M/S. Tril Inforpark Limited Ramanujan It City Taramani Rajiv Gandhi Salai, Omr Chennai 600 113 v. The Income Tax Officer (Tds) Ward-1(1) Chennai 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 07.3.2016 CORAM THE HONBLE MR.JUSTICE V.RAMASUBRAMANIANandTHE HON'BLE MR.JUSTICE N.KIRUBAKARAN Tax Case Appeal No.882 of 2015 M/s. TRIL Inforpark LimitedRamanujan IT CityTaramaniRajiv Gandhi Salai, OMRChennai 600 113...AppellantVs. The Income Tax Officer (TDS)Ward-1(1)Chennai 600 034. ..Respondent ----- Appeal under Section 260A of the Income Tax Act, 1961,against the order of the Income Tax Appellate Tribunal, 'A'Bench, Chennai dated 19.6.2015 in ITA No.699/Mds/2014against the order of Commissioner of Income tax (Appeals)VII Chennai 34 dated 28.02.2014 in ITA No.1066/13-14against the order of the Income Tax Officer, TDS Ward 1(1),Chennai 34 dated 03.10.2013 made in TAN No.CHET10517D/TDSWard 1(1)/2013-14. ----- (Delivered by V.Ramasubramanian,J.) The above tax case appeal filed by the assessee wasoriginally admitted on 16.9.2015, on two substantialquestions of law. Subsequently, when the matter came up for https://hcservices.ecourts.gov.in/hcservices/ hearing on 30.10.2015, a request was made to re-frame thequestions already framed and also to consider one more question.Therefore, we framed the following three questions of law asarising for consideration in this appeal on 30.10.2015: "(i) Whether the period of limitationstipulated under Section 201(3) of the Act wouldcommence from the end of the financial year offiling of the TDS statement for the relevantfirst quarter in which the impugned payment wasmade or from the end of the financial year offiling of the revised TDS statement for thesecond quarter and whether the answer to thisquestion would depend upon the nature andcontents of the revised TDS statement filed forthe second quarter? (ii) Whether an upfront payment made by aperson for winning a long term lease for a periodof 99 years could be treated as rent liable forTDS under Section 1941-I or not? and (iii) Whether on the facts and circumstancesof the case and in law, the payment of Rs.1,412Crores representing market value of landcollected by TIDCO at the behest of theGovernment and immediately paid to the Governmenton the basis of various orders of the Governmentinstructing TIDCO to collect and pay even beforethe execution of the lease deed, was, in essence,a payment to the Government, being the real ownerthereof and consequently, the appellant was notliable to withhold tax from the captioned paymentin terms of Section 196 of the Act?" 2. Heard Mr.Arvind P.Datar, learned senior counselappearing for the appellant/assessee and Mr.J.Narayanaswamy,learned Standing Counsel appearing for the respondent/revenue. 3. Since the facts out of which the above appeal arises arelittle peculiar, it is necessary for us to bring on record thosefacts for a complete understanding of the issues of law raisedfor our consideration. (a) Way back in the year 2001, the Government of Tamil Naduidentified a vast extent of land measuring about 40.19 acres,lying in Thiruvanmiyur as well as Kanagam villages of Mylapore-Triplicane and Mambalam-Guindy Taluks of the District ofChennai, for the development of Second Information TechnologyPark at Taramani, Chennai. This was done by a Government Orderin G.O.Ms.No.455, Revenue dated 02.11.2001.(b) By another Government Order passed in G.O.Ms.No.165,Revenue dated 11.4.2003, the Government designated the Tamil https://hcservices.ecourts.gov.in/hcservices/ 3. Since the facts out of which the above appeal arises arelittle peculiar, it is necessary for us to bring on record thosefacts for a complete understanding of the issues of law raisedfor our consideration. (a) Way back in the year 2001, the Government of Tamil Naduidentified a vast extent of land measuring about 40.19 acres,lying in Thiruvanmiyur as well as Kanagam villages of Mylapore-Triplicane and Mambalam-Guindy Taluks of the District ofChennai, for the development of Second Information TechnologyPark at Taramani, Chennai. This was done by a Government Orderin G.O.Ms.No.455, Revenue dated 02.11.2001.(b) By another Government Order passed in G.O.Ms.No.165,Revenue dated 11.4.2003, the Government designated the Tamil https://hcservices.ecourts.gov.in/hcservices/ Nadu Industrial Development Corporation as the custodian of thesaid land for the development of the Second IT Park in jointventure. Originally it was conceived that a part of the landwould be allotted to a joint venture company and the remainingwould be utilised by TIDCO by other joint venture projects.(c) Subsequently, a proposal was mooted for the allotmentof 25.19 acres out of the aforesaid 40.19 acres of land, toTIDCO on outright sale basis for the construction of a businessHotel complex and IT based Complex. After several round ofnegotiations, the Government issued G.O.Ms.No.103, Industriesdated 24.4.2007, permitting TIDCO to implement the projectthrough joint venture companies by selecting the joint venturepartner through open competitive bidding process and alsopermitting TIDCO to hand over the lands to the joint venturecompany on 99 year lease. The operative portion of the order ofthe Government in G.O.Ms.No.103, dated 24.4.2007 may be usefullyextracted as follows: (d) As could be seen from the operative portion ofG.O.Ms.No.103, TIDCO was required by the Government to implementthe project through joint venture companies by selecting thepartner through open competitive bidding process. The procedureand mode of payment of rent and the execution of the lease deed,etc. in favour of the joint venture company was left to bedecided by TIDCO, as per the decision taken in their Board inits 419th meeting held on 16.10.2006, the contents of which wereextracted in paragraph 5 of G.O.Ms.No.103. Since the questionsraised in this case, may have to be decided on the facts out of https://hcservices.ecourts.gov.in/hcservices/ (d) As could be seen from the operative portion ofG.O.Ms.No.103, TIDCO was required by the Government to implementthe project through joint venture companies by selecting thepartner through open competitive bidding process. The procedureand mode of payment of rent and the execution of the lease deed,etc. in favour of the joint venture company was left to bedecided by TIDCO, as per the decision taken in their Board inits 419th meeting held on 16.10.2006, the contents of which wereextracted in paragraph 5 of G.O.Ms.No.103. Since the questionsraised in this case, may have to be decided on the facts out of https://hcservices.ecourts.gov.in/hcservices/ which the legal issues originated, it is necessary to extractparagraph 5 of G.O.Ms.No.103, as follows:"5. The Board of TIDCO, at its 419th meetingheld on 16.10.2006, considered the above matterand resolved to send proposals to Government forapproval of TIDCO's proposal to implement the ITParks (IT/ITES-SEZ in an area of 25.19 acres atTaramani behind TICEL Bio Park and IT/ITES-SEZcomprising IT Park and an InternationalConvention Centre cum Hotel in an area of 25acres at Taramani in front of TIDEL Park) throughjoint venture companies by selecting the jointventure through open competitive bidding process(Two part bid). The successive bidder who quotesthe highest rate (H1) (above or equivalent to theupset price) will have to arrange for payment ofbid amount for the entire land through JVC toTIDCO within a period of three months from thedate of letter of award and amounts paid by theJVC is non refundable. The successful biddershall also arrange for payment of an amountescalated at the rate of 12% (P.A or inproportion to the actual period) of the total bidamount through the JVC to TIDCO for the periodfrom date of bid inviting expression or interestto date of payment of bid amount for the entireland. This amount is payable along with the bidamount. The lease deed in favour of the JVC willbe executed only after full financial closure ofwithin 60 days of payment of lease rent,whichever is later. In addition to the upfrontpayment which is non refundable and to be payableto TIDCO within the period mentioned above, therespective JVCs shall have to pay a sum ofRs.1000/- (Rupees one thousand only) per acre perannum towards the remaining lease rent till theend of 99 year lease period. The Joint VentureCompany shall have the right only to lease thebuilt up space only up to the period of the leaseof land granted to the Joint Venture Company andno sale or transfer is permitted. TIDCO's equitycontribution in the joint venture will be to theextent of 26% of the paid up capital of the jointventure or an investment of Rs.50 Crores in eachof the joint venture companies whichever islesser. It is proposed to make TIDCO's equitycontribution out of the deposit of the nonrefundable upfront lease rent." (e) As could be seen from what is extracted above, TIDCO was obliged to select the successful bidder who quoted thehigher rate. The amount so quoted, will have to be paid throughthe Joint Venture Company to TIDCO within a period of threemonths from the date of the letter of award. The amounts paid bythe joint venture company are supposed to be non-refundable. (f) In other words, the joint venture company to whom alease for a period of 99 years is to be granted, could be bornonly after the joint venture partner is selected by TIDCOthrough competitive bidding process. (e) As could be seen from what is extracted above, TIDCO was obliged to select the successful bidder who quoted thehigher rate. The amount so quoted, will have to be paid throughthe Joint Venture Company to TIDCO within a period of threemonths from the date of the letter of award. The amounts paid bythe joint venture company are supposed to be non-refundable. (f) In other words, the joint venture company to whom alease for a period of 99 years is to be granted, could be bornonly after the joint venture partner is selected by TIDCOthrough competitive bidding process. (g) As per the directions of the Government contained inG.O.Ms.No.103, TIDCO floated a tender. The request for proposalfloated on 08.6.2007 together with addendum issued on22.11.2007, showed that qualified bidders were entitled to takethe documents on or before 12.11.2007. The last date for receiptof written enquiries was fixed as 16.11.2007. The pre-bidmeeting was scheduled to be held on 22.11.2007, the last datefor submission of bids was fixed as 13.12.2007, the opening ofthe first cover was to be by 11.15 hours and the opening of thesecond cover was to be by 17.00 hours on 13.12.2007. (h) The RFP document issued by TIDCO indicated the ReservePrice per sq.ft. of land as Rs.12,000/-. This amount ofRs.12,000/- was arrived at, on the basis of the guideline valueavailable with the registration department.(i) A company by name Tata Reality Infrastructure Limited,became the highest bidder by quoting a rate of Rs.12,050/- persq.ft. Despite the fact that by G.O.Ms.No.479, Revenue dated24.8.2007, the Government of Tamil Nadu claimed to havealienated the entire extent of land, namely 25.27 acres infavour of TIDCO, the highest commercial offer made by TataRealty Infrastructure Limited had to be in fact accepted only bythe Government and not by TIDCO as seen from letter Ms.No.25,Industries dated 27.02.2008. By this letter dated 27.02.2008,the approval of the Government was conveyed to TIDCO to acceptthe highest commercial offer of what was indicated as "Upfrontland lease rent of Rs.12,050/-". However, it was also indicatedin the said letter that TIDCO was entitled to retain Rs.50/- persq.ft., but pay to the Government the rest of the amount workingout to Rs.1326.42 Crores collected from the consortium. (j) After receipt of the decision of the Governmentdirecting TIDCO to accept the offer made by the consortium,TIDCO issued the Letter Of Award dated 29.02.2008, in favour ofTata Realty and Infrastructure Limited, directing them to enterinto a Joint Venture Agreement with TIDCO. It was indicated inthe said letter also that the Upfront Land Lease Rent shall benon-refundable. (k) Pursuant to the above, a Joint Venture Agreement wasentered into on 24.3.2008 by and between TIDCO and Tata RealtyInfrastructure Limited and the Indian Hotels Company Limited.Simultaneously, the Joint Venture Company Tril Infopark Limited https://hcservices.ecourts.gov.in/hcservices/ was incorporated on 20.3.2008. (l) Thereafter, TIDCO executed a deed of lease dated13.8.2008 in favour of the Joint Venture Company, namely TrilInfopark Limited, granting a lease of the land of the extent ofabout 25.27 acres, in favour of the said company for a period of99 years. (m) The Joint Venture Company made payment of total amountof Rs.1412,79,68,010/- to TIDCO on 27.5.2008. Out of the saidamount, TIDCO retained a sum of about Rs.85.00 Crores andremitted to the Government of Tamil Nadu a sum of Rs.1320 Croreson 29.5.2008. Since what was supposed to be retained by TIDCOwas only around Rs.5.50 Crores at the rate of Rs.50/- persq.ft., the Government made a demand and later agreed to treatthe excess amount retained by TIDCO as a loan by Government toTIDCO. was incorporated on 20.3.2008. (l) Thereafter, TIDCO executed a deed of lease dated13.8.2008 in favour of the Joint Venture Company, namely TrilInfopark Limited, granting a lease of the land of the extent ofabout 25.27 acres, in favour of the said company for a period of99 years. (m) The Joint Venture Company made payment of total amountof Rs.1412,79,68,010/- to TIDCO on 27.5.2008. Out of the saidamount, TIDCO retained a sum of about Rs.85.00 Crores andremitted to the Government of Tamil Nadu a sum of Rs.1320 Croreson 29.5.2008. Since what was supposed to be retained by TIDCOwas only around Rs.5.50 Crores at the rate of Rs.50/- persq.ft., the Government made a demand and later agreed to treatthe excess amount retained by TIDCO as a loan by Government toTIDCO. (n) On 9th February 2012, an inspection by the Officers ofthe department was carried out at the premises of the JointVenture Company, purportedly for ascertaining whether thecompany had complied with Chapter 17-B of the Act. Thereafter,the Assessing Officer passed an order under Section 201(1) and201(1A) holding that the Joint Venture Company is an assessee indefault, in the light of the fact that they had failed to deducttax at source in terms of Section 194-I, on the amount ofRs.1407,29,29,960/-. A penalty was also levied. (o) Aggrieved by the said order, Joint Venture Company,which is the assessee in this case, filed a first appeal beforethe Commissioner of Income Tax (Appeals). By an order dated28.02.2014, the Commissioner of Income Tax (Appeals) dismissedthe appeal, concurring with the views of the Assessing Officer.The assessee's further appeal to the Income Tax AppellateTribunal was allowed and the matter remitted back to theAssessing Officer. The order of remand was passed by theTribunal on the short ground that the copy of the leaseagreement entered into between the assessee and TIDCO was notavailable before them and therefore, they were unable to arriveat a finding of fact as to whether it was an advance payment ofrent or the cost of acquisition of land. The Tribunal took theview that the matter needed to be re-examined in the light ofthe provisions of Section 2(47) read with Explanation (i) toSection 194-I. Aggrieved by the said order of remand passed bythe Tribunal and contending that the lease deed always formedpart of the records of the Assessing Officer as well asCommissioner of Income Tax (Appeals), the assessee has come upwith the above appeals. 4. Before proceeding further, we must bring on record oneimportant fact. If factually what the Tribunal stated inparagraph 12 of its order was correct, in the sense that the https://hcservices.ecourts.gov.in/hcservices/ copy of the lease deed was not available before the Tribunal,the substantial questions of law raised before us may not arisefor consideration. But, as seen from the order of the AssessingOfficer as well as the order of the Commissioner of Income Tax(Appeals), the lease deed was very much available. Even thelearned Standing Counsel for the Department is unable to denythis fact. The lease deed formed part of the Annexure to theorder of assessment. Therefore, the Tribunal was in error inthinking that the lease deed was not available at all. 4. Before proceeding further, we must bring on record oneimportant fact. If factually what the Tribunal stated inparagraph 12 of its order was correct, in the sense that the https://hcservices.ecourts.gov.in/hcservices/ copy of the lease deed was not available before the Tribunal,the substantial questions of law raised before us may not arisefor consideration. But, as seen from the order of the AssessingOfficer as well as the order of the Commissioner of Income Tax(Appeals), the lease deed was very much available. Even thelearned Standing Counsel for the Department is unable to denythis fact. The lease deed formed part of the Annexure to theorder of assessment. Therefore, the Tribunal was in error inthinking that the lease deed was not available at all. 5. Once we find that the Tribunal did not address itself tothe issue raised before them, on the presumption that a crucialdocument was not available, then there is one alternative,namely to remit the matter back to the Tribunal. But, thatappears to be a distant possibility, in view of the fact thatthe Tribunal has also relied upon a decision of its own renderedin Foxconn. The said decision of the Tribunal in Foxconn is thesubject matter of appeal before us in TCA No.801 of 2013.Therefore, today, there is no point in remitting the matter backto the Tribunal for consideration of these issues. Therefore, wehave taken up the three questions that we framed on 30.10.2015for our consideration. 6. For the purpose of convenience, we would take the secondquestion for consideration first. The second question revolvesaround the dispute as to whether the amount of more than aboutRs.1400 Crores paid by the Joint Venture Company to TIDCOconstituted rent or not. 7. Section 194-I imposes an obligation upon any person notbeing an individual or a Hindu undivided family, who isresponsible for paying to a resident, any income by way of rent,to deduct income tax at the rates specified in clauses (a) or(b) as the case may be. Therefore, to oblige a person makingpayment to deduct income tax at source, what is paid should beshown to be "an income by way of rent". 8. The explanation to Section 194-I indicates the meaningof the expression "rent" and it reads as follows:" "rent" means any payment, by whatever namecalled, under any lease, sub- lease, tenancy orany other agreement or arrangement for the use ofany land or any building (including factorybuilding), together with furniture, fittings andthe land appurtenant thereto, whether or not suchbuilding is owned by the payee; " 9. It must be noted that the definition is an exhaustivedefinition and not an inclusive definition as seen from the https://hcservices.ecourts.gov.in/hcservices/ usage of the words "means". To constitute a rent within themeaning of Section 194-I, there must be a payment by whatevername called under any lease, sub-lease, tenancy or any otheragreement or arrangement. In addition, such payment should befor the use of any land, building, etc. 9. It must be noted that the definition is an exhaustivedefinition and not an inclusive definition as seen from the https://hcservices.ecourts.gov.in/hcservices/ usage of the words "means". To constitute a rent within themeaning of Section 194-I, there must be a payment by whatevername called under any lease, sub-lease, tenancy or any otheragreement or arrangement. In addition, such payment should befor the use of any land, building, etc. 10. What has happened in the case on hand, as seen from thenarration of facts that we have given earlier, that theGovernment originally decided to make TIDCO as a mere custodianof a land of larger extent of about 40.19 acres. Subsequently,the Government decided, as seen from G.O.Ms.No.103 dated24.4.2007, the operative portion of which we have alreadyextracted earlier,is to permit TIDCO to implement the projectthrough Joint Venture Companies by selecting the Joint VenturePartner through open competitive bidding process. In otherwords, the sequence of events that have taken place fromG.O.Ms.No.455, Revenue dated 02.11.2001 up to G.O.Ms.No.479,Revenue, dated 24.8.2007 shows that the whole process comprisedof two distinct steps. The first step was the identification ofJoint Venture Partner and the birth of the Joint VentureCompany. The second is the execution of the lease deed in favourof the Joint Venture Company. 11. Once the exercise undertaken by the Government andTIDCO is understood to have comprised of these two distinct andseparate steps, the question that arises for consideration, caneasily be answered. What happened in the open competitivebidding process that took place in November 2007 was theidentification of a Joint Venture Partner. The selection of theJoint Venture Partner depended upon the quote that he was ableto make. The amount of more than Rs.1400 Crores, which wasactually quoted in the form of per sq.ft., rate at Rs.12,050/-per sq.ft. was not actually for taking the land on lease, butwas a consideration paid to make TIDCO accept a company as itsJoint Venture Partner. If this amount had not been offered byTata Realty Infrastructure Limited, they could never have becomethe Joint Venture Partner with TIDCO and the assessee before uswould never have been born. Once we understand this position andonce we cross this first step, it is only thereafter that we canland up in the second step, namely that of execution of thelease deed. 12. It is true that at the time when the lease deed wasexecuted on 13.8.2008, the joint venture was already born andthis is why under the terms of the Joint Venture Agreement, theJoint Venture Company itself was obliged to make payment of theentire amount of more than Rs.1400 Crores. But, despite the factthat the lease deed was executed on 13.8.2008, the lease wasdeemed to have commenced from 29.02.2008. That was the date on which the joint venture agreement was entered into, but thecompany got incorporated only on 20.3.2008. The revised leasedeed was later entered into on 03.02.2009. 13. The lease deed dated 13.8.2008 actually imposed anobligation upon the Joint Venture Company to set up the IT Parkwithin 18 months not from the date of lease deed namely13.8.2008, but from 29.02.2008, the date on which the Letter OfAward was issued to the consortium by TIDCO. 14. Therefore, fundamentally, the amount of Rs.1400 Croreswas offered by Tata Realty Infrastructure Limited, which was notthe lessee, as the lessee was yet to be born, for the purpose ofbecoming a Joint Venture Partner with TIDCO and to create a newentity, which will eventually become the lessee. If we treat, ascontended by the Revenue, this amount as part of the rent, itwould result in a proposition that on behalf of a company yet tobe born, one of the spouses which was supposed to give birth hadalready agreed upon the commitment. 14. Therefore, fundamentally, the amount of Rs.1400 Croreswas offered by Tata Realty Infrastructure Limited, which was notthe lessee, as the lessee was yet to be born, for the purpose ofbecoming a Joint Venture Partner with TIDCO and to create a newentity, which will eventually become the lessee. If we treat, ascontended by the Revenue, this amount as part of the rent, itwould result in a proposition that on behalf of a company yet tobe born, one of the spouses which was supposed to give birth hadalready agreed upon the commitment. 15. Therefore, in essence, what was offered by the jointventure partner, namely Tata Realty Infrastructure Limited, inthe bidding that took place in February 2008 and what was paidon 27.5.2008 by the Joint Venture Company was actually aconsideration for bagging the contract to have a joint ventureand for getting the right of 99 years lease conferred upon theJoint Venture Company. If the payment is understood in thisclearcut fashion, then no doubt may be cast upon the nature ofthe payment. 16. Arguments were advanced across the Bar as to how oneshould distinguish a rent from a premium. Relying upon thedefinition of the expression premium contained in Halsbury'sLaws of England, Mr.J.Narayanasamy, learned Standing Counsel forthe Department submitted that premium represents a capitalisedrent and hence, it may be different from the actual rent, butwould nevertheless continue to be rent. 17. As we have pointed out earlier, it is not evennecessary for us to get into a question whether what was paidwas premium or rent. In a case where two existing entities enterinto an agreement for the lease of a property, the question asto what was paid as premium and what was agreed to be paid asrent would arise. In this case, the original agreement wasactually between the lessee and a company which agreed to have ajoint venture with the lessor. It is only out of the saidagreement that the lessor was born. The amount fixed, namelymore than Rs.1400 Crores, was to confer the benefit of enteringinto a joint venture with the lessor. Therefore, in this case, we need not even get into the exercise of finding out whetherwhat was paid would come within the meaning of premium or rent. 18. As a matter of fact, P.Ramanatha Aiyar Law Lexicondefines "premium" as "either a reward, or a periodical paymentfor the insurance of life or property, or a lumpsum or fine paidfor the grant of a house, a sum paid in excess of the nominalvalue of the share of stocks etc.. 19. In this case, as we have indicated earlier, thedetermination of the amount of Rs.1400 Crores preceded even thebirth of the Joint Venture Company and the creation of the leasedeed. Therefore, it was actually a consideration paid for twothings, namely (a) to be conferred with the benefit of being aJoint Venture Partner, and (b) to be conferred with the benefitof a 99 years lease in favour of the Joint Venture Company thatwas born out of the partnership. 20. Relying upon Section 105 of the Transfer of PropertyAct, it is contended by Mr.Arvind P.Datar, learned seniorcounsel for the assessee that the said provision makes adistinction between premium and rent. While Section 105 definesa lease of immovable property to be a transfer of right to enjoysuch property, either for a certain duration of time or inperpetuity, in consideration of a price paid or promised, thesecond part of Section 105 indicates that the price paid orpromised for the lease could be called premium and the money,share, service or other thing to be tendered is to be calledrent. 21. On the basis of the definition so made under Section105 of the Transfer of Property Act, the learned senior counselfor the appellant/ assessee also submitted that this distinctionwas incorporated into Chapter XX-C of the Income Tax Act underSection 269-UA and that therefore, the income tax law alsorecognised the distinction between the two. 21. On the basis of the definition so made under Section105 of the Transfer of Property Act, the learned senior counselfor the appellant/ assessee also submitted that this distinctionwas incorporated into Chapter XX-C of the Income Tax Act underSection 269-UA and that therefore, the income tax law alsorecognised the distinction between the two. 22. Relying upon the decision of the Patna High Court inRaja Shiva Prasad Singh v. King Emperor [AIR 1924 Patna 679],the learned senior counsel contended that a salami which is likea premium was always understood as not part of the rent. Asimilar view was taken by the Supreme Court in Board ofAgricultural Income Tax v. Sindhurani , wherethe Supreme Court indicated that salami is not rent and it couldnot be called revenue within the meaning of the word used in thedefinition of agricultural income under Section 2(1)(a) of theAssam Agricultural Income Tax Act, 1939. https://hcservices.ecourts.gov.in/hcservices/ [57 ITR 422 (SC)], the Supreme Court was concerned with thequestion as to whether the payment of premium fixed under a deedof lease, in instalments, would make it different from a revenuereceipt instead of capital receipt at the hands of therecipient. Irrespective of the fact whether the premium fixedunder the lease deed is paid in lumpsum or in instalments, theSupreme Court held that the distinction between rent and premiumwill not vanish. 24. In the Chief Controlling Revenue Authority v. S.M.AbdulJammal [AIR 1970 Madras 288], a Full Bench of this Court wasconcerned with the question as to whether the cost of repairs,additions and improvement to be effected on the premises by thelessees would fall within premium or for money advanced inaddition to rent received. The Full Bench took the view that thedistinction between a premium and rent lies in the fact thatpremium is one paid in consideration of the conveyance impliedin the lease and is quantified in lump. 25. In V.Srinivasan v. Sub Registrar [AIR 1985 Kar. 56], aFull Bench of the Karnataka High Court was concerned with twoquestions, one of which was whether the rent paid in advance isto be construed as money advanced in addition to rent reserved.Even in the said decision, the Full Bench of the Karnataka HighCourt drew inspiration from the distinction between premium andrent available in Section 105 of the Transfer of Property Act. 26. Apart from the above citations, the learned seniorcounsel for the assessee also relied upon several decisions ofthe Tribunal itself, where the rental income at the hands of thelessor was treated as revenue income. 27. However, in response to the above contentions,Mr.J.Narayanasamy, learned Standing Counsel for the Departmentcontended that the question as to how a particular item is to betreated at the hands of the person making payment, does notdepend upon the manner in which the same is treated at the handsof the recipient. Therefore, he contended that the distinctionbetween premium and rent sought to be made by the learned seniorcounsel for the assessee and the support sought to be drawn fromthe manner in which the income was treated at the hands of therecipient cannot decide the question of law raised here. 28. We have carefully considered the above submissions. 29. We have no doubt in our mind that how a particular itemis to be treated at the hands of the person making the payment,cannot depend upon the manner in which the same was treated atthe hands of the recipient. We have not even gone into the https://hcservices.ecourts.gov.in/hcservices/ question of fact as to how the lessor, namely TIDCO treated theamount received by them from the assessee. 30. As we have pointed out earlier, the question in thiscase arises at the very threshold, as to why was a payment ofmore than Rs.1400 Crores made by the assessee and what was themethod adopted by the parties to fix such an amount as payableto the lessor. 28. We have carefully considered the above submissions. 29. We have no doubt in our mind that how a particular itemis to be treated at the hands of the person making the payment,cannot depend upon the manner in which the same was treated atthe hands of the recipient. We have not even gone into the https://hcservices.ecourts.gov.in/hcservices/ question of fact as to how the lessor, namely TIDCO treated theamount received by them from the assessee. 30. As we have pointed out earlier, the question in thiscase arises at the very threshold, as to why was a payment ofmore than Rs.1400 Crores made by the assessee and what was themethod adopted by the parties to fix such an amount as payableto the lessor. 31. As we have indicated earlier, though the amount ofRs.1412 Crores was paid actually by the lessee to the lessor, itwas not paid merely for the purpose of retaining the lease for aperiod of 99 years. The amount paid was actually determined inan open competitive bidding that took place even before theJoint Venture Company was born. Tata Realty and InfrastructureLimited, which was the Joint Venture Partner, offered thisamount for getting the benefit of entering into a Joint VentureAgreement with TIDCO, the benefit of which will spill over tojoint venture company in the form of a 99 years lease.Therefore, the mistake of the Department lies in treating thetransaction as having commenced from the date of the lease,namely 13.8.2008. The date on which the amount was quantified,the manner in which the amount was quantified and the method ofselection of the Joint Venture Partner are the crucialdetermining factors in this case to understand that the saidamount could never constitute rent. 32. To put it differently, a premium or rent irrespectiveof how they are treated, could be decided only after anagreement for lease is finalised. If an amount has to bedetermined even before an agreement for lease is finalised, thesame would never form part of the rental income. It is thisdistinction that has been lost sight of by all the authorities.Therefore, the second question of law has to be answered infavour of the assessee. 33. The third question of law is as to whether the payment,which has eventually gone to the coffers of the Government,could be taken to be a payment made to somebody else, for thepurpose of attracting the provisions of Section 194-I or not. 34. On facts, there is no dispute that even at the timewhen the alienation was made by the Government, the amountdetermined by the parties was agreed to paid to the Government.We have extracted paragraph 5 of G.O.Ms.No.103 earlier. Themethod of determination of the amount and the method of choosingthe lessee alone were left to TIDCO. But, TIDCO was obliged toretain only a sum of Rs.50/- per sq.ft. and pass on the balanceamount to the Government. Therefore, the amount liable to be https://hcservices.ecourts.gov.in/hcservices/ passed on to the Government cannot be a consideration paid toTIDCO, which is the lessor. It was a consideration paid to theGovernment. Once it is understood to be a consideration paid tothe Government, the question of deducting tax at source does notarise. Therefore, the third question of law is also to beanswered in favour of the appellant/assessee. 35. The learned Standing Counsel has circulated a note ofsubmissions and an additional note of submissions. Most of thecontentions of the learned Standing Counsel revolved around twosubstantial questions, namely use of the expression "upfrontland lease rent" and the distinction sought to be made by theassessee between premium and rent. Both these issues are alreadyanswered by us by tracing the history of the birth of the verycontract itself. passed on to the Government cannot be a consideration paid toTIDCO, which is the lessor. It was a consideration paid to theGovernment. Once it is understood to be a consideration paid tothe Government, the question of deducting tax at source does notarise. Therefore, the third question of law is also to beanswered in favour of the appellant/assessee. 35. The learned Standing Counsel has circulated a note ofsubmissions and an additional note of submissions. Most of thecontentions of the learned Standing Counsel revolved around twosubstantial questions, namely use of the expression "upfrontland lease rent" and the distinction sought to be made by theassessee between premium and rent. Both these issues are alreadyanswered by us by tracing the history of the birth of the verycontract itself. 36. Though Mr.Arvind P.Datar, learned senior counsel forthe appellant wanted to make submissions even on the question oflimitation, which has been framed as the first question of law,we do not think that we need to go into the said question. Oncewe have found on merits that the amount paid by the appellant toTIDCO just for the purpose of passing on to the Government,could not be treated as rent, the question as to whetherproceedings were initiated within the period of limitation ornot, need not be gone into. Therefore, in the light of ouranswers to questions of law 2 and 3, we do not answer questionNo.1. The appeal is allowed answering questions of law 2 and 3in favour of the appellant. No costs. Consequently, M.P.No.1 of2015 is closed. kpl To1. The Income Tax Appellate Tribunal,Á'Bench, Chennai.2.The Commissioner of Income Tax (Appeals) VII, Chennai 34.3.The Income Tax Officer (TDS)Ward-1(1) Chennai 600 034. +1 cc to Mr.Subbaraya Iyer, Advocate, sr.14612+1 cc to Mr.J.Narayanasamy, Advocate, sr.14611 kgk cokra 28.04.2016