Commissioner of Income Tax-TDS v. The Indian Newspaper Society

1. These are two appeals by the Revenue under Section 260A ofthe Income Tax Act,1961('Act')directed against the common order dated 20^*^ June 2013 passed by the Income Tax Appellate Tribunal('ITAT')in ITA Nos. 5207 & 5208/Del/2012 for Assessment Years ('AYs') 2008-09 and 2010-11 respectively.

2. At the very outset, the Court would like to observe that there,is an extraordinary delay of740 days in re-filing ofthese appeals. The explanation offered is the standard one regarding the practice directions issued by this Courtfor e-filing ofthe appeals.As has already been observed by this Court in several orders, the practice directions were issued after consultation with the bar and after giving sufficient time for the bar to get acquainted with the requirement of e-filing. Additionally, the Court has also provided scanning machines at the filing counter so that no difficulty is caused to the bar for switching over to the system of e-filing. In any event,the delay of over two years on this ground is wholly unacceptable. Consequently, the Court is not persuaded to condone the extraordinary delay of 740 days in re-filing the appeals.

3. Neverthelessthe appeals have also been examined on merits.The short point urged by the Revenue in these appeals is that the lease premium paid by the Assessee to the Mumbai Metropolitan Regional Development Authority ('MMRDA')on27^December2005 and 18*''February2008inthetotalsum of Rs.88,72,55,000 for acquiring a plot of land on an 80 year lease at Bandra- Kurla Complex, Mumbai was in the nature of a capital expense not falling ITA Nos.918/2015&920/2015 Page2of[5] > within the ambit of Section 1941 of the Act. While the Assessing Officer ('AO')treated it as revenue expenditure, the Commissioner of Income Tax (Appeals)['CIT (A)'] reversed it and held it to be in the nature of a capital expense not requiring deduction oftax at source under Section 1941 ofthe Act. TheITAT has in the impugned order concurred with the CIT(A)and dismissed the Revenue's appeals.

4. Mr. Rohit Madan, learned Senior Standing counsel for the Revenue submitted thatthe actual annual rent was a nominal sum and,therefore,whatin fact was paid by the Assessee to MMRDA was in the nature ofadvance rent. According to him,the premium paid had camouflaged the annual rent payable over the period of80 years for the land in question. He submitted that under Section 1941 ofthe Act, any payment ofrent for land would attract TDS.He placed reliance on a large number of decisions including Commissioner of Income Tax, Tamil Nadu v. Madras Auto Service(P)Ltd.[1998]233ITR 468(SC) and the decision of the Madras High Court in Commissioner of Income Tax v. Gemini Arts P. Ltd.(2002)254ITR 201. He also referred to the recent decision of this Court in Krishak Bharati Cooperative Ltd. v. Deputy Commissioner ofIncome Tax(2013)350ITR 24(Del).

5. Mr. Sunil Femandes,learned counsel appearing for the Assessee referred to the specific factual findings ofthe CIT(A)at its discussion ofthe clauses of the lease agreement which have been set out in extenso by the ITAT in the impugned order.

6. Atthe outset,it requires to be noticed that under Section 1941 ofthe Actthe responsibility for deducting tax at source arises when a person pays "to a resident any income by way ofrent." The deduction has to be effected"at the ITA Nos.918/2015&920/2015 Page3of[5] Jo 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..." at the rate specified in Section 1941 of the Act. The critical word, therefore,is"income" in the hands ofthe payee. On facts it requires to be first noted that the clauses of the lease agreement with MMRDA dated 9^*^ April 2008 clearly state thatthe payment ofRs.88,52,75,000 is only on the ground of lease premium and not rent. There is no provision in the lease agreement for adjustment of the premium amount against the annual rent of Rs.10,415 payable by the Assessee to MMRDA.

7. The second factor is that under the lease agreement, the plot of land "together with all the rights, easements and appurtenances and the like for 80 years commencing from 01. 04.2008" was demised to the Assessee. A third factor which has been noticed in the impugned order ofthe ITAT is that in the writ petition filed by the Assessee in the Bombay High Court, being WP(C) NO. 1504 of 2001, an affidavit has been filed by the Revenue in which it accepted that "MMRDA has construed the receipt of premium as a capital receipt not eligible to tax." The above three undisputed factual aspects, in the considered view of the Court, conclusively settle the issue whether the premium paid to the MMRDA by the Assessee in terms ofthe lease agreement is,in fact,only a capital and notarevenue expenditure.

8. The impugned order pfthe ITAT refers to several decisions ofthe Supreme Court including A.R. Krishnamurthy v. Commissioner ofIncome Tax 172 ITR 311(SC)and R.K.Palshikar 172ITR 311(SC)which have construed the payment made for transfer of leasehold rights for long period of time as a benefit of an enduring nature. The recent decision of this Court in Krishak ITA Nos.918/2015&920/2015 Page4of[5] Bharati{supra)also decides this particular issue likewise although on the facts ofthat case,the appeal ofthe that Assessee was dismissed.In Durga Khanna

V. Commissioner ofIncome Tax^72ITR 796(SC), the Supreme Court held that,primafacie,premium or salami was not income and the onus was on the Revenue to show that facts existed which would make it a revenue payment. The decisions cited by Mr.Madan clearly turned on their own facts. As far as the present case is concerned,the facts brought on record, and which have not ^ been contested by the Revenue,unmistakably show that the payment ofthe lease premium for the land given on lease to the Assessee for a period of80 years with "all the rights, easements and appurtenances" was in the nature ofa capital expenditure. This coupled with the fact that the MMRDA did not treat the receipt as income clinches the issue in favour ofthe Assessee and against the Revenue.

9. This being the main issue on merits,the Court does not consider it necessary to decide the other issue oflimitation that arises in AY 2008-09.

10. The appeals are accordingly dismissed both on the ground of the ) extraordinary delay of740 daysin re-filing the appeals as well as on merits.

S.MURALIDHAR,J VIBHUBAKHRU,J