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Showing contexts for: leasehold plot in Oriental Bank Of Commerce , Mumbai vs Department Of Income Tax on 23 November, 2015Matching Fragments
5. On behalf of the assessee it was submitted that pre- dominant objective for the payment of lease premium under lease deed(s) is acquisition of leasehold rights in the said leasehold land and not for the use of the land. That lease premium are consideration for purchase of larger interest in the said leasehold land which comprises of bundle of rights including but not limited to right of possession, right of long term enjoyment, right of development by way of construction of building thereon, right to sale constructed premises on ownership basis right to collect and appropriate the sale proceeds etc. Thus by implication lessor would forego all such rights in favour of lessee permanently. It was also contended that rent as defined in section 194- I of the Act, envisages such payments only for use of land or building, without there being any corresponding acquisition of larger rights in the said leasehold plots. Hence, the lease premium paid to CIDCO Ltd. for acquisition of leasehold land is clearly distinct from rent. On behalf of assessee, a reference was made to section 105 of the Transfer of 6 Oriental Bank of Commerce ITA No.1300 & 1301/Mum/2014 Property Act, 1882 and submitted that rent is defined to mean money paid periodically or onspecified occasion to the transferor of land. Relying on the decision of the Hon'ble Apex Court in the case of A.R.Krishnamurthy V/s CIT (176 ITR 417) it was submitted that there is a difference between rent and premium and if what is paid is the cost of acquisition of right in a property known as leasehold right, it is not rent but a premium which is a capital for the recipient. On behalf of the assessee it was also submitted that section 2(14) of the Act also recognizes leasehold interest as a separate, distinct and independent right in an immovable property capable of being transferred for a consideration. Thus the payment made by the lessee to the lessor to be construed as a capital payment for acquisition of leasehold rights in any immovable property. Hence the premium for transfer of land under lease will be taxable in the form of capital gain u/s 45 of the Act in the hands of the lessor. The assessee also placed reliance on the decision of Special Bench Mumbai of the Tribunal in the case of JCIT V/s Mukund Ltd (13 SOT 558) (Mum) (106 ITD 231 (SB) and submitted that the Tribunal has held that lump sum payment of Rs.2.04 crores paid by the assessee to Maharashtra Industrial Development Corporation (MIDC) on lease for 99 years of land by MIDC for the purpose of setting up factory/ plant was capital in nature as the said payment was made for obtaining leasehold rights. The assessee also stated that the basic motive for making payment of lease payment for the lease deed is towards transfer of larger interest/ and lease hold rights by CIDCO in the leasehold plots and not just for its use as envisaged u/s 194-I of the Act. Therefore, there was no default for not deducting TDS as question of deduction of TDS on the said payment does not arise. It was also stated before the AO that the lease premium paid are capital receipts in the hands of CIDCO and are completely distinguished from rent. Hence, applicability of section 194- I is not applicable.
8. L.d CIT(A) in the impugned order(s) has stated that the assessee filed the written submissions stating the non-applicability of provisions for section 194-I of the Act on lease premium paid to CIDCO in respect of land allotted to it. L.d CIT(A) has stated that the assessee executed lease agreements with CIDCO. CIDCO has also
8 Oriental Bank of Commerce ITA No.1300 & 1301/Mum/2014 executed the Development Agreement with the assessee which outlines and rights and obligations of the assessee with regard to designing, planning, financing, marketing, development of necessary infrastructure provisions of necessary services, operations and maintenance of infrastructure administration and management of the "NMSEZ" along-with the rights to determine, levy, collect, retain and utilize the user charges, fees for provision of services and/or tariffs in accordance with the terms therein. On behalf of the assessee it was contended that rent as defined in section 194-I of the Act is essentially a payment only for the use of any land or building. However, the predominant objective for payment of lease premium under the lease deed(s) isacquisition of leasehold rights in the said leasehold plots and not for the use of the plots. Lease premium are consideration for purchase of larger interest in the said leasehold plots which comprises of bundle of rights including but not limited to right of possession, right of long term enjoyment, right of development by way of construction of building thereon, right to sale constructed premises on ownership basis, right to collect and appropriate the sale proceeds, etc. That grant of lease by CIDCO in favour of assessee is a capital assets. Hence the consideration received by CIDCO is a capital receipt and not income by way of rent. The ld. CIT(A) has also stated that assessee further submitted before him as under :
"Rent" as defined in Section 194-I of the Income-tax Act, 1961 envisages such payments made under a lease only for use of land, without there being any corresponding acquisition of larger rights in the said leasehold plots. Hence the lease premium paid by us to CIDCO are clearly distinct from Rent.
Further to the above explanation, Section 105 of the Transfer of Property Act, 1882 defines a lease of an immovable property as transfer of right to enjoy the property, made a certain time in consideration of a price. The Section further distinguishes between Lease Premium and Rent. Rent is defined u/s 105 of the Transfer of Property Act, 1882 to mean money paid periodically or on specified occasion to the transferor of land. Premium on the other hand means a consideration of a price paid for transfer of a right to enjoy the
It is submitted that under the provisions of the Income Tax Act, 1961, different treatment cannot be given to same payment under different sections of the Income- tax Act, 1961 i. e. in the hands of lessor as consideration taxable under the head Capital Gains u/s. 45, in the hands of lessee as Rentfor the purpose of deduction of tax u/s 194-I The above contention seems very absurd and authority cannot take separate stand for treating a payment made by appellant.
The basic motive for making payment of Lease Premium under the Lease Deed is towards transfer of larger interest/ right (leasehold right) by CIDCO to us in the said leasehold plots arid not just for its use as envisaged under section 194-I of the Income-tax Art. 1961.