ACIT vs. Oil and Natural Gas Corporation Ltd (ITAT Mumbai)

DATE: December 3, 2014 (Date of pronouncement)
DATE: December 8, 2014 (Date of publication)
AY: 2008-09
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S. 194-I: Lease premium and additional Floor Space Index (FSI) charges paid to MMRDA is not "rent" for TDS

It is the real nature of the arrangement or transaction, and not merely the words or phrases employed, even as cautioned by the apex court in Panbari Tea Co. Ltd. (supra), i.e., the substance of the transaction, that is relevant and paramount. The amount charged by MMRDA as lease premium is equal to the rate prevailing as per the stamp duty ready reckoner for the acquisition of commercial premises. There is no provision in the lease agreement for termination of the lease at the instance of the lessee and, hence, for refund of lease premium under regular circumstances. Even the additional floor space index (FSI), given for additional space, is as per the ready reckoner rate only. The whole transaction is thus for grant of leasehold rights, and only a transfer of property; the lease premium being the consideration for the leasehold rights, which comprise a bundle of rights, including the right of possession, exploitation and its’ long term enjoyment. The charges for FSI also partake the character of a capital asset in the form of Transferable Development Rights (TDRs), so that the owner (of land) had transferred the rights of development and exploitation of land, which are again capital in nature. The restrictive convents toward excavation seek to retain the right of the State to any minerals from land. Excavation is permitted for the purpose of construction of the foundation of the building, or for executing any work in pursuance of the terms of lease. Similarly, restriction with regard to erection beyond building line was only in conformity with DC Rules, civil aviation rules, BMC and coastal regulations, etc., i.e., are regulatory, and do not define the character of the transaction per se. The same in fact would apply, i.e., be imposed by a local authority while granting permission for construction on freehold land. The tribunal has in fact taken a consistent view for similar transactions with MMRD Ltd., CIDCO Ltd in ITO vs. Naman BKC CHS Ltd. (in ITA Nos. 708 & 709/Mum/2012 dated 12.09.2013) and TRO vs. Shelton Infrastructure Pvt. Ltd. (in ITA No. 5678/Mum/2012 dated 19.05.2014). The decisions relied upon by the A.O. stand also distinguished by the tribunal, as in ITO vs. Dhirendra Ramji Vora (in ITA No.3179/Mum/2012 dated 09.04.2014) and Naman BKC CHS Ltd. (supra).

2 comments on “ACIT vs. Oil and Natural Gas Corporation Ltd (ITAT Mumbai)
  1. right view of tribunal.
    All rights fall under bundles of rights granted on different grounds not just on one principle, see FSI 3 is given at New Mumbai is the government consideration not that the urban planner the CIDCO that body like MMRDA gave the primary lease and any FSI has nothing to do with MMRDA that has to be essentially to be noted.

    Revenue man looks like eagle for some snake prey that is what revenue is, whether it is legal or not his concern when he pounces on prey.

    tribunal well considered the issue very correctly.

  2. Floor space index is the air space that can be several 100s of times as you can measure in the airspace and indeed air space is unmeadsurable when so revenue need to collect all the depth of space!

    first if it knows how to measure the airspace over the expance of india then revenue can be astronomical why to borrow at all!

    there should be some common sense when space becomes some flat in multistory structure may be he could say this area is served by me and you have to pay and the like, if no one used fsi till it is used Revenue can never imagine some income is the purport of the decision.

    true common sense is indeed uncommon but it indeed a great fact revenue works on some special sense devoid of any common sense, as revenue found the 12th Boson particle at Holdron collider!

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