M/S New Okhla Industrial Development ... vs Commissioner Income Tax Appeals(41)

3. The   respondent   Rajesh   Projects   (India)   is   a   private limited   company   engaged   in   the   business   of   real   estate activities of constructing, selling residential units etc.  On 03.11.2010,   the   respondent­company   entered   into   a   long­term lease   for   90   years   with   the   Greater   Noida   Industrial Development Authority for Plot No. GH­07A for development and marketing of Group Flats.  As per terms of the lease deed, the company   partially   paid   the   consideration   amount   for   the acquisition   of   the   plot   to   Greater   Noida   at   the   time   of execution   of   the   lease   deed   and   is   also   paying   the   balance lease premium annually as per the terms and conditions of the lease deed.  Notice under Section 201/201(A) of the Income Tax Act,   1961   was   issued   by  the  Income   Tax   department   inquiring regarding non­deduction of tax at source under Section 194­I of   the   Income   Tax   Act   from   the   annual   lease   rent   paid   to Greater   Noida.     The   respondent­company   replied   the   notices. The respondents case was that it did not deduct tax at source as   it   was   advised   by   Greater   Noida   that   it   is   a   Government authority,   hence   the   tax   deduction   at   source   provisions   are not applicable.  The Assessing Officer passed the order dated 31.03.2014 for the Financial Year 2010­2011 and 2011­2012, the respondent   was   held   as   “assessee­in­default”   for non­deduction/non­deposit   of   TDS   on   account   of   payment   of 5 lease   rent   and   interest   made   to   Greater   Noida.     Consequent demand   was   raised   against   the   respondents.   Aggrieved   by assessment   order,   the   respondent­company   filed   an   appeal before   the   Commissioner   of   Income   Tax­Appeals.     Respondents prayed   to   stay   the   demand   which   was   refused   and   recovery proceedings   were   initiated.     Aggrieved   by   assessment   and recovery   proceedings   emanating   therefrom,   the respondent­company   filed   a   Writ   Petition   No.   8085   of   2014 praying   for   various   reliefs   including   the   relief   that respondent­company   be   not   treated   as   “assessee­in­default” under the Income Tax Act for non­deduction/depositing the tax at source in respect of payment of rent on lease land and in respect of other charges paid to Greater Noida.       Different other entities also filed the writ petitions in the Delhi High Court praying for more or less the same reliefs relating to lease   rent   payment   and   for   payment   of   interest   to   Greater Noida.   All the writ petitions involving common questions of law   and   facts   were   heard   together   and   were   allowed   by   the Delhi High Court by its judgment dated 16.02.2017.     Before the   High   Court,   Greater   Noida   and   the   Noida   authorities contended that they are local authorities within the meaning of   Section   10(20)   of   the   Income   Tax   Act,   1961,   hence   their income   is   exempt   from   the   Income   Tax.     It   was   further 6 contended that the interest received by them is exempt under Section   194A(3)(iii)(f)   of   the   Income   Tax   Act   and   they   are exempted from payment of any tax on the interest.

(2)   Amounts   constituting   annual   lease   rent,   expressed in   terms   of   percentage   (e.g.   1%)   of   the   total premium for the duration of the lease, are rent, and therefore   subject   to   TDS.   Since   the   petitioners could not make the deductions due to the insistence of   GNOIDA,   a   direction   is   issued   to   the   said authority (GNOIDA) to comply with the provisions of law   and   make   all   payments,   which   would   have   been otherwise   part   of   the   deductions,   for   the   periods, in question, till end of the date of this judgment. All payments to be made to it, henceforth, shall be subject to TDS.

17. In view of what has been stated above, we do not find any error in the judgment of the High Court dated 16.02.2017.  In result, all the appeals are dismissed.