Income Tax Appellate Tribunal - Delhi
M/S. Sjp Infracon Ltd., Noida vs Dcit (Tds), Noida on 11 March, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G', NEW DELHI
Before Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
(Through Video Conferencing)
ITA No. 3102/Del/2016 : Asstt. Year : 2011-12
M/s SJP Infracon Ltd., Vs DCIT,
A-133, Sector-63, TDS,
Noida-201301 Noida
(APPELLANT) (RESPONDENT)
PAN No. AAOCS6480K
Assessee by : None
Revenue by : Sh. Umesh Takyar, Sr. DR
Date of Hearing: 07.03.2022 Date of Pronouncement: 11.03.2022
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-I, Noida dated 29.02.2016.
2. The order of the ld. CIT(A) is as under:
"3. The dispute is between the appellant and revenue over liability to withhold tax on payment of lease rent to the Noida Authority and other two authorities having the same status against the lease of land taken by the appellant from those authorities. The A.O. has held that the lease rent paid by the appellant to the authorities is covered under the provisions of section 1941 of I.T. Act, 1961 and the appellant not having 2 ITA No. 3102/Del/2016 SJP Infracon Ltd.
deducted the tax thereon to the credit of Central Government is liable to be proceeded against.
4. The ld. Counsel raised the spirited defense the sum and substance of which was that the lease rent paid was not the revenue payment but was capital in nature. Placing reliance on certain authorities the Id. counsel claimed that the payment to the Noida Authority etc. was not covered by the liabilities u/s. 1941 and the impugned order was incorrect in law.
5. The ld. Counsel placed reliance on the order dated 04.12.2006 of Hon'ble Supreme Court in the case of Enterprising Enterprises Vs. DCIT where the Hon'ble Court directed that there was no need to deduct tax on payment of lease rent. With due respect to the said orders of Hon'ble Supreme Court it is to be noted that being an order the same cannot be a precedence. This order accordingly, is of no help to the appellant.
6. The ld. Counsel of the appellant further placed reliance on the judgment of Hon'ble Allahabad High Court in (2015) 379 ITR 14 (All.) which is on the procedure to be adopted by the assessing officer u/s. 143 and is not concerned with section 1941. This authority also is therefore of no help to the appellant. The Id. counsel' placed reliance on an order of ITAT, Delhi Benches in the case of ITO Vs. The Indian Newspaper Society, A.Ys. 2007-08 and 2009-10 where the Tribunal made a distinction between the payment of capital account and payment of revenue account. In the instant case there is no dispute as the Noida Authority has itself claimed in various proceedings before the undersigned that the land was given only on lease 3 ITA No. 3102/Del/2016 SJP Infracon Ltd.
and was not transferred on sale. This fact is also built in the lease agreement where all the conditionalities of lease are present and the lessor has demanded and received lease rent only. The definition of rent in section 1941 is very vast and will cover the situation in which the appellant is. The payment made by the appellant is on revenue account and not on capital account. In view of the said order of ITAT, Delhi Benches is of no help to the appellant."
3. We find that the sole dispute pertains to deduction of TDS on the payments made by the assessee to Greater Noida Authorities. The assessee paid lease rentals of Rs.2,28,94,571/- on 30.10.2010 and failed to deduct TDS u/s 194-I. The AO demanded an amount of Rs.32,51,029/- including interest u/s 201(1) and 201(1A).
4. The matter deductibility of TDS on the payments made to Greater Noida Authorities has been examined by the Hon'ble Supreme Court in the case of M/s New Okhla Industrial vs. CIT in Civil Appeal No. 15613 of 2017 dated 02.07.2018 wherein it was held that "deduction at source is on payment of rent under Section 194‐ I, which is clearly the statutory liability". For the sake of ready reference, the order of the Hon'ble Supreme Court is as under:
"Delay condoned.
2. These appeals have been filed against the co mmon judgment of De lhi High Court date d 16.02.2017 by which the Delhi High Co urt has allowe d the writ petitions filed by the private re spondents here in. The appe als have bee n filed by Ne w Okhla I ndustrial De velopm ent Autho rity, Greater 4 ITA No. 3102/Del/2016 SJP Infracon Ltd.
Noida Industrial Develo pment Authority, Commissio ner of Income Tax as we ll as Income Tax Office r and o thers. The facts and issues in all the appeals being common, it shall be sufficient to refe r the facts and ple adings in Civil Appe al No. 15130 of 2017 - Commissioner o f Income Tax (TDS) - II & Ors. Vs. Rajesh Projects (India) Pvt. Ltd. & Anr. for de ciding this batch o f appe als.
3. The respo nde nt Rajesh Projects (India) is a private limite d company engage d in the business o f real estate activities of constructing, selling re sidential units etc. On 03.11.2010, the responde nt company e ntere d into a long term lease for 90 years with the Greate r Noida Industrial Develo pment A uthority for Plo t No . GH07A for deve lopment and marketing o f Gro up F lats. As per terms o f the lease deed, the company partially paid the consideratio n amount for the acquisitio n of the plot to Greater No ida at the time of executio n of the lease deed and is also paying the balance le ase premium annually as per the te rms and conditio ns of the lease deed. Notice under Section 201/201(A) of the Income Tax Act, 1961 was issue d by the Income Tax department inquiring regarding no n-de ductio n of tax at so urce under Sectio n 194I of the Income Tax Act from the annual lease rent paid to Greater Noida. The respondent company replied the no tices. The respo ndents case was that it did not de duct tax at so urce as it was advised by Greate r Noida that it is a Gove rnment authority, hence the tax deduction at source provisio ns are not applicable. T he A ssessing Officer passed the orde r date d 31.03.2014 for the Financial Y ear 2010 ‐ 2011 and 20112012, the responde nt was held as "asse ssee in default" fo r non-deduction/no n-de po sit of TDS on acco unt of payment of lease rent and interest made to Greate r Noida.5 ITA No. 3102/Del/2016
SJP Infracon Ltd.
Consequent demand was raise d against the respondents. Aggrie ved by assessment order, the respondent co mpany filed an appeal before the Commissioner o f Income Tax Appeals. Responde nts prayed to stay the demand which was refuse d and reco very proceedings were initiate d. Aggrieved by assessment and recove ry proceedings e manating there from, the responde nt company filed a Writ Pe titio n No. 8085 of 2014 praying fo r various reliefs including the relief that respondent company be not treate d as "assessee in default" under the Income Tax Act fo r non- deductio n/depositing the tax at source in respect of payment of rent on lease land and in respect o f other charges paid to Greate r Noida. Different o ther entitie s also filed the writ pe titions in the Delhi High Co urt praying for more or less the same reliefs relating to lease rent payment and fo r payment of inte rest to Gre ater Noida. All the writ petitio ns involving common questions of law and facts were heard together and we re allowed by the De lhi High Co urt by its j udgment dated 16.02.2017. Before the High Court, Greater Noida and the Noida autho rities conte nde d that they are lo cal autho rities within the meaning of Sectio n 10(20) o f the Income Tax Act, 1961, he nce their income is exempt from the Income Tax. I t was further contended that the inte rest receive d by them is exempt unde r Section 194A( 3)
(iii)( f) o f the Inco me Tax Act and they are e xempted from payment o f any tax on the interest.
4. The revenue re fute d the co ntention of Gre ate r Noida and Noida contending that w.e .f. 01.04.2003, the Greater Noida and Noida is not a local authority within the meaning of Section 10(20) and further the y are also not entitle d for the benefit o f notification issued unde r Sectio n 194A(3)( iii)( f) . It was further co ntended that with regard to payme nt of 6 ITA No. 3102/Del/2016 SJP Infracon Ltd.
rent to the Noida and Gre ate r Noida, the responde nt company was liable to de duct the tax on payment of inte rest, no inco me tax was deducted by the respondent company while paying re nt to Noida and Gre ater Noida , hence the y are "assessee in de fault". The re venue also relie d on Division Bench judgment of Allahabad High Court in Writ Pe tition Tax No . 1338 of 2005 decided on 28.02.2011 whe re the Allahabad High Co urt has held that Noida is not a local authority within the meaning of S ection 10( 20) as amended by Finance Act, 2002. T he De lhi High Court after hearing all the parties allowed the writ petitions.
The Delhi High Co urt held that Noida and Greater Noida are not local autho rities within the meaning of Section 10(20) as amende d w.e .f. 01.04.2003. Delhi High Co urt further held that inte rest income of the Noida and Greater Noida is exempted under the notification dated 22.10.1970 issued unde r Section 194A(3)( iii) (f) of the Income Tax A ct. The High Co urt furthe r held that as far as payment of rent to the Noida and Greater Noida, the re sponde nt company was liable to de duct income tax at source. The High Court recorde d its co nclusions in Para 20 of the judgment, which is to the fo llo wing effect: "20. In view of the above analysis, the co urt here by concludes as follows:
(1) Amounts paid as part of the lease premium in terms of the time schedule (s) to the Lease Deeds e xecute d between the petitio ners and GNOI DA, or bi ‐ annual or annua l payments for a limited/specific pe riod towards acquisition of lease ho ld rights are no t subject to TDS, being capital payments;
(2) Amounts constituting annual le ase rent, expressed in terms of percentage (e.g. 1%) of the total premium for the 7 ITA No. 3102/Del/2016 SJP Infracon Ltd.
duration of the lease, are rent, and the refo re subject to TDS. S ince the petitione rs could not make the deductions due to the insiste nce of GN OIDA , a direction is issue d to the said autho rity ( GNOIDA) to comply with the provisions of law and make all payments, which would have been otherwise part of the deductio ns, for the periods, in question, till end of the date of this judgment. A ll payments to be made to it, henceforth, shall be subject to TDS.
(3) Amounts which are payable towards inte rest o n the payment of lump sum lease premium, in terms of the Lease which are co vere d by Sectio n 194 ‐ A are covere d by the exemptio n under Section 194A( 3) (f) and there fore , no t subjecte d to T DS.
(4) For the reaso n mentioned in ( 3) above, any payment of inte rest accrue d in favour o f GN OIDA by any pe titione r who is a bank to the GNOIDA , to wards fixed deposits, are also exempt from TDS ."
5. Aggrieve d by the afo resaid judgm ent o f De lhi High Court, Greater Noida, N oida as well as Revenue has file d these appe als.
6. Learned co unsel appearing fo r the Noida and Greate r Noida contende d that Noida and Greate r Noida have been constituted under Section 3 of the Uttar Pradesh I ndustrial Area Deve lopment Act, 1976 and is a local autho rity within the meaning of Section 10( 20) of the Income Tax Act, 1961. Reliance o n no tificatio n dated 24.12.2001 issued by the Governor o f the S tate o f Uttar Pradesh under the pro viso to Article 243Q(1) has also been placed to conte nd that by virtue o f said no tificatio n bo th Gre ater Noida and Noida are municipalities and are covered by the local authorities as explained under the explanatio n to Section 10(20) of the 8 ITA No. 3102/Del/2016 SJP Infracon Ltd.
Income Tax Act. I t is further conte nded that inte rest income of the authorities is exempted unde r the no tification issued unde r Sectio n 194A(3)( iii)(f) . Further re liance has been place d on Circular No. 35/2016 date d 13.10.2016 wherein it has been clarified that provision of Section 194I of the Income Tax Act, 1961 on lump ‐ sum lease premium paid for acquisitio n o f long term lands is no t applicable.
7. It is furthe r submitted that the question as to whether Noida/ Greater No ida is local autho rity is engaging attentio n of this Court in Civil A ppeal No. 792 ‐ 793 o f 2014, in which judgment has already been reserved. On tax deduction at source , it is further submitte d that the said issue is also pending consideration o f this Court in Special Leave Pe tition (Civil) No . 33260 of 2016, in which judgment has also been reserve d. With re gard to tax deduction at source o n the payment of lease rent, re liance has been place d on Circular date d 30.01.1995.
8. Le arned counsel for the reve nue in support of its appeal submits that Noida and Gre ate r No ida are no t co vered by the definitio n o f local authority as contained under S ection 10( 20) and the ir income is no t exempted unde r S ection 10( 20) . J udgment of Allahabad High Court date d 28.02.2011 in Writ Petition Tax No . 1338 of 2005 was also relied by the revenue against which appe al has already been filed by Noida and has been heard. With regard to inco me tax deductio n at source unde r Section 194A, the revenue has referred to its appeal in Special Le ave Petitio n (C) No.34530 of 2016 Commissioner of Income T ax - TDS - Kanpur Vs. Central Bank of I ndia, where the arguments has already been co ncluded and judgment is re served.
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9. Le arned counsel fo r the revenue submits that Noida/ Greater No ida is not e ntitled for the bene fit of Section 194A(3)( iii)(f) .
10. We have considere d the subm issions of the le arne d counsel fo r the parties and pe rused the records.
11. Inso far as the appe als filed by Noida/ Greater No ida are concerne d, the principal submission raise d by the appellant is applicability of Section 10( 20) of the Income Tax Act. Learned counsel for the Noida has submitted that the said issue has alre ady been addressed in detail in Civil Appeal No. 792 ‐ 793 o f 2014. By our judgment of the date in Civil Appeal No. 792 ‐ 793 of 2014 New Okhla Industrial Develo pment Authority Vs. Commissioner of Incom e Tax ‐ Appeals & Ors., we have he ld that Noida is not a "local authority" within the meaning of Section 10(20) of the Income Tax Act as amended by the Finance Act, 2002 w.e .f. 01.04.2003. For the reaso ns given by our judgment of the date in the abo ve appeals, this submission has to be rejected.
12. Now coming to the appe als filed by the revenue, insofar as the question re lating to e xemptio n under Section 194A(3)
(iii)( f) by virtue of notification dated 24.10.1970, i.e. the exemptio n of inte rest income of the Noida, we have already decide d the said contro versy in CI VIL APPEAL NO.____OF 2018 (arising o ut of SLP ( C) No. 3168 of 2017) Commissioner o f Income Tax(TDS) Kanpur and A nr. Vs. Canara Bank. Having he ld that N oida is covere d by the notification date d 22.10.1970, the judgment o f the Delhi High Co urt holding that Noida/Greater Noida is entitled for the bene fit o f Section 194A( 3)(iii)( f) has to be appro ve d.
10 ITA No. 3102/Del/2016SJP Infracon Ltd.
13. Now coming to the direction of the High Court regarding deductio n of tax at source on the payment of le ase rent as per Section 194 ‐ I of the I ncome Tax Act, 1961, the authority has re lied on Circular dated 30.01.1995. S ection 194I of the Inco me Tax Act provides as follows: "Section 194I : Rent 2[Any perso n, not be ing an individual or a Hindu undivide d family, who is responsible fo r paying to a reside nt] any inco me by way of rent, shall, at the time of credit o f such income to the acco unt o f the payee or at the time of payment thereof in cash or by the issue of a cheque or draft o r by any other mode, whichever is e arlier, deduct income tax thereo n at the rate of 4[ (a) two per cent for the use of any machinery o r plant o r e quipment; and
(b) ten per cent for the use of any land or building (including facto ry building) or land appurtenant to a building (including factory building) or furniture o r fittings:] Pro vide d that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggre gate of the amounts o f such income credited or paid o r like ly to be credite d or paid during the financial year by the aforesaid person to the account of, o r to , the payee, does not e xceed 5[one hundred e ighty thousand rupees] :
6[Provided further that an individual or a Hindu undivide d family, whose to tal sales, gross re ceipts or turno ver from the business o r profession carrie d on by him excee d the monetary lim its specified unde r clause (a) or clause (b) of section 44AB during the financial year imme diately preceding the financial year in which such income by way of rent is cre dited o r paid, shall be liable to de duct income tax unde r this section.] 1[ Pro vided also that no deduction shall be made under this section whe re the income by way o f rent is cre dited o r paid to a business trust, be ing a real estate 11 ITA No. 3102/Del/2016 SJP Infracon Ltd.
investment trust, in respect of any real e state asset, referred to in clause (23FCA) o f section 10, owned directly by such business trust.] Explanatio n : Fo r the purpo ses of this sectio n, 2[(i) "rent" means any payment, by whateve r name calle d, under any le ase , sublease , tenancy or any other agreement or arrangement for the use of (either separate ly or toge ther) any,
(a) land; o r
(b) building (including factory building); o r
(c) land appurte nant to a building ( including factory building); or
(d) machine ry; or
(e) plant; o r
(f) equipment; or
(g) furniture; or
(h) fittings, whether or no t any o r all of the above are owned by the paye e;]
(ii) where any income is cre dite d to any acco unt, whether calle d "Suspense account" or by any othe r name, in the books of account of the perso n liable to pay such income, such crediting shall be deemed to be credit o f such income to the account o f the payee and the provisio ns of this section shall apply acco rdingly."
14. The definition of rent as contained in the e xplanation is a very wide de finition. Explanation states that "rent" means any payment, by whatever name calle d, under any lease , suble ase, te nancy or any other agreement or arrangement for the use of any land. The High Court has read the relevant clauses o f the le ase dee d and has rightly co me to the conclusion that payment which is to be made as annua l rent is re nt within the meaning of S ection 194I, we do not 12 ITA No. 3102/Del/2016 SJP Infracon Ltd.
find any infirmity in the aforesaid conclusio n of the High Court. The High Court has rightly held that TDS shall be deducted o n the payment o f the le ase re nt to the Greate r Noida as per Section 194 ‐ I. Reliance o n circular date d 30.01.1995 has been place d by the Noida/Greater No ida. A perusal o f the circular dated 30.01.1995 indicate that the query which has been answe red in the abo ve circular is "Whether re quire ment of deductio n of income tax at source unde r Sectio n 194I applie s in case of payment by way of rent to Go vernment, statutory authorities re ferred to in Section 10(20A) and local autho rities whose income unde r the head "Income from house property" or "I ncome from other sources" is e xempt from income tax."
15. I n Paragraph 3 o f the circular, it was stated that income of an authority constituted in India by or unde r any la w enacte d either fo r the purpose of dealing with and satisfying the need fo r housing accommodatio n or for the purpose of planning, deve lopment or impro vement o f cities, towns and villages, is exempt from income tax under Sectio n 10(20A) . In view o f the aforesaid, in Paragraph 4 o f the circular, following was stated: "In view of the aforesaid, there is no requirement to de duct income tax at source on inco me by way o f 're nt' if the payee is the Go vernment. I n the case of the local authorities and the statutory autho rities re ferre d to in para 3 o f this circular, the re will be no re quirement to deduct income tax at source from income by way of rent if the pe rson responsible for paying it is satisfied abo ut their tax ‐ e xempt status unde r clause(20) or (20A) o f Section 10 on the basis of a certificate to this effect given by the said authorities."
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16. A perusal of the above circular indicate that circular was issued on the strength of Sectio n 10( 20A) and Section 10( 20) as it e xisted at the rele vant time. Section 10(20) has been amended by F inance A ct, 2002 by adding an explanation and further Section 10(20A) has been o mitted w.e .f. 01.04.2003. The ve ry basis of the circular has been knocked out by the amendments made by Finance Act, 2002. T hus, the Circular canno t be relie d by No ida/Greater Noida to co ntend that there is no requirement o f deductio n of tax at source unde r Section 194 ‐ I. Thus, deduction at source is on paym ent of rent under Section 194 ‐ I , which is clearly the statutory liability of the respondent ‐ co mpany. The High Court has adjusted the e quities by recording its conclusion in Paragraph 20 and issuing a direction in Paragraph 21.
17. In vie w of what has been state d above , we do not find any erro r in the judgment of the High Court dated 16.02.2017. In result, all the appeals are dismissed."
..........................J .
( A.K . SIKRI ) ..................J .
5. Since, the matter stands settled by the order of the Hon'ble Apex Court, we hereby decline to interfere with the order of the ld. CIT(A).
14 ITA No. 3102/Del/2016SJP Infracon Ltd.
6. In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 11/03/2022.
Sd/- Sd/-
(Saktijit Dey) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 11/03/2022
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR