Income Tax Appellate Tribunal - Delhi
The Indian News Papers Society , New ... vs Department Of Income Tax
1 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H' NEW DELHI
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
AND
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA No. 5207/Del/2012
Assessment Year: 2007-08
ITA No. 5208/Del/2012
Assessment Year: 2009-10
Income Tax Officer, vs The Indian News Papers Society,
Ward 50(1),, INS Building, Rafi Marg,
Delhi-110092 New Delhi-110001
(Appellant) (Respondent)
Appellant by: S/Shri Sanjeev M. Shah & Ramesh Vora
Respondent by: Shri A.K. Mishra, C.I.T. DR
ORDER
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
These appeals have been filed against the order of Commissioner of Income Tax(A)-XXX, New Delhi dated 27.7.2012 in Appeal No.312/2012- 13 for AY 2008-09 and Appeal No. 311/12-13 for AY 2010-11, both dated 27.07.2012. It is pertinent to mention that the impugned orders have been passed deciding the appeals of the assessee which were filed against the order of the Assessing Officer u/s 201(1)/201(1A) of the Income Tax Act, 1961 (for short the Act).
2 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
2. The main grounds raised by the revenue in ITA No.5207/D/2012 for AY 2008-09 read as under:-
"1. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in treating the order passed u/s 201 (1)/201 (1A) of the I. T Act is barred by limitation by ignoring the fact that the same was passed in order to give effect to the order of Hon'ble High Court Mumbai.
2. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in not appreciating that payment of Rs.66,39,56,250/- made by the assessee to M/s Mumbai Metropolitan Regional Development Authority is covered under the definition of "Rent" as per provisions of section 194-1 of the IT Act.
3. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in not treating the assessee in default within the meaning of section 201 (1) of the IT Act for non deduction of TDS on payment of Rs.66,39,56250/-. "
3. The main grounds raised by the revenue in ITA No.5208/D/2012 for AY 2009-10 read as under:-
"1. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in not appreciating that payment of Rs.65,80,59,700/- made by the assessee to M/s Mumbai Metropolitan Regional Development Authority is covered under the definition of "Rent" as per provisions of section 194-1 of the IT Act.
2. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in not treating the assessee in default within the meaning of section 201 (1) of the IT Act for non deduction of TDS on payment of Rs.65,80,59,700/-."3 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
4. Briefly stated, the facts giving rise to these appeals are that the assessee is a non-profit making company formed and registered u/s 25 of the Companies Act, 1956 with the object of functioning as an apex organization to protect the interest of press in India. Mumbai Metropolitan Regional Development Authority (MMRDA) offered to the assessee land situated at Bandra Kurla Complex on lease for a period of 80 years to enable construction of office complex by the assessee in order to provide space at subsidized rates to the assessee's members, inter alia, for a consideration comprising lease premium of Rs.88,52,75,000 which was paid on 27.12.2005 and 18.02.2008. The assessee entered into a development agreement dated 14.02.2008 with Orbit Enterprises to develop this land on the terms and conditions agreed upon in the agreement. Subsequently, the assessee executed a lease deed dated 09.04.2008 with MMRDA commencing from 01.04.2008 postulating payment of annual rent of Rs.1 per sq. meter per annum which was calculated at Rs.10,415 per year. The MMRDA subsequently granted Floor Space Index (FSI) to the assessee by virtue of which the assessee enabled to build additional built up area of 20,830 sq mtr on the commercial building already sanctioned for the assessee. The revenue carried out a survey u/s 133A of the Act on the premises of MMRDA to verify tax deduction at source compliance. 4 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
5. Subsequently, the ITO (TDS)-3(4), Mumbai wrote a letter dated 16.03.2011 to the assessee addressed to the Mumbai address as to why TDS has not been deducted on the lease premium payments to MMRDA. In response, the assessee vide its letter dated 29.03.2011 challenged the jurisdiction of Mumbai TDS Officer and explained that the lease premium cannot be subjected to tax deduction at source u/s 194-I of the Act. The Mumbai TDS Officer vide its order dated 29.03.2011 for AY 2008-09 held that the assessee is in default u/s 201(1A) of the Act r/w section 194-I of the Act. Subsequently, this order was quashed by High Court of Bombay and the issue was left open for the appropriate competent authority to initiate TDS proceedings keeping in view the law of limitation. Later, the ITO(TDS)-50(1) Delhi issued a notice dated 09.02.2012 in respect of proceedings u/s 201/201(1A) calling for details and documents in relation to AY 2010-11. In reply, it was argued on behalf of the assessee that it was not exigible to deduct tax at source u/s 194-I on the lease premium paid to MMRDA and consequently, the assessee cannot be deemed as assessee in default. The TDS Officer vide order dated 30.03.2012 rejected all the contentions of the assessee and proceeded to saddle the demand of Rs.8,39,81,641/- u/s 201(1) of the Act, Rs.6,58,05,970 and u/s 201(1A) of Rs.1,81,75,671/- respectively.
6. Being aggrieved by the above order of the Assessing Officer, the assessee carried the matter in appeal before the Commissioner of Income 5 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 Tax(A) which was partly allowed. Now the revenue is before this Tribunal with the grounds as mentioned hereinabove.
Ground No.1 of ITA No. 5207/Del/2012
7. Apropos ground no.1, ld. DR submitted that the Commissioner of Income Tax(A) has erred in treating the order passed by Assessing Officer/TDS Officer u/s 201(1)/201(1A) of the Act as barred by limitation by ignoring the fact that the same was passed in order to give effect to the order of Hon'ble High Court of Bombay. Replying to the above, ld. counsel of the assessee submitted that the assessee's case falls within the ambit of section 201(3)(i) of the Act which prescribes deadline of two years from the end of financial year in which the tax at source return was furnished by the assessee. The return for last quarter ended on 31.03.2008 was filed on 13.06.2008 (PB page no. 287 and 291) i.e. financial year 2008-09 and if two years are further calculated from 31.03.2009, the same period would end on 31.03.2011. The counsel further submitted that the impugned order of the TDS officer was passed on 29.03.2012, hence it was barred by a period of limitation as per above provisions of the Act which cannot be extended by the courts. In this regard, the counsel of the assessee has placed his reliance on the judgment in the case of Hope Textiles vs UOI 205 ITR 508(SC). 6 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
8. From the impugned order we observe that the Commissioner of Income Tax(A) has decided the issue in favour of the assessee which reads as under:-
"I have considered the AO's impugned order, arguments of the Appellant and the1 provisions of Section
201. It is undisputed that the statement envisaged in Section· 200 for the last quarter of the financial year 2007- 08 i.e. 31.03.2008 was lodged on 13.06.2008 implying the financial year 2008-09 and thus there can be no doubt that clause (i) of Section 201 (3) would apply to the facts and circumstances of the Appellant. In the premises, the period of limitation of two years shall run from 01.04.2009 and end on 31.03.2011, whereas the impugned order has been passed on 29.03.2012 well beyond the cut off date. Therefore, I have no hesitation in holding that the impugned order is barred by the period of limitation as per in Section 201(3)(i). I concur with the submission of the Appellant that Bombay High Court 's order dated 09.11.2011 cannot be construed as extending the period of limitation inasmuch as the Apex Court in the pronouncement quoted supra has categorically laid down that the judiciary is not competent to extend the statutory prescribed period of limitation. The AO's reliance on clause (ii) of sub-section (3) of Section 201 and on clause
(ii) of the Explanation to Section 153 is of no avail and cannot assist the AO to save the impugned order from the taint of crossing the period of limitation. In the result, I allow the plea of limitation raised by the Appellant and therefore, ground nos. 2 and 3 are allowed."
9. After careful consideration of the contentions and submissions of both the parties in this regard, at the outset, we observe that as per facts recorded by the Commissioner of Income Tax(A), Hon'ble High Court of Mumbai 7 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 quashed the order of TDS Officer, Mumbai leaving the issue open for appropriate competent authority to initiate TDS proceedings. The DR appearing for the Revenue has not disputed the point that Hon'ble High Court of Mumbai left the issue open for the appropriate competent authority to initiate TDS proceedings, keeping in view the law of limitation, meaning thereby that the Hon'ble High Court of Mumbai simply quashed the order of TDS officer, Mumbai perhaps on the ground of jurisdiction and the issue was left to be decided by the competent authority but the period of limitation has to be taken from the relevant provisions of the Act which cannot be extended by judicial pronouncements. On careful perusal of the relevant para of the impugned order, we observe that the Commissioner of Income Tax(A) has dealt the issue of limitation as per relevant provisions of the Act and rightly held that the order was passed by crossing the period of limitation as prescribed by the Act. Accordingly, ground no.1 of ITA No. 5207/D/2012 is dismissed.
Ground no.2 of ITA No.5207/D/12 and ground no.1 of ITA 5208/D/12
10. Apropos these grounds, the DR submitted that the Commissioner of Income Tax(A) has grossly erred in not appreciating that the payment made by the assessee in the respective assessment years to MMRDA was covered under the definition of "Rent" as per provisions of Section 194-I of the Act. 8 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10 The DR further submitted that the assessee has acquired land rights from MMRDA who provided land to the assessee on lease basis but on payment of lease premium. The DR also contended that the assessee company was not holding full rights of land as the agreement entered into between MMRDA and the assessee company was bearing some restrictive clauses which show that the MMRDA did not transfer all perpetual rights to the assessee in the land. The DR finally contended that in the case of Commissioner of Income Tax vs Reebok Company 163 Taxman 61 (Del) it was held that as per the facts and circumstances of the case, even a security deposit under lease agreement can be tantamount to advance rent, hence TDS deduction is required to be made.
11. After careful consideration of the above submissions, contentions and legal propositions of both the parties in the light of factual matrix of present case, we observe that it is argued on behalf of the assessee that the MMRDA in its computation of income has not included the lease premium received in computing the total income because it was further payable to the Government of Maharashtra. From the impugned order, we observe that the issue involved in this ground has been decided in favour of the assessee with following observations and findings:-
"I have considered the written submission of AR's and gone through various arguments canvassed by 9 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 the learned counsel of the appellant as also taken into account the objections of the Assessing Officer as mentioned in the impugned order.
i) It is well settled that premium and rent have distinct and separate connotations in law as enshrined in Section 105 of the Transfer of Property Act, 1882. The essence of premium lies in that fact it is paid prior to the creation of the landlord and tenant relationship, that is, before the commencement of the tenancy and constitutes the very superstructure of the existence of that relationship. Its another vital characteristic is that it is a one time non-recurring payment for transferring and purchasing the right to enjoy the benefits granted by the lessor resulting in conveyance of some of the rights, title and interest in the property out of such a bundle of rights.
ii) In the Appellant's case, the premium RS.88,52,75,000/- has been paid in two installments on 27.12.2005 [Rs.22,13,18,750/-] and 18.02.2008 [Rs.66,39,56,250/-] to MMRDA in respect of the Bandra land and as per the lease agreement dated 09.04.2008 read with the possession receipt dated 10.04.2008 issued by MMRDA the lease starts from 09.04.2008 and hence the payment of Rs.88,52,75,000/- is before the initiation of the tenancy relationship between the Appellant and MMRDA and consequently, a cardinal ingredient of premium as advocated in the case laws cited supra is satisfied. .
iii) Moreover, the payment Rs.88,52,75,000/- is made only once for all by the Appellant since there is no other further payment apart from Rs. 88,52,75,000/- which can be attributed to bringing into existence the foregoing landlord and tenant relationship between the Appellant and MMRDA.
10 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
iv) Furthermore, the receipts dated 27.12.005 and 18.02.2008 pertaining to the payment of RS.88,52,75,000/- contain the description that the payment is on account of lease premium and not rent and there is no provision either in lease agreement dated 09.04.2008 or any other document for adjustment of the aforementioned premium amount against the annual rent RS.10,415/- payable by the Appellant to MMRDA de hors the premium.
v) The development agreement dated 14.02.2008 entered into by the Appellant with Orbit Enterprises transfers development rights to the latter on terms and conditions set out therein which would not have been possible, but for the substantive rights, interest and title enjoyed by the Appellant in the Bandra land in consideration ofRs.88,52,75,000/- disbursed to MMRDA.
vi) In addition, clause 1 of the operative portion of the lease agreement dated 09.04.2008 read with the recitals thereof unequivocally covenants that in consideration of the payment of RS.88,52,75,000/- by the Appellant, MMRDA, the lessor, demises the Bandra plot to the Appellant together with all the rights, easements and appurtenances and the like for 80 years commencing from 09.04.2008. In light of the above discussion read with the lease agreement dated 09.04.2008, the conclusion is irresistible that Appellant by tendering the amount Rs.88,52,75,0001- acquired the right, title and interest in the Bandra land demised by MMRDA, the lessor.
In the result, I hold that all the yardsticks as judicially held in the foregoing rulings relied upon by the learned counsel for terming the sum of Rs.
88,52,75,000/- as lease premium are fulfilled in the Appellant's case.
11 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10 Moreover, in A. R. KRISHANAMURTHY v. CIT 176 ITR 417 (SC), the transfer of leasehold rights even for temporary period of 10 years has been held to give rise to chargeable capital gains where the Apex Court followed its earlier decision in R.K. PALSHlKAR v. CIT 172 ITR 311 (SC) where the lease for 99 years was concluded to be of an enduring nature. Similar view has been upheld in JCIT v. MUKUND LTD. 106 ITD 231 (MUM) (SB), CIT v. INTERNATIONAL HOUSING COMPLEX (KER) BEARING ITA NO 770 OF 2009 which was converse case where the Assessee offered the lease premium received for 99 years as rental income in each year, but the revenue assessed the same as capital gains which was ratified by the High Court. The abovementioned view has been approved by the jurisdictional Delhi High Court in KRISHAK BHARA TI v. CIT DECIDED ON 12.07.2012 to which my attention was drawn by the learned counsel vide letter dated 23.07.2012 enclosing the copy of the same. Thus in conformity with the consistent stand of the judiciary including the latest pronouncement of the jurisdictional High Court, in my view, undoubtedly premium in relation to leased land is a payment on capital account not liable to be classified as revenue outgoing and I hold accordingly. On the facts and circumstances of the present case, even the revenue in its affidavit in reply dated 14.09.2011 filed in the Bombay High Court in Writ petition no 1504 of 2011 instituted by the Appellant has accepted that MMRDA has construed the receipt of premium as a capital receipt not exigible to tax and the AO (TDS), Delhi cannot now approbate and reprobate, on the above issue.
In DURGA KHANNA v. CIT 72 ITR 796 (SC), the Supreme Court held that the onus is on the revenue to demonstrate that premium has been camouflaged as advance rent and the Assessing Officer, in the instant case has not brought on record any material to indicate that the rent has been suppressed and the 12 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 premium has been inflated. In my opinion, to prove such a factual case of measly rent and enlarged premium where an arm of the government is a party [MMRDA] to the lease agreement, the burden would very heavy and onerous. Such a state of affairs cannot be presumed without cogent evidence and the AO has made no attempt to lead any such evidence whatsoever, much less to substantiate the same. In that view of the matter, I hold that the impugned sum does not constitute advance rent, but lease premium for capital expenditure not falling within the operative realm of Section 194-1 of the Act. I am strengthened in my view by the orders passed by CIT(A)-14, Mumbai in favour of the Assessee in the cases listed on page no.9 above, copies of which are placed on record by the Appellant wherein facts are identical and all the seven cases pertain to the land leased by MMRDA in the same or adjoining area which is fortified by the plan appearing at page no.- 44 and 59 of the lease deed dated 09.04.2008 [G block-page 43 of the factual paper book.]"
12. In view of above observations, we clearly observe that the Commissioner of Income Tax(A) has also dealt with other cases pertaining to the land leased by MMRDA in the same or adjoining area and has held that the impugned deposit of lease premium does not constitute advance rent but it is a lease premium for acquiring land with right to construct a commercial building although with certain restrictions, but it is a capital expenditure not falling within the ambit of section 194-I of the Act. We also observe that the payment of lease premium was not to be made on periodical 13 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 basis but it was one time payment to acquire the land with right to construct a commercial complex thereon and the lease premium was paid to MMRDA in four installments, therefore, we are unable to see any perversity, infirmity or any other valid reason to interfere with the findings of the Commissioner of Income Tax(A). Accordingly, this issue is decided in favour of the assessee by disposing ground no.2 of ITA 5207/D/12 and ground no.1 of ITA 5208/D/12.
Ground no.3 of ITA No.5207/D/12 and ground no.2 of ITA 5208/D/12
13. Apropos these grounds, the DR submitted that the Commissioner of Income Tax(A) has erred in not treating the assessee as assessee in default within the meaning of section 201(1) of the Act for non-payment of TDS on payment made to MMRDA. The DR further contended that as per section 201 of the Act where any person including the Principal Officer of a company who is required to deduct any sum in accordance with the provisions of this Act or referred to sub-section 1A of Section 192 of the Act being an employer does not deduct or does not pay or after deduction fails to pay the whole or in part of the tax as required by the Act, then such person shall, without prejudice to any other sections which he may incur, be deemed to be an assessee in default in respect of such taxes. 14 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
14. Replying to the above, the counsel of the assessee submitted that the payment of lease premium was payment of capital expenditure and the payment was not liable for tax deduction at source by the payee, therefore, the assessee had no occasion to deduct tax at source and in this situation, the Assessing Officer/TDS officer wrongly held that the assessee was liable to deduct tax at source on payment of lease premium to MMRDA. The counsel of the assessee vehemently submitted that when TDS was not required to be made, how the assessee can be held liable for default in not deducting TDS from the payment of lease rent paid to MMRDA.
15. On careful consideration of the rival submissions, we observe that as per section 194-I of the Act, any person , not being an individual or a Hindu undivided family, who is responsible for paying any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, shall deduct income-tax thereon at the rate prescribed therein. Since in the present case, we have held that the lease premium paid by the assessee was capital in nature and was not rent, therefore, we are unable to approve the findings of TDS Officer/Assessing Officer that the assessee was liable to deduct TDS on payment of lease premium to MMRDA. At this point, we place reliance on the judgment of 15 ITA No.5207 & 5208/Del/2012 Asstt.Years: 2007-08 & 2009-10 Hon'ble jurisdictional High Court of Delhi in the case of Krishak Bharati Cooperative Ltd. vs DCIT (2013) 350 ITR 24 (Del) wherein their lordships held that for premium on acquisition of lease hold rights in the land, lease for 90 years with substantial interest in the land, then lease premium constituted capital expenditure.
16. In view of discussions made hereinabove, we are not in agreement with the findings of the Assessing Officer and we decline to hold that the Commissioner of Income Tax(A) has erred in not treating the assessee as assessee in default within the meaning of section 201(1) of the Income Tax Act for non-deduction of TDS on payment of lease premium to MMRDA. At the cost of repetition, it is worthwhile to mention that for invoking the provisions of section 201(1) of the Act, this is a pre-condition that the person should be required to deduct any sum in accordance with the provisions of this Act and he does not deduct, or does not pay or after deduction fails to pay the whole or in part of the tax as required under the provisions of the Act, then only such person shall be deemed to be an assessee in default in respect of payment of such tax. In the case in hand, the assessee was not liable to deduct any tax on payment of lease premium to MMRDA because it was capital expenditure to acquire land on lease with substantial right to construct a commercial building complex.16 ITA No.5207 & 5208/Del/2012
Asstt.Years: 2007-08 & 2009-10
17. To sum up, we finally hold that the assessee was not liable to deduct tax at source from the payment made to MMRDA as lease premium, therefore, the Commissioner of Income Tax(A) rightly decided this issue in favour of the assessee and we have no reason to interfere with the findings of the Commissioner of Income Tax(A) in this regard. Accordingly, ground no. 3 of ITA 5207/D/12 and ground no.2 of ITA 5208/D/12 being devoid of merits are dismissed.
18. In the result, both the appeals of the revenue are dismissed.
Order pronounced in the open court on 20.06.2013.
Sd/- Sd/-
( J.S. REDDY ) (CHANDRA MOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 20th JUNE 2013
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT 5. DR True copy
By Order
Asstt. Registrar