and the Assessing Officer was not justified in raising the demand under section 201(1) and 201(1A) of the Act. The grounds of appeal raised by the Revenue are thus, dismissed.
11. In the result, the appeal of the Revenue is dismissed."
6. Following the aforesaid precedent, we hereby affirm the order of the CIT(A) and the Revenue has to fail accordingly.
7. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 12 th January, 2015.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 12 th January, 2015.
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-V, Pune;
4) The CIT-V, Pune;
5) The DR "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune