Section 194-I – Payments towards lease premium and additional Floor Space Index (FSI) charges not subjected to TDS.
Facts:
The issue before the Tribunal was about the exigibility to Tax Deduction at Source (TDS) u/s.194-I of the sum, described as lease premium and additional Floor Space Index (FSI) charges paid by the assessee to Mumbai Metropolitan Regional Development Authority (MMRDA) during the relevant year.
The Revenue’s case was that u/s.194-I the ‘rent’ is very comprehensively defined to include any payment made under the lease, sub-lease, tenancy or any such agreement or arrangement for use (either separately or together) of any land, building, plant, machinery, etc. By legal fiction, therefore, the scope of the term ‘rent’ stands thus extended beyond its common meaning. The same would include not only the payments on revenue account, but on capital account as well, as long as the sum paid is toward the use of any of the assets specified under the provision. For the purpose, the reliance was placed on the decisions in the case of CIT vs. Reebok India Co. [2007] 291 ITR 455 (Del); United Airlines vs. CIT [2006] 287 ITR 281 (Del); Krishna Oberoi vs. Union of India [2002] 257 ITR 105 (AP); and CIT vs. H.M.T. Ltd. [1993] 203 ITR 820 (Kar).
The CIT(A) on appeal, had held that the lease premium in the instant case was only toward acquisition of lease hold rights and additional FSI in the leased plots and thus, the payment made was not in the nature of rent hence, not covered u/s. 194(I).
Held:
The Tribunal noted that the amount charged by MMRDA as lease premium was equal to the rate prevailing as per the stamp duty ready reckoner for the acquisition of commercial premises. Further, it was also noted that there was no provision in the lease agreement for termination of the lease at the instance of the lessee and hence, for the refund of lease premium under normal circumstances. It noted that even the charges levied for additional FSI was as per the ready reckoner rate. Thus, according to the Tribunal, the whole transaction was for grant of leasehold rights or transfer of property; the lease premium paid by the assessee was the consideration for acquiring leasehold rights, which comprise a bundle of rights, including the right of possession, exploitation and its long term enjoyment. It further observed that the charges for FSI also partake the character of capital assets in the form of Transferable Development Rights (TDRs), such that the owner (of land) transfers the rights of development and exploitation of land, which rights are again capital in nature.
On the basis as discussed above and relying on the decisions in the cases of ITO vs. Naman BKC CHS Ltd. (in ITA Nos. 708 & 709/Mum/2012 dated 12-09-2013) and TRO vs. Shelton Infrastructure Pvt. Ltd. (in ITA No. 5678/ Mum/2012 dated 19-05-2014), the Tribunal upheld the decision of the CIT(A) and dismissed the appeal filed by the revenue. Referring to the decisions of the Tribunal in ITO vs. Dhirendra Ramji Vora (in ITA No.3179/Mum/2012 dated 09-04-2014) and Naman BKC CHS Ltd. (supra), it further observed that the decisions relied on by the A.O. were distinguishable and cannot be applied to the case of the assessee.
