Income Tax Appellate Tribunal - Pune
M/S. Patil Hospital,, vs Department Of Income Tax on 10 February, 2016
आयकर अपील य अ धकरण, पुणे यायपीठ "बी" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
एवं ी !वकास अव थी, या#यक सद य के सम$
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No.2015/PN/2014
#नधा&रण वष& / Assessment Year : 2011-12
ITO, TDS-2, Pune .......... अपीलाथ /
Appellant
बनाम v/s
M/s. Patil Hospital, .......... यथ
Ganesh Colony, Rupee Nagar, /
Talawade, Tal Haveli, Pune Respondent
PAN No.AAMFP0197M
आयकर अपील सं. / ITA No.2017/PN/2014
#नधा&रण वष& / Assessment Year : 2011-12
ITO, TDS-2, Pune .......... अपीलाथ /
Appellant
बनाम v/s
M/s. Nirman Associates, .......... यथ
Sector 29, Bulk Land No.13/3, /
Near D.Y. Patil College, Respondent
PCNTDA, Ravet, Pune - 411044
PAN No.AAHFN7864L
अपीलाथ क ओर से / Assessees by : None
यथ क ओर से / Revenue by : Shri Hitendra Ninawe
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :03.02.2016 Date of Pronouncement:10.02.2016
आदे श / ORDER
PER R.K. PANDA, AM :
The above 2 appeals filed by the Revenue are directed against the separate orders dated 25-08-2014 and 06-08-2014 2 ITA Nos.2015 & 2017/PN/2014 respectively of the CIT(A)-V, Pune relating to Assessment Year 2011-12. Since identical issues are involved in both the appeals, therefore, both the appeals were heard together and are being disposed of by this common order.
2. Despite service of notice on the above assessees none appeared on their behalf nor any petition was filed seeking adjournment of the cases. Hence, we proceed to decide the appeals on the basis of material available on record and after hearing the Ld. Departmental Representative. ITA No.2015/PN/2014 (M/s. Patil Hospital) :
3. Facts of the case, in brief, are that the assessee is a partnership firm. It had entered into a 99 year lease agreement with Pimpri Chinchwad New Township Development Authority (PCNTDA in short) within village limits of Chikhali, Taluka Haveli, Pune. The assessee has paid land lease premium of Rs.73,77,700/- and agreed to pay a sum of Rs.100/- per annum for the entire period of lease. The AO after examining the provisions of section 194I of the I.T. Act as well as terms of lease deed entered into between the assessee and PCNTDA was of the view that the payment in question was covered by the definition of "rent" as per proviso to section 194I of the I.T. Act. Accordingly, the AO was of the view that TDS u/s.194I was required to be deducted. The AO confronted the assessee on this issue. It was explained by the assesee that lease agreement with PCNTDA was nothing but a sale transaction on which provisions of section 194I were not applicable. The AO, however, was not convinced with the arguments advanced by 3 ITA Nos.2015 & 2017/PN/2014 the assessee. Relying on the decision of the Chennai Bench of the Tribunal in the case of Foxconn India Developer Pvt. Ltd. Vs. ITO, TDS in ITA No.292/Mds/2010 order dated 30-04-2012, the AO held that TDS u/s.194I was required to be deducted on the payment for clearing leasehold rights. The AO accordingly raised demand amounting to Rs.7,34,886/- u/s.201(1) and levied interest amounting to Rs.2,86,605/- u/s.201(1A).
4. In appeal the Ld.CIT(A) following the decision of the Mumbai Bench of the Tribunal in the case of Navi Mumbai SEZ Pvt. Ltd. in ITA Nos.7738 to 7741/Mum/2012 order dated 12- 08-2013 for A.Yrs. 2006-07 to 2009-10 and the decision in the case of M/s. Wadhwa Associates in ITA No.695/Mum/2012 order dated 03-07-2013 and various other decisions held that the AO is not justified in raising demand u/s.201(1) and interest u/s.201(1A) of the I.T. Act in respect of lease premium paid to PCNTDA.
5. Aggrieved with such order of CIT(A) the Revenue is in appeal before us with the following grounds :
"1. The learned Commissioner of Income tax(Appeals) erred in deleting the demand raised of Rs 10,21,491/- u/s 201(1)/201(lA) of the Income tax Act 1961 in respect of lease premium paid to Pimpri Chinchwad New Township Development Authority.
2. The learned Commissioner of Income tax(Appeals) erred in not considering the fact that the lease premium paid to PCNTDA was covered by the definition of rent as per proviso of section 194I of the Act.
3. The learned Commissioner of Income tax(Appeals) erred in not appreciating the fact that the deed entered into the deductor with PCNTDA was not a transfer deed but a lease deed and Explanation to section 194I clearly stipulates that any payment by whatever name called under any lease agreement is to be taken as rent for TDS purpose.4
ITA Nos.2015 & 2017/PN/2014
4. The appellant craves to add, alter or amend any or all the grounds of appeal."
6. We have heard the arguments advanced by the Ld. Departmental Representative and perused the material available on record. We find identical issue had come up before the Pune Bench of the Tribunal in the case of ITO (TDS)-3, Pune Vs. Shri Ajay N. Yerwadekar vide ITA No.636/PN/2014 order dated 14-08-2015. We find the Tribunal in the said decision has held as under :
"6. After hearing both the sides, we find an identical issue had come up before the Tribunal in the case of ITO Vs. Preetam Medical Foundation & Research Centre vide ITA No.190/PN/2014 order dated 16-01-2015 wherein similar demand u/s.201(1) & 201(1A) was raised by the AO in respect of lease premium paid to PCNTDA. The CIT(A) deleted such demand and on appeal filed by the Revenue, the Tribunal dismissed the appeal filed by the Revenue by holding as under :
"5. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the demand raised under sections 201(1) and 201(1A) of the Act in respect of the lease premium paid to Pimpri Chinchwad New Township Development Authority (PCNTDA). In the facts of the case before us, the assessee had entered into 99 years lease agreement through its Chairman with PCNTDA for using 3261 sq. mtrs. of land located on Plot No.1, in Sector 13, Chikhali, Taluka Haveli, Pune. The said land was to be used for education purposes as per clause (N) of the lease deed. The assessee paid lease premium of Rs.1,37,36,963/- for the said plot and further agreed to pay sum of Rs.100/- per annum for the entire period of lease. The Assessing Officer (TDS) was of the view that the assessee was required to deduct tax at source under section 194 I of the Act at the time of payment of lease premium to PCNTDA. The Assessing Officer issued a show cause notice to the assessee and also issued summons to the deductor. In reply, the assessee explained that the transaction between it and PCNTDA was a transaction of sale and further appropriate tax return had been filed by it. The Assessing Officer was of the view that the transaction between the parties was not that of transfer, but of lease and there was no transfer of ownership of the property, but the same was leased for use either for commercial or residential purposes as approved by the Lessor. However, the Assessing Officer referred to the various restrictions on the Lessee / assessee put up by the Lessor and it was observed by the Assessing Officer that this was not a case of freehold transfer or sale and the assessee was not the absolute owner of the property. The Assessing Officer thus, concluded that the assessee was liable to deduct tax at source under section 194 I of the Act on the lease premium paid to PCNTDA. The assessee having failed to deduct tax at source, was held to be in default under section 201(1) of the Act at Rs.13,73,696/- and further interest under section 5 ITA Nos.2015 & 2017/PN/2014 201(1A) of the Act was charged at Rs.82,416/-. Reliance was placed on the ratio laid down by Chennai Bench of the Tribunal in Foxconn India Developer (P) Ltd. Vs. ITO (TDS) (supra).
6. The CIT(A) after considering the facts and reply filed by the assessee, observed that no doubt, after 99 years of lease, the lease hold right expired and the Lessor was vested with the full rights on the said plot of land, with the option either to renew the lease for further period and take back the possession of the land. However, the preliminary clause of the lease agreement reflects that the payment of lease premium was a pre-condition for entering into lease agreement. The CIT(A) has reproduced the preliminary clause of the lease agreement at page 7 of the appellate order, which are not being reproduced for the sake of brevity. The CIT(A) thus, held that the payment of lease premium of Rs.1,37,36,963/- was a pre-condition for entering into the lease agreement and the same was not under the lease deed, therefore, the payment of lease premium fell outside the purview of definition of rent as provided under section 194I of the Act. It was further pointed out by the CIT(A) that there is no merit in the reliance placed upon the decision of Chennai Bench of the Tribunal in Foxconn India Developer (P) Ltd. Vs. ITO (TDS) (supra) as the same was distinguishable on facts. In the facts of the case before the Tribunal, the issue in question was upfront payment of lease and further the said upfront payment was part of the conditions for acquiring leasehold rights, unlike the present case where, the payment of lease premium was a pre-condition for entering into a lease agreement. The CIT(A) placed reliance on the decision of Mumbai Bench of the Tribunal in Navi Mumbai SEZ(P) Ltd in ITA No.738 to 7741/Mum/2012, relating to assessment years 2006-07 to 2009-10, vide order dated 12.08.2013, in order to hold that the payment of lease premium to PCNTDA being a pre-condition for entering into lease agreement, could not be said to be paid under the terms of lease agreement. Further, stamp duty had been paid on the market value of the plot represented by lease premium. In view thereof, the Assessing Officer was directed to delete the demand created under sections 201(1) and 201(1A) of the Act.
7. The issue arising in the present appeal is squarely covered by the ratio laid down by the co-ordinate Bench of the Tribunal in ITO Vs. Camp Education Society (supra), wherein it was held 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 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 / 6 ITA Nos.2015 & 2017/PN/2014 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 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 7 ITA Nos.2015 & 2017/PN/2014 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."
8. Following the same parity of reasoning, we hold that where the lease premium paid to PCNTDA was a pre-condition for entering into the lease agreement, the same not being paid consequent to the execution of the lease agreement, cannot be said to be payment in lieu of rent as envisaged under section 194 I of the Act. In addition, the assessee had paid stamp duty on the market value of the plot represented by the lease premium and the said finding of the CIT(A) having not been controverted by the learned Departmental Representative for the Revenue, we find no merit in the appeal filed by the Revenue. Accordingly, we uphold the order of CIT(A) and dismiss the grounds of appeal raised by the Revenue."
7. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of Preetam Medical Foundation & Research Centre (Supra), therefore, respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice we find no infirmity in the order of the CIT(A) deleting the demand raised u/s.201(1)/201(1A) of the I.T. Act in respect of lease premium paid to PCNTDA. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed."
7. Since the facts of the instant case are identical to the facts of the case decided by the Tribunal in the case of Shri Ajay N. Yerwadekar (Supra) to which both of us are parties, therefore, in absence of any contrary material brought to our notice, we find no infirmity in the order of the CIT(A) deleting the demand raised u/s.201(1)/201(1A) of the I.T. Act in respect of lease premium paid to PCNTDA. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
ITA No.2017/PN/2014 (M/s. Nirman Associates) :
8. Grounds raised by the Revenue are as under :
"1. The learned Commissioner of Income tax(Appeals) erred in deleting the demand raised of Rs 68,56,408/- u/s 201(1)/201(1A) of the Income tax Act 1961 in respect of lease premium paid to Pimpri Chinchwad New Township Development Authority.8
ITA Nos.2015 & 2017/PN/2014
2. The learned Commissioner of Income tax (Appeals) erred in not considering the fact that the lease premium paid to PCNTDA was covered by the definition of rent as per proviso of section 194I of the Act
3. The learned Commissioner of Income tax (Appeals) erred in not appreciating the fact that the deed entered into the deductor with PCNTDA was not a transfer deed but a lease deed and Explanation to section 194I clearly stipulates that any payment by whatever name called under any lease agreement is to be taken as rent for TDS purpose
4. The appellant craves to add, alter or amend any or all the grounds of appeal."
9. After hearing the Ld. Departmental Representative and on perusal of the orders of the authorities below, we find the assessee is a partnership firm engaged in the business of Promoters and Developers. In the F.Y. 2010-11 it purchased leasehold plot from Pimpri Chinchwad New Township Development Authority (PCNTDA in short) for the purpose of development of a residential and a commercial complex. Lease agreement was executed for 99 years for which the assessee firm has paid total lease premium of Rs.5,39,87,590/- as cost of this leasehold plot and also agreed to pay Rs.100/- per annum as lease rent for the entire lease period. According to the AO the assessee has actually paid the lease rent and therefore the provisions of section 194I are applicable for lease premium. Since there is default on the part of the assessee as contemplated under section 201(1) the AO computed the liability u/s.201(1) at Rs.53,98,759/- and levied interest u/s.201(1A) at Rs.14,57,649/-.
9
ITA Nos.2015 & 2017/PN/2014
10. In appeal the Ld.CIT(A) following various decisions deleted the demand raised u/s.201(1)/201(1A) for which the Revenue is in appeal before us.
11. We find the grounds raised by the Revenue in the above appeal are identical to the grounds in ITA No.2015/PN/2014. We have already decided the issue and the grounds raised by the Revenue have been dismissed. Following the same reasonings, the grounds raised by the Revenue are dismissed.
12. In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 10-02-2016.
Sd/- Sd/-
(VIKAS AWASTHY) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पण
ु े Pune; दनांक Dated : 10 February, 2016.
th
सतीश
आदे श क) *#त,ल!प अ-े!षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A)-V, Pune
4. The CIT-V, Pune
5.
$वभागीय 'त'न(ध, आयकर अपील य अ(धकरण, "बी" पण ु े/ DR, ITAT, "B" Pune;
6. गाड- फाईल / Guard file.
आदे शानस ु ार/ BY ORDER, // True Copy // // True Copy // //स या$पत 'त //Tru व/र0ठ 'नजी स(चव / Sr. Private Secretary आयकर अपील य अ(धकरण, पुणे / ITAT, Pune