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II. Direct Taxes Case Laws:
1. M/s.
Foxconn India Developer (P) Ltd. & others Vs. ITO, Tax Case Appeal
no. 801 of 2013, Date of Decision: 04.04.2016, High Court of Madras
Whether
the upfront payment made for the acquisition of leasehold rights over
an immovable property for a long duration, say 99 years, constitute
rental income in the hands of lessor, thereby attracting provisions of
Section 194-I of the Act?
Held_No
Brief Facts:
The SIPCOT, a government undertaking, acquired certain acres of land
for its development as an Industrial Park. After development of land,
SIPCOT laid out the said land into various plots and the assessee was
chosen as Developer to establish project specific SEZ in partnership
with SIPCOT. The assessee paid Non-refundable One Time Upfront charges
for allotment of land. By virtue of the lease deeds, the assessee was
entitled to enjoy the land for a period of 99 years, upon payment of
annual lease rent of Re.1/- p.a for 98 years and Rs.2/- per year for the
99th year to be paid in advance. The ld. AO contended that the payment
was liable for deduction of TDS u/s 194-I of the Act.
Held:
The hon’ble High Court held that the substance of the transaction is
of importance and the requirement to deduct tax u/s 194-I of the Act
would depend upon the agreement between the parties. The purpose of the
acquisition was to develop the area into an industrial park and it is
clear that the lessor as well as the lessee intended to treat the
transaction as "deemed sale". The payments were not only made under the
agreement of lease but for a variety of purposes such as becoming a
co-developer, developing a Product Specific SEZ, for putting up an
industry in the land, etc. Also, the payments were not merely made for
the use of land.
Thus,
the upfront payment made by the assessee for acquisition of leasehold
rights over an immovable property for a long duration of time say 99
years could not be taken to constitute rental income at the hands of the
lessor, obliging the lessor to deduct tax at source u/s 194-I of the
Act.
The appeal of assessee is allowed.
(Please click here for judgment)
2. DCIT Vs. M/S Yamuna Power & Infrastructure Ltd., I.T.A. No. 57/Chd/2016, Date of Order: 06.04.2016, ITAT - Chandigarh
Issue:
Whether the losses of the assessment years prior to the initial
assessment year need to be carried forward notionally up to the initial
assessment year while calculating the deduction u/s 80-IA of the Income
Tax Act, 1961?
Held_No
Brief Facts:
The assessee company established two wind mills and claimed deduction
u/s 80IA of the Act @100% on the income earned from the business of
wind power generation projects from AY 2008-09. AO denied the exemption
to the assessee for AY 2012-13 in accordance with the provisions of
Section 80-IA(5) of the Act while setting off the losses for AY 2004-05
to 2006-07 against the income for AY 2007-08 to 2012-13. CIT(A) reversed
the order of the AO. Aggrieved by the order of the CIT(A), the revenue
is in appeal before the ITAT.
Held:
It was held that only losses of the years beginning from initial
assessment year are to be brought forward and no losses of earlier years
which were already set off against the income of the assessee. The
Revenue is not allowed to look backward and find out if there is any
loss of earlier years and bring forward notionally even though the same
were set off against other income of the assessee and the set off
against the current income of the eligible business. Once the set off is
taken place in earlier year against the other income of the assessee,
the Revenue cannot rework the set off amount and bring it notionally.
The losses pertaining to previous years prior to AY 2008-09 will not be
taken into consideration for calculating the amount of deduction u/s
80IA of the Act. Therefore, the AO was not justified in disallowance of
claim of deduction u/s 80IA of the Act.
The appeal of the revenue stands dismissed.
(Please click here for judgment)
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