Income Tax Appellate Tribunal - Chennai
Tril Infopark Limited, Chennai vs Assessee on 19 June, 2015
आयकर अपील
य अ धकरण, 'ए' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ए. मोहन अलंकामणी, लेखा सद य केसम%
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.699/Mds/2014
नधा'रण वष' / Assessment Year : 2009-10
M/s TRIL Infopark Limited, The Income Tax Officer(TDS)
Ramanujan IT City, Taramani, v. Ward I(1),
Rajiv Gandhi Salai, OMR, Chennai - 600 034.
Chennai - 600 113.
PAN : AACCT 9203 B
(अपीलाथ+/Appellant) (,-यथ+/Respondent)
अपीलाथ+ क. ओर से/Appellant by : Sh. R. Vijayaraghavan,
Advocate
,-यथ+ क. ओर से/Respondent by : Dr. S. Moharana, CIT
सन
ु वाई क. तार
ख/Date of Hearing : 23.04.2015
घोषणा क. तार
ख/Date of Pronouncement : 19.06.2015
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-VII, Chennai, dated 28.02.2014 and pertains to assessment year 2009-10. 2 I.T.A. No.699/Mds/14
2. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the Assessing Officer found the assessee as assessee in default under Section 201(1) of the Income-tax Act, 1961 (in short 'the Act') and levied penal interest under Section 201(1A) of the Act. According to the Ld. counsel, the Assessing Officer passed the order on 3.10.2013 treating the assessee as assessee in default for the assessment year 2009-10. Referring to Section 201(3) of the Act, the Ld.counsel pointed out that no order shall be made under Section 201(1) for failure to deduct the whole or any part of the tax at any time after expiry of two years from the end of the financial year in which the statement is filed in a case where statement referred to in Section in Section 200 has been filed. Referring to Section 200 of the Act, the Ld.counsel submitted that any person deducting any sum on or after 1.04.2005, shall, after paying the tax deducted to the credit of the Government within the prescribed time, prepare such statements quarterly for the year ending 30th June, 30th September, 31st December and 31st March in each financial year. According to the Ld. counsel, the assessee was filing its statements under Section 200 of the Act and also filed its TDS return in the first quarter of the financial year 2008-09. According to the Ld.counsel, the due date for passing the impugned 3 I.T.A. No.699/Mds/14 order under Section 201(1) of the Act, for failure to deduct the tax was 31.03.2011. Therefore, According to the Ld. counsel, the order passed by the Assessing Officer on 3.10.2013 is barred by limitation. The Ld.counsel submitted that the time limit provided under the Act cannot be extended under any circumstances.
3. On the contrary, Dr. S. Moharana, the Ld. Departmental Representative, pointed out the assessee itself filed the statement as required under Section 200 of the Act in respect of the TDS paid, on 18th August, 2011 for the second quarter of financial year 2008-
09. This is the revised statement filed by the assessee. The Ld. D.R. placed a Xerox copy of the statement filed under Section 200 of the Act on file. Since the revised statement itself was filed on 18th August, 2011, according to the Ld. D.R., the order passed by the Assessing Officer on 03.10.2013 is within the period of time limit provided under Section 201(3) of the Act. Therefore, the contention of the assessee that the order passed by the Assessing Officer is barred by limitation is not justified.
4. We have considered the rival submissions on either side and perused the relevant material on record. The impugned order under Section 201(1) of the Act treating the assessee as assessee in default was passed on 03.10.2013. The assessee has claimed that 4 I.T.A. No.699/Mds/14 the statement under Section 200 of the Act was filed for the first quarter on 15th July, 2008. Therefore, the Assessing Officer ought to have passed the order on or before 31.03.2011. The fact remains that the assessee revised itself the statement filed under Section 200 of the Act by way of correction on 18th August, 2011. The Assessing Officer may not be in a position to consider the revised statement filed by the assessee on or before 18.08.2011. Therefore, the date of filing of the statement for all practical purposes has to be taken as 18th August, 2011. If the date of filing of statement is taken as 18.08.2011, then the impugned order is within the period of time limit as provided under Section 201(3) of the Act. Therefore, this Tribunal is of the considered opinion that the order passed by the Assessing Officer under Section 201(1) of the Act is not barred by limitation.
5. Now coming to the merit of the appeal, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee is a joint venture with the object of development of Special Economic Zone for Information Techonology/Information Technology Enabled Services in Chennai. For the purpose of development of Special Economic Zone in relation to Information Technology and Information Technology Enabled Services, the 5 I.T.A. No.699/Mds/14 Government of Tamil Nadu, by an order dated 24.04.2007, allotted 25.27 acres of land on lease for a period of 99 years. The assessee paid `1412,79,68,017/- to Tamil Nadu Industrial Development Corporation Ltd. The Ld.counsel clarified that in fact the Government of Tamil Nadu authorized Tamil Nadu Industrial Development Corporation Ltd. to lease 25.27 acres of land to the assessee. The Ld.counsel further pointed out that out of `1412,79,68,017, TIDCO paid a sum of `1320 Crores to the Government of Tamil Nadu. The Assessing Officer by the impugned order found that the assessee has not deducted tax under Section 194-I of the Act, on the payment made to Tamil Nadu Industrial Development Corporation Ltd. to the extent of `1412.79 Crores for the year under consideration. According to the Ld. counsel, what was paid by the assessee is upfront fee for allotment of the land for 99 years. The Ld.counsel pointed out that the lease for 99 years is almost like a sale. Therefore, what was paid by the assessee is a sale consideration, hence there is no question of deduction of tax under Section 194-I of the Act. Referring to a unreported judgment of Madras High Court in CIT v. Rane Brake Linings Ltd. in Tax Case (Appeal) No.1031 of 2007 dated 07.04.2014, the Ld.counsel submitted that the upfront fee paid by the assessee for getting the land on lease for 99 years amounts to 6 I.T.A. No.699/Mds/14 alienation as a sale or mortgage. Merely because it was referred in the document as lease, that itself would not make the document as lease deed. Therefore, According to the Ld. counsel, for all practical purposes, the property taken by the assessee on lease has to be treated as purchase of a capital asset, hence the provisions of Section 194-I of the Act is not applicable to the facts of the case.
6. The Ld.counsel for the assessee placed his reliance on the judgment of the Bombay High Court in Director of Income-tax v. Mahindra & Mahindra Ltd. (2014) 48 taxmann.com 150 and submitted that for the assessment year 1998-99, the Income-tax Act does not prescribe any limitation for declaring the assessee as assessee in default under Section 201(1) of the Act. Inspite of that, the Bombay High Court found that the revenue authorities have to exercise their power to declare the assessee as assessee in default within a reasonable time. Since no limitation was prescribed, the Bombay High Court found that the order passed by the Assessing Officer beyond four years was barred by limitation. The Ld.counsel has also referred to the decision of this Bench of the Tribunal in Foxconn India Developer (P) Ltd. v. ITO [I.T.A. No.492/Mds/2010 dated 30.04.2012] and submitted that on identical circumstances, this Tribunal found that the upfront fee paid by the assessee would 7 I.T.A. No.699/Mds/14 fall within the definition of "rent" as provided under Explanation to Section 194-I of the Act. Therefore, this Tribunal found that the assessee is liable to deduct tax at source. However, by placing reliance on the judgment of Apex Court in Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (2007) 293 ITR 226, the Ld.counsel submitted that the recipient has already paid the tax. Therefore, at the best, the Department could recover interest till the payment of tax by the recipient.
7. On the contrary, Dr. S. Moharana, the Ld. D.R. submitted that on identical circumstances, this Tribunal in Foxconn India Developer (P) Ltd. (supra) found that the upfront fee paid by the assessee would fall within the definition of "rent". Therefore, the assessee is liable to deduct tax under Section 194-I of the Act. Referring to the judgment of Calcutta High Court in Braithwaite & Co.(India) Ltd. v. CIT (1978) 111 ITR 542, the Ld. D.R. pointed out that the assessee took on lease the entire industrial undertaking along with land and building, plant and machinery, furniture and fixtures and vehicles for 99 years. Under the lease agreement, the assessee was required to pay the lessor annual payments for 99 years. The agreement provided that in the event of premises being acquired by the Government, the lessor would entitle only to the 8 I.T.A. No.699/Mds/14 capitalized value of the rent accrued for the unexpired period of lease and the remaining surplus would be paid to the lessee. The lessee was given option to renew the lease at much lower rent. The assessee claimed the annual rent paid under the lease as revenue expenditure. However, the Assessing Officer found that the arrangement contained in the deed was in effect a sale of property to the assessee and the annual payment was a payment made towards purchase consideration of the property. Therefore, the Assessing Officer treated the same as capital expenditure. The Appellate authority upheld the order of the ITO. On further appeal before the Tribunal, it was found that the annual payments would be in the nature of equated annuity payments consisting partly of price of the asset and partly of either the hire charges or interest in respect of unpaid purchase price. The Tribunal directed the Income Tax Officer to work out the interest embedded in each annual payment and allow the same as deduction and balance of the annuity, was found to be attributable to the capital value of the assets. Accordingly, the same was treated as capital expenditure. On further reference, the Calcutta High Court found that under the terms of agreement, the assessee was required to pay the lessor annual payments for 99 years. The lease agreement provided in the event of premises being rented by the Government, the lessor 9 I.T.A. No.699/Mds/14 would be entitled to capitalized value of rent accrued for unexpired period of lease and remaining surplus would be paid to the lessee. Therefore, the Calcutta High Court found that the document in question was document of lease and annual payment made by the assessee to the lessor was payment of rent, therefore, it was allowable as revenue expenditure. In view of the Calcutta High Court judgment in Braithwaite & Co.(India) Ltd. (supra), according to the Ld. D.R., the assessee is liable to deduct tax while making payment.
8. The Ld. Departmental Representative further submitted that the contention of the assessee is that the transaction amounts to sale of the property is not tenable. According to the Ld. D.R., the so-called upfront fee paid by the assessee was duly escalated and additional sum of `1000 per acre per annum has to be paid during the lease period. The upfront rent is nothing but an advance payment of lease rent. In addition to that, `25,000/- per acre per annum was also collected towards the lease rent. Referring to Section 2(14) of the Act, the Ld. D.R. pointed out that the definition in Section 2(14) is inclusive one and not exhaustive. Section 2(45) of the Act defines "total income" computed in the manner laid down under the provisions of the Income-tax Act. Referring to Section 10 I.T.A. No.699/Mds/14 194-I of the Act, the Ld. D.R. submitted that the payment of rent for land is subject to deduction of tax under Section 194-I of the Act. According to the Ld. D.R., Section 194-I provides for deduction of 20% of the rent payable for use of the land or building where the payee is other than individual or HUF.
9. The Ld. Departmental Representative further pointed out that as per the Government order dated 11.03.2010, 25.27 acres of land were alienated in favour of Tamil Nadu Industrial Development Corporation (TIDCO) on 24.08.2007. In a letter dated 11.03.2010, it was observed that TIDCO paid only a sum of `1320.95 Crores to the Government of Tamil Nadu towards cost of the land. The balance of `91.85 Crores was retained by TIDCO. The Government observed that TIDCO has to retain only `5.50 Crores. However, the excess amount of `86.35 Crores was converted as term loan to TIDCO on payment of interest @ 10.5% per annum. Since the provisions of Section 194-I provide for deduction of tax on payment of rent for the use of the land, according to the Ld. D.R., the assessee is liable to deduct tax. Therefore, the CIT(Appeals) has rightly confirmed the order of the Assessing Officer.
10. We have considered the rival submissions on either side and perused the relevant material on record. We have also gone 11 I.T.A. No.699/Mds/14 through the orders of the Government of Tamil Nadu. The Government order dated 11.03.2010 in G.O (Ms) No.28 issued by Industries (I.T) Department shows that the upfront land lease rent was escalated by 12% and Tamil Nadu Industrial Development Corporation received a sum of `1412.80 Crores from the assessee. However, Tamil Nadu Industrial Development Corporation paid only a sum of `1320.95 Crores to the Government towards the cost of the land and retained the balance amount of `91.85 Crores and utilized the same for discharging its own liability to Government and bank overdraft dues. The Government further found that Tamil Nadu Industrial Development Corporation has to retain only `5.50 Crores out of `1412.80 Crores received from the assessee and should have paid the balance of ` 1407/- Crores to the Government. On the request of the Chairman & Managing Director of Tamil Nadu Industrial Development Corporation, the above said balance amount of `88.22 Crores was treated as term loan for a period of three years and repayable with interest @ 10.5% per annum. The question now arises for consideration before the Tribunal is whether the payment of `1412.80 Crores made by the assessee to Tamil Nadu Industrial Development Corporation is a capital payment for acquiring the land to the extent of 25.27 acres of land or it is a lease rent? The assessee claims that even though the lease period was 12 I.T.A. No.699/Mds/14 99 years, the payment made by the assessee is only for acquiring the property. Accordingly, the assessee claims that it was a purchase of property, hence, what was paid by the assessee is a capital amount for acquiring the land. The contention of the Revenue is that the amount paid by the assessee is only a lease rent for using the land, therefore, tax has to be deducted under Section 194-I of the Act. To appreciate the contentions made by the parties before the Tribunal, it is necessary to go through the copies of the lease agreement entered into between the parties. During the course of hearing, it was pointed out to the Ld.counsel for the assessee that the copies of the lease agreement said to be entered into between the assessee and Tamil Nadu Industrial Development Corporation is not available on record of this Tribunal. The Ld.counsel submitted that a copy of the lease deed was already filed before the Tribunal. After perusing the file once again during the course of hearing, it was brought to the notice of the Ld.counsel for the assessee that the lease agreement is not available on record. Though the Ld.counsel submitted that he will file one more copy of the lease deed before the Tribunal, in fact, no such copy was filed till now. Therefore, this Tribunal is unable to appreciate the exact nature of transaction between the assessee and Tamil Nadu Industrial Development Corporation. Therefore, we have to 13 I.T.A. No.699/Mds/14 proceed only on the basis of the facts which were brought on record by the Assessing Officer.
11. We have carefully gone through the judgments relied upon by the Ld.counsel for the assessee during the course of hearing. In Rane Brake Linings Ltd. (supra), the Madras High Court found that lease for 99 years is as much as alienation as a sale. The Madras High Court placed reliance on the judgment of Apex Court in Palshikar (HUF) v. CIT reported in 172 ITR 311 and judgment of Madras High Court in Archaka Sundara Raju Dikshatulu v. Archaka Seshadri Dikshatulu (1928) 54 MLJ 76. The assessment year under consideration before the Madras High Court in Rane Brake Linings Ltd. was 1994-95. We find that that "transfer" is defined in Section 2(47) of the Act. In fact, Section 2(47) is an inclusive definition and substituted by Taxation Laws (Amendment) Act, 1984 with effect from 1.04.1985. We also find that Parliament has introduced Section 194-I of the Act by Finance Act, 1994 with effect from 1.06.1994. Explanation to Section 194-I was substituted by Taxation Laws (Amendment) Act, 2006 with effect from 13.07.2006. For the first time in the Income-tax Act, the Parliament defined "rent" by saying that any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement 14 I.T.A. No.699/Mds/14 for the use of either separately or together any land. Therefore, with effect from 13.07.2006, any amount paid by the assessee, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of the land has to be treated as rent. The Madras High Court in Rane Brake Linings Ltd. (supra) had no occasion to consider the Explanation (i) to Section 194-I which was introduced with effect from 13.07.2006. In fact, this Bench of the Tribunal in Foxconn India Developer (P) Ltd. (supra) considered this identical issue and found that the assessee is liable to deduct tax on the lease rent in view of Explanation (i) to Section 194-I of the Act. However, after referring to judgment of Apex Court in Hindustan Coca Cola Beverages P. Ltd. (sulpra), this Tribunal found that since the payee has paid taxes, there cannot be any doubt that TDS could not be recovered from the assessee. However, the assessee is liable to pay interest under Section 201(1A) of the Act till the payment was made by the recipient.
12. Since copy of the lease agreement between the assessee and Tamil Nadu Industrial Development Corporation is not available before us, we are unable to express our opinion on the nature of transaction whether, it was an advance payment of rent or cost of acquisition of the land could be decided after going through the so- 15 I.T.A. No.699/Mds/14 called lease deed executed by the assessee and TIDCO. Moreover, the matter needs to be re-examined in the light of the provisions of Section 2(47) read with Explanation (i) to Section 194-I of the Act. This Tribunal is of the considered opinion that the nature of the transaction could be ascertained only after going through the lease agreement said to be executed by the assessee and Tamil Nadu Industrial Development Corporation. Accordingly, the orders of the lower authorities are set aside. The entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh in the light of the lease deed and thereafter decide the issue afresh in accordance with law. The Assessing Officer shall also verify whether the recipient Tamil Nadu Industrial Development Corporation has paid taxes or not on the amount received by them. If the recipient has paid the taxes, then it may not be necessary to recover the TDS amount from the assessee and the Revenue can only recover interest under Section 201(1A) of the Act till the payment was made by the recipient as held by Apex Court in the case of Hindustan Coca Cola Beverages P. Ltd. (sulpra).
13. In the result, the appeal of the assessee is allowed for statistical purposes as indicated above.
16 I.T.A. No.699/Mds/14
Order pronounced on 19th June, 2015 at Chennai.
sd/- sd/-
(A.Mohan Alankamony) (N.R.S. Ganesan)
(ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
चे नई/Chennai,
th
4दनांक/Dated, the 19 June, 2015.
Kri.
आदे श क. , त5ल6प अ7े6षत/Copy to:
1. अपीलाथ+/Appellant
2. ,-यथ+/Respondent
3. आयकर आय8
ु त (अपील)/CIT(A)-VII, Chennai-34
4. आयकर आय8
ु त/CIT(TDS), Chennai
5. 6वभागीय , त न ध/DR
6. गाड' फाईल/GF.