The division bench of Delhi High Court held that, Tax deduction at Source (TDS) need not to be required for the payments of Lease Rent / Interest / Other payments for Acquisition of a Plot on Lease.
The Writ Petitions were filed by group of petitioners engaged in developing, constructing and selling residential units, plots and flats. Each of the petitioners entered into a long-term 90 years lease with the Greater Noida Industrial Development Authority (GNOIDA) for development and sale of land in various housing colonies. In terms of the lease deed entered into with the lessor, the petitioner paid upfront consideration and the balance was payable in terms of annual installments according to the terms and conditions of the lease deed.
The petitioners were served with notices by the income tax authorities under Sections 201 /201 (lA) of the Income Tax Act, 1961 for the Financial Years 2010- 11 to 2012-13 for non-deduction and non-payment of TDS required to be deducted from the payments of lease rent/interest/other payments for acquisition of a plot of land on 90 years lease from NOIDA for the periods mentioned.
The division bench comprising of Justice S.Ravindra Bhat and Justice Najimi Waziri observed that, “Amounts paid as part of the lease premium in terms of the timeschedule(s) to the Lease Deeds executed between the petitioners and GNOIDA, or bi-annual or annual payments for a limited/specific period towards acquisition of lease hold rights are not subject to TDS, being capital payments”.
The bench also observed that, “Amounts which are payable towards interest on the payment of lump sum lease premium, in terms of the Lease which are covered by Section 194- A are covered by the exemption under Section 194A (3) (f) and therefore, not subjected to TDS”.
“Any payment of interest accrued in favour of GNOIDA by any petitioner who is a bank – to the GNOIDA, towards fixed deposits, are also exempt from TDS”, the bench added.
The Court also directed that, wherever amounts have been paid by the petitioners, towards TDS as a result of the coercive process used by the Revenue, the GNOIDA shall make appropriate orders to credit/reimburse such payments. In case payments are made through deposit, over and above the rental amounts paid to the GNOIDA, without TDS, the income tax authorities shall not pursue any coercive proceedings; GNOIDA shall duly reimburse the petitioners for such amounts. Any amounts deposited in the court or with the Revenue, shall, to the extent of TDS liability only be appropriated for such purpose.
While setting aside the order of Income Tax Authority, the Court also is clarified that GNOIDA shall ensure that reimbursement is made to compensate the petitioners’ excess payments; the income tax authorities shall not pursue any coercive methods for recovery of the amounts, or penalty, once the basic liability (with interest, to be paid by GNOIDA) is satisfied.
Read the full text of the Judgment below.
