Payment for lease is different from ‘for obtaining a lease’; only former is subject to sec. 194-I TDS, says ITAT

Payment of lease premium for allotment of plot of land is not liable to TDS liability under section 194-I

In the instant case, the assessee-realtors took a plot of land from MMRD Ltd. and made payment of lease premium for allotment of a plot. It also paid for additional FSI. The AO held that the assessee was required to deduct tax under section 194-I in respect of the aforesaid payment to MMRD. According to him, the assessee had not complied with the provisions of section 194-I, it had committed default within the meaning of section 201(1) and, therefore, the assessee was to be treated as assessee-in-default. On appeal by the assessee, the CIT (A) reversed the findings of AO. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) From lease deed it was clear that the premium was not paid under a lease but was paid as a price for obtaining the lease, hence, it preceded the grant of lease;

2) Therefore, it couldn’t be equated with the rent which was paid periodically. Thus, the assessee had made payment to MMRD under development control for acquiring leasehold land and additional built-up area. The case of CIT v. Khimline Pumps Ltd. (2002) 125 Taxman 104 (Bom.) was squarely and directly applicable to the facts of the case wherein the jurisdictional High Court had held that payment for acquiring leasehold land was a capital expenditure;

3) Considering the facts in totality - in the light of the judicial decisions vis-à-vis provisions of section 194-I, definition of rent as provided under the said provision, there was no reason to tamper or interefere with the findings of the CIT (A) – ITO(TDS) V. WADHWA & ASSOCIATES REALTORS (P.) LTD (2013) 36 taxmann.com 526 (Mumbai - Trib.)

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