REDWOOD IT SERVICES PRIVATE LIMITED,MUMBAI vs. DCIT, CIRCLE 14(1)(2), MUMBAI

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ITA 1547/MUM/2026Status: DisposedITAT Mumbai04 August 2026AY 2013-1426 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the separate agreements for amenities and furniture were integral parts of the principal Leave and Licence Agreement, forming a single composite transaction. Therefore, all receipts should be assessed under 'Income from House Property'.

What were the facts?

The assessee company licensed fully developed office spaces, including amenities and furniture, to corporate entities. The assessee treated all receipts as 'Income from House Property', claiming statutory deductions. The CIT(A) re-characterized receipts from separate amenity and furniture agreements as 'Income from Other Sources'.

What were the issues?

Whether receipts from separate amenity and furniture agreements, alongside rental income, should be assessed as 'Income from House Property' or 'Income from Other Sources'. Whether the CIT(A) could enhance the assessment by re-characterizing income sources.

Which sections of the Income-tax Act were involved?

Section 24,Section 57,Section 143(3),Section 251

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH

Before: SHRI AMIT SHUKLA & SHRI ARUN KHODPIA

For Appellant: Shri Vijay Mehta
For Respondent: Shri Sandeep Lakra, CIT DR
Hearing: 30/07/2026Pronounced: 04/08/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): These two appeals by the assessee are directed against separate orders passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, for Assessment Years 2013-14 and 2014-15 arising from assessments framed under section 143(3) of the Income-tax Act, 1961 (“the Act”). Since the controversy involved in both

2 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited the appeals arises from an identical factual background, pertains to the same commercial property, involves common contractual arrangements, substantially identical additions and common questions of law, they were heard together and are being disposed of by this consolidated order. As the factual foundation as well as the issues arising in Assessment Year 2013-14 are more comprehensive, the said assessment year is treated as the lead appeal and our findings recorded therein shall govern the appeal for Assessment Year 2014-15 also, except to the extent of variation in figures wherever applicable.

2.

The assessee is a company engaged, inter alia, in owning, developing and commercially exploiting Information Technology Park premises by way of licensing fully developed office spaces to corporate entities. The commercial premises owned by the assessee comprise modern office units equipped with various infrastructural facilities necessary for occupation by corporate tenants. During the years under consideration, the assessee licensed different units of its commercial complex to various occupants including First Data (India) Private Limited and Aditya Birla Retail Limited. In respect of such occupation, the parties executed a principal Leave and Licence Agreement governing the occupation of the office premises and, simultaneously, separate agreements dealing with amenities and fixed furniture & fixtures. According to the

3 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited assessee, these agreements merely documented different components of one composite commercial arrangement under which a fully functional office premises was licensed to the occupants. Accordingly, the entire receipts arising under all the agreements were consistently returned under the head “Income from House Property”, and the statutory deductions contemplated under section 24 of the Act were claimed. The Revenue authorities, however, viewed the matter differently, resulting in the present litigation.

3.

For Assessment Year 2013-14, the return of income filed by the assessee was selected for scrutiny and the assessment was completed under section 143(3). During the course of assessment proceedings, the Assessing Officer examined, inter alia, the claim of deduction under section 24(b) in respect of interest paid on borrowed capital, the maintenance expenditure claimed by the assessee and the nature of receipts arising under the contractual arrangements entered into with the occupants of the commercial premises. The Assessing Officer was of the opinion that the assessee had not satisfactorily established the nexus between the borrowed capital and acquisition of the property so as to qualify for deduction under section 24(b). Certain maintenance expenditure was also disallowed. The assessment accordingly culminated in additions and disallowances, against which the assessee preferred an appeal before the learned CIT(A).

4 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited

4.

During the appellate proceedings, the assessee not only challenged the disallowances made in the assessment order but also produced detailed documentary material, including fund-flow statements, bank records and utilisation charts, in support of its claim that the borrowings were directly relatable to acquisition of the property. The learned CIT(A), however, while adjudicating the appeal, travelled beyond the issues arising from the assessment order and exercised enhancement jurisdiction under section 251 of the Act. Upon examination of the contractual documents executed between the assessee and its tenants, the learned CIT(A) came to the conclusion that the receipts attributable to the Amenities Agreement and the Furniture & Fixtures Agreement were independent of the rental receipts arising from the Leave and Licence Agreement. Proceeding on the premise that separate agreements coupled with separate consideration necessarily indicated separate sources of income, the learned CIT(A) held that such receipts were liable to be assessed under the head “Income from Other Sources” and not under the head “Income from House Property”. Consequentially, the statutory deduction available under section 24(a) in respect of such receipts was denied. While partially observing that depreciation on certain movable assets could be considered under section 57, subject to verification, the learned CIT(A) declined the remaining claims of the assessee. It is this

5 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited enhancement, together with the confirmation of the disallowance under section 24(b), which constitutes the principal subject matter of challenge before us.

5.

Assessment Year 2014-15 presents substantially the same factual and legal position. The Assessing Officer adopted an approach similar to that taken in the immediately preceding year while examining the assessee’s claim under section 24(b). In appellate proceedings, the learned CIT(A.), following the reasoning adopted in Assessment Year 2013-14, once again re-characterised the receipts arising from the Amenities Agreement and the Furniture & Fixtures Agreement as income assessable under the head “Income from Other Sources”, thereby denying the statutory deduction available under section 24(a). At the time of hearing, both the learned representatives fairly submitted that the controversy arising in Assessment Year 2014-15 is entirely dependent upon the adjudication of the issues involved in Assessment Year 2013- 14 and that, barring the variation in figures, the contractual arrangements, factual matrix and legal submissions remain common.

6.

Opening his arguments, the learned Senior Counsel appearing on behalf of the assessee assailed the impugned enhancement as being founded upon an erroneous understanding of the contractual framework governing the

6 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited relationship between the assessee and its tenants. Drawing our attention to the Leave and Licence Agreement, the Amenities Agreement and the Furniture & Fixtures Agreement forming part of the paper book, it was submitted that the learned CIT(A) has proceeded solely on the existence of separate agreements while completely overlooking their true legal effect. It was pointed out that the Amenities Agreement itself expressly records that it is supplemental to and forms an integral part of the Leave and Licence Agreement; that the provisions of the principal agreement govern the ancillary agreement mutatis mutandis; and that both agreements are co-extensive and co-terminus. Similar stipulations are incorporated in the Furniture & Fixtures Agreement, making its continuance entirely dependent upon the subsistence of the principal licence. It was, therefore, contended that the agreements themselves conclusively establish that the parties never intended to create separate commercial transactions but merely reduced different facets of one integrated arrangement into separate documents for convenience of documentation and commercial accounting.

7.

Developing the submission further, the learned counsel invited our attention to the nature of the amenities and fixtures covered by the agreements. According to him, the amenities comprise central air-conditioning, AHU rooms, BTU metering system, DG back-up, lift lobbies, washrooms,

7 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited parking facilities and allied infrastructure permanently attached to the commercial building. Likewise, the furniture & fixtures consist of fixed partitions, cabins, conference rooms, server rooms, workstations, pantry structures, electrical fittings and other permanent fit-outs embedded in the office premises. None of these assets, according to the learned counsel, possesses an independent commercial identity capable of separate enjoyment or separate exploitation. Their only purpose is to render the office premises fit for commercial occupation. Consequently, the dominant intention of the parties throughout remained licensing of fully functional office premises and not exploitation of independent commercial assets. It was submitted that once the true nature of the contractual arrangement is appreciated in its entirety, the artificial segregation adopted by the learned CIT(A) cannot be sustained.

8.

In support of the aforesaid propositions, the learned counsel placed reliance upon the authorities cited in the written submissions, including Sultan Brothers (P.) Ltd. v. CIT (1964) 51 ITR 353 (SC), Shambhu Investment (P.) Ltd. v. CIT (2003) 263 ITR 143 (SC), CIT v. Bhaktawar Construction (P.) Ltd. (1986) 162 ITR 452 (Bom.), CIT v. J.K. Investors (Bombay) Ltd. (2013) 25 taxmann.com 12 (Bom.), JST Realty (P.) Ltd. v. DCIT (2014) 51 taxmann.com 52 (Mum. - Trib.),

8 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited Care Institute of Medical Sciences Ltd. v. DCIT (2015) 55 taxmann.com 537 (Hyd. - Trib.), ACIT v. Lloyd Manufacturing (P.) Ltd., ITA No.3874/Del/2011, order dated 11.10.2013 (Delhi Bench) and Dy. DIT v. Shri G. Raghuram & connected appeals, ITA Nos.6, 67, 68, 69, 70 & 71/Hyd/2010, order dated 30.04.2010, to contend that where the dominant object remains the letting of immovable property and the amenities merely facilitate its enjoyment, the entire receipts necessarily assume the same character as the principal letting.

9.

On the issue relating to deduction under section 24(b), the learned counsel submitted that the authorities below have failed to properly appreciate the additional evidences produced during the appellate proceedings. Referring to the fund-flow statements, sanction letters, utilisation charts and bank records placed in the paper book, it was submitted that the borrowing obtained from Kotak Bank had substantially been utilised to discharge earlier loans obtained from the directors, which themselves had been utilised for acquisition of the commercial property. It was argued that the documentary trail clearly establishes the nexus contemplated under section 24(b) and that the learned CIT(A), instead of examining such evidence, proceeded to question the commercial necessity of refinancing itself. Without prejudice, it was further submitted that even if the receipts relating to amenities and furniture & fixtures were to be assessed under

9 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited the head “Income from Other Sources”, the assessee would nevertheless be entitled to deduction of all expenditure directly relatable thereto under section 57 of the Act.

10.

Per contra, the learned Departmental Representative supported the reasoning contained in the assessment orders as well as the impugned appellate orders. According to the Revenue, the separate agreements executed by the assessee, coupled with separate consideration attributable to the amenities and furniture & fixtures, unmistakably establish that such receipts arise from sources distinct from the ownership of the building. It was submitted that the learned CIT(A) has rightly appreciated the legal position while re- characterising the receipts under the residuary head of income. So far as the claim under section 24(b) is concerned, it was contended that the assessee had failed to establish an unbroken nexus between the borrowed capital and acquisition of the property and, therefore, the authorities below were justified in sustaining the disallowance.

11.

We have carefully considered the rival submissions, examined the assessment records, the impugned appellate orders, the agreements executed between the assessee and its tenants, the additional documentary evidence placed in the paper books and the judicial authorities relied upon by both sides. From the rival contentions advanced before us, it

10 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited emerges that the controversy essentially centres around two broad questions. The first, and the more fundamental issue, concerns the true legal character of the receipts arising under the Amenities Agreement and the Furniture & Fixtures Agreement and whether such receipts can be separated from the principal letting of the commercial premises so as to be assessed under the head “Income from Other Sources”, or whether they constitute an inseparable component of a composite letting assessable under the head “Income from House Property.” The second issue relates to the allowability of deduction under section 24(b) in respect of the borrowed capital utilised for acquisition of the property and the consequential alternative claim under section 57. Since the determination of the first issue necessarily depends upon the statutory framework, the contractual stipulations and the settled judicial principles governing composite letting, we shall first examine those aspects before adverting to the remaining grounds of appeal.

12.

Having given our thoughtful consideration to the rival submissions and having carefully examined the assessment order, the impugned appellate order, the contractual documents executed between the assessee and its licensees, the additional evidences forming part of the paper book and the judicial authorities relied upon by both the parties, we find that the controversy before us lies in a narrow but

11 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited significant compass. The enhancement made by the learned CIT(A.) fundamentally rests upon the premise that since the assessee has executed separate agreements in respect of the office premises, amenities and furniture & fixtures and has separately quantified the consideration payable under each agreement, the receipts attributable to the latter two agreements necessarily lose their character as rental income and become independently assessable under the head “Income from Other Sources”. In our considered opinion, the correctness of such an approach cannot be examined merely from the form of documentation adopted by the parties. The enquiry necessarily has to commence with the statutory framework governing the respective heads of income, thereafter proceeding to an examination of the contractual obligations undertaken by the parties and finally testing the conclusions against the principles consistently laid down by the Hon’ble Supreme Court, the jurisdictional High Court and the coordinate Benches of the Tribunal.

13.

Section 22 of the Act brings to charge the annual value of buildings and lands appurtenant thereto owned by the assessee under the head “Income from House Property”. The charging provision does not contemplate taxation merely of the bare walls of a building divorced from those facilities which ordinarily constitute an integral part of its beneficial enjoyment. Once the receipt is found to arise from ownership

12 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited and letting of the property, section 24 provides the deductions statutorily available therefrom. Section 56, on the other hand, is only a residuary charging provision intended to operate where the receipt is incapable of being brought to tax under any of the specific heads enumerated under section 14. Therefore, before invoking section 56, the Revenue must first demonstrate that the receipt in question is incapable of falling within section 22. It is only after such a conclusion is reached that the consequences flowing under section 57 would arise. Thus, the determination of the correct head of income constitutes the foundation upon which the entire controversy relating to deductions under sections 24 and 57 necessarily rests.

14.

We have, therefore, examined the contractual arrangement in its entirety instead of reading each agreement in isolation. The Leave and Licence Agreement constitutes the principal agreement under which the assessee granted the licensee the right to occupy the commercial premises. Simultaneously, the Amenities Agreement and the Furniture & Fixtures Agreement were executed between the very same parties in respect of the very same premises and for the identical tenure. Significantly, the Amenities Agreement itself records that it is supplemental to and forms an integral part of the Leave and Licence Agreement and that the provisions of the principal agreement shall apply thereto mutatis mutandis.

13 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited Equally significant is the stipulation that the Amenities Agreement is co-terminus with the Leave and Licence Agreement and shall automatically come to an end upon termination of the principal licence. The Furniture & Fixtures Agreement contains an identical stipulation making its existence wholly dependent upon the subsistence of the Leave and Licence Agreement. Thus, the contractual documents themselves reveal that the ancillary agreements neither create nor recognise any independent commercial relationship between the parties. Their existence is entirely derivative of and dependent upon the principal licence.

15.

The nature of the facilities covered by the ancillary agreements also assumes considerable importance. The amenities consist of central air-conditioning system, AHU rooms, BTU metering arrangement, diesel generator, electrical infrastructure, lift lobbies, finished washrooms, parking facilities and allied infrastructure attached to the commercial building. Likewise, the furniture & fixtures comprise permanently fixed partitions, cabins, conference rooms, server rooms, workstations, pantry structures, electrical fittings and similar fit-outs embedded in the premises. These are not movable commercial assets capable of independent exploitation in the ordinary course of business. They merely render the office premises functional and commercially usable. Their utility is inseparable from the occupation of the

14 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited premises itself. No material has been brought on record by the Revenue to demonstrate that these facilities were ever intended to be commercially exploited independently of the building or that any person could have enjoyed them without simultaneously occupying the licensed premises. The factual matrix, therefore, unmistakably indicates that the building, amenities and fixtures together constituted one integrated commercial unit.

16.

In our considered view, the learned CIT(A.) has attached decisive significance to the existence of separate agreements while overlooking the legal effect of the contractual clauses themselves. Commercial transactions are often documented through more than one agreement to facilitate accounting, financing, stamp duty considerations or commercial convenience. Such drafting methodology by itself neither fragments one transaction into several independent transactions nor alters its essential legal character. What assumes significance is the intention gathered from the agreements read as a whole. Where every ancillary agreement expressly declares itself to be supplemental to, inseparable from and co-terminus with the principal agreement, the parties themselves have negatived the possibility of any independent letting. Consequently, the mere segregation of consideration under separate agreements cannot be elevated

15 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited into a determinative factor for deciding the head under which the receipts are chargeable.

17.

The aforesaid approach also stands fortified by the settled legal position. In Sultan Brothers (P.) Ltd. v. CIT (1964) 51 ITR 353 (SC), the Hon’ble Supreme Court explained that the decisive enquiry is whether the letting of the building and the letting of the accompanying assets constitute one inseparable transaction. Their Lordships held that if one would not have been let without the other and the intention of the parties was to create one integrated letting, the transaction must be examined as a composite whole. The emphasis, therefore, is not upon the number of agreements or the manner in which the consideration is apportioned, but upon the commercial reality emerging from the contractual arrangement itself.

18.

The same principle was reiterated by the Hon’ble Supreme Court in Shambhu Investment (P.) Ltd. v. CIT (2003) 263 ITR 143 (SC), wherein the Court held that the real test is the dominant intention underlying the transaction. If the primary object of the assessee is exploitation of the immovable property by way of letting and the accompanying facilities merely facilitate such enjoyment, the receipts ordinarily retain the character of income from house property notwithstanding the fact that certain services or facilities accompany the occupation of the premises. The ratio of the aforesaid

16 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited decision, therefore, does not support an artificial dissection of one integrated commercial arrangement merely because certain ancillary facilities are separately identified.

19.

The jurisdictional High Court has consistently adopted the same approach. In CIT v. Bhaktawar Construction (P.) Ltd. (1986) 162 ITR 452 (Bom.), the Hon’ble Bombay High Court recognised that facilities provided as an incident of occupation of the premises do not alter the essential character of the rental receipts. Likewise, in CIT v. J.K. Investors (Bombay) Ltd. (2013) 25 taxmann.com 12 (Bom.), the Hon’ble Bombay High Court held that where the dominant intention remains letting of immovable property and the facilities provided are merely incidental thereto, the receipts continue to be assessable under the head “Income from House Property”. These decisions, emanating from the jurisdictional High Court, squarely govern the controversy before us.

20.

Similar principles have also been consistently applied by the coordinate Benches. In JST Realty (P.) Ltd. v. DCIT (2014) 51 taxmann.com 52 (Mum.-Trib.), the Tribunal held that the receipts arising from facilities forming an integral part of the premises cannot be divorced from the principal letting. In Care Institute of Medical Sciences Ltd. v. DCIT (2015) 55 taxmann.com 537 (Hyd.-Trib.), the Hyderabad Bench

17 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited observed that furniture, fixtures and infrastructural facilities accompanying the premises merely facilitate its beneficial enjoyment and do not create an independent source of income. Likewise, in ACIT v. Lloyd Manufacturing (P.) Ltd., ITA No.3874/Del/2011, order dated 11.10.2013, and Dy. DIT v. Shri G. Raghuram & connected appeals, ITA Nos.6, 67, 68, 69, 70 & 71/Hyd/2010, order dated 30.04.2010, it was held that execution of multiple agreements in respect of the same premises does not alter the true character of a composite letting where the ancillary facilities are incapable of independent enjoyment.

21.

Applying the aforesaid statutory provisions and judicial principles to the facts of the present case, we find ourselves unable to concur with the reasoning adopted by the learned CIT(A.). The enhancement proceeds almost exclusively upon the existence of separate agreements without adequately appreciating that each of those agreements expressly incorporates the principal Leave and Licence Agreement, declares itself to be supplemental thereto and makes its own continuance dependent upon the subsistence of the principal licence. The contractual arrangement, therefore, has to be read as one composite document reflecting one composite commercial understanding. The amenities and furniture & fixtures neither possess an independent source of income nor can they be commercially enjoyed independent of the

18 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited occupation of the licensed premises. Their commercial identity is wholly subsumed in the letting of the building itself. Once these foundational facts are appreciated, the conclusion becomes inescapable that the receipts arising under the ancillary agreements necessarily partake the same legal character as the receipts arising under the principal Leave and Licence Agreement.

22.

We accordingly hold that the learned CIT(A.) was not justified in artificially segregating the receipts arising from the Amenities Agreement and the Furniture & Fixtures Agreement and directing their assessment under the head “Income from Other Sources”. The enhancement proceeds upon an erroneous appreciation of both the contractual framework and the settled legal position governing composite letting. The receipts arising under all the agreements constitute one indivisible stream of income derived from ownership and letting of the commercial premises and are, therefore, assessable under the head “Income from House Property”. The enhancement made by the learned CIT(A.) is, therefore, set aside. The consequential issues flowing from this conclusion, together with the assessee’s claim under section 24(b) and the remaining grounds of appeal, shall now be considered.

19 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited 23. Having held that the receipts arising under the Amenities Agreement and the Furniture & Fixtures Agreement constitute an integral and inseparable component of the composite letting of the commercial premises and are assessable under the head “Income from House Property”, the consequential denial of deduction under section 24(a) by the learned CIT(A.) cannot survive. Once the character of the receipts is determined under section 22 of the Act, the deductions statutorily provided under section 24 necessarily follow as a matter of legal consequence and cannot be selectively denied by artificially segregating a part of the rental receipts. The enhancement made by the learned CIT(A.) thus not only proceeds on an incorrect appreciation of the contractual arrangement but also defeats the statutory scheme contained in sections 22 and 24 of the Act. We, therefore, direct the Assessing Officer to assess the receipts arising under the Leave and Licence Agreement, the Amenities Agreement and the Furniture & Fixtures Agreement under the head “Income from House Property” and allow the consequential deduction admissible under section 24(a) in accordance with law.

24.

We shall now deal with the assessee’s claim under section 24(b). The disallowance made by the Assessing Officer proceeds principally on the ground that the assessee failed to establish the nexus between the borrowed capital and

20 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited acquisition of the property. During the appellate proceedings, however, the assessee furnished comprehensive additional evidence comprising sanction letters issued by Kotak Bank, bank statements, ledger accounts, fund-flow statements and utilisation charts tracing the movement of funds from the subsequent borrowing to the discharge of the earlier borrowings obtained from the directors and, ultimately, to the acquisition of the commercial property. The written submissions also quantify the utilisation and demonstrate that out of the borrowing of Rs.9 crores obtained from Kotak Bank, an amount of approximately Rs.8.70 crores stood directly relatable to acquisition of the property, with the corresponding claim under section 24(b) worked out at Rs.74,07,467/- as an alternative computation. These documentary evidences have neither been found to be fabricated nor inherently unreliable. The learned CIT(A.), however, instead of undertaking an examination of the documentary trail furnished by the assessee, proceeded substantially on the footing that the assessee had not satisfactorily established the nexus and also questioned the commercial rationale for refinancing the earlier borrowing.

25.

In our considered opinion, the aforesaid approach is not in consonance with the scope of section 24(b). The provision merely requires that the capital borrowed should be for acquisition, construction, repair, renewal or reconstruction of

21 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited the property. The Act does not mandate that the original borrowing alone must continue throughout the life of the asset, nor does it prohibit refinancing of an earlier eligible borrowing. If the subsequent borrowing merely substitutes an earlier borrowing which itself had been utilised for acquisition of the property, the character of the borrowing does not undergo any transformation merely because one lender stands substituted by another. The documentary evidence placed before us demonstrates a continuous chain linking the borrowed funds with acquisition of the property. Neither the Assessing Officer nor the learned CIT(A.) has brought any positive material on record to establish diversion of the borrowed funds towards any non-qualifying purpose. On the contrary, the evidentiary material produced by the assessee substantially corroborates the utilisation claimed by it. Accordingly, the assessee’s entitlement to deduction under section 24(b) cannot be denied merely because the borrowing was subsequently refinanced. The Assessing Officer is, therefore, directed to allow the deduction claimed under section 24(b). However, if any minor variation in the quantum survives purely on account of arithmetical verification of the utilisation statement already forming part of the record, the Assessing Officer shall confine himself only to such limited verification without reopening the legal entitlement which stands concluded by this order.

22 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited 26. So far as the disallowance of maintenance expenditure and the consequential disallowance of the related interest component are concerned, we find that these issues are intrinsically connected with the principal controversy relating to the head under which the receipts are assessable. Once the receipts are held to be assessable under the head “Income from House Property” and the statutory deductions available thereunder are restored, the consequential computation requires suitable modification. The Assessing Officer shall accordingly recompute the income under the head “Income from House Property” in conformity with the findings recorded hereinabove and grant all consequential reliefs arising therefrom. The assessee’s alternative plea seeking deduction under section 57 was advanced only without prejudice to the principal contention. Since we have accepted the principal contention and held that the receipts are assessable under the head “Income from House Property”, the alternative claim under section 57 does not survive for adjudication and is rendered purely academic.

27.

Before concluding, we consider it appropriate to observe that the enhancement made by the learned CIT(A.) appears to have proceeded primarily upon the existence of separate contractual documents rather than upon the true legal effect flowing from those documents. Tax liability cannot be determined merely on the basis of the drafting format adopted

23 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited by commercial parties. Particularly in commercial leasing transactions, separate agreements relating to amenities, infrastructure or fixtures are frequently executed for reasons of accounting convenience, commercial negotiation or stamp duty considerations. Such documentation, by itself, neither fragments a single composite transaction into multiple independent transactions nor creates separate taxable sources where none otherwise exist. The true test continues to be the intention of the parties gathered from the agreements read as a whole and the commercial substance of the arrangement. In the present case, the contractual clauses unequivocally establish that the ancillary agreements derive their existence entirely from the principal Leave and Licence Agreement, are incapable of independent survival and merely facilitate beneficial enjoyment of the licensed premises. Consequently, the receipts arising therefrom necessarily partake the same character as the rental receipts from the building itself.

28.

The judicial authorities relied upon by the learned counsel uniformly recognise that while determining the correct head of income, the Court is required to ascertain the real substance of the transaction and the dominant intention of the parties rather than be guided merely by the form in which the contractual documents are structured. They consistently hold that where the amenities, fixtures and other facilities are

24 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited inseparably connected with the occupation and enjoyment of the immovable property and are incapable of independent commercial exploitation, the entire receipts retain the same character as the principal letting of the property. Applying the aforesaid well-settled principles to the contractual framework before us, we are satisfied that the amenities and furniture & fixtures provided by the assessee merely facilitate effective enjoyment of the licensed premises and do not constitute independent income-generating assets. Consequently, the enhancement made by the learned CIT(A.) by bifurcating the composite receipts and assessing a part thereof under the head “Income from Other Sources” cannot be sustained and deserves to be set aside.

29.

Insofar as Assessment Year 2014-15 in ITA No.1869/Mum/2026 is concerned, both the learned representatives fairly submitted that the contractual arrangements, the additions made by the Assessing Officer, the enhancement carried out by the learned CIT(A.), the documentary evidence and the legal submissions are materially identical to those considered by us while adjudicating the appeal for Assessment Year 2013-14. No distinguishing factual or legal feature has been brought to our notice warranting a different conclusion. Accordingly, for the detailed reasons recorded while deciding ITA No.1547/Mum/2026 for Assessment Year 2013-14, we hold

25 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited that the receipts arising under the Amenities Agreement and the Furniture & Fixtures Agreement are assessable under the head “Income from House Property”, the enhancement made by the learned CIT(A.) is unsustainable, the assessee is entitled to deduction under section 24(a), and the claim under section 24(b) shall be allowed in terms of the directions contained hereinabove. Our findings recorded in the lead appeal shall, therefore, apply mutatis mutandis to Assessment Year 2014-15.

30.

Before parting, we may observe that the present appeals illustrate the distinction between the form of a commercial arrangement and its true legal substance. The Income-tax Act taxes the real character of a transaction and not merely the drafting technique adopted by the contracting parties. Once the agreements are read harmoniously and in their entirety, the inescapable conclusion is that the building, the amenities and the permanent fixtures together constituted one integrated commercial unit intended to be enjoyed as such by the licensee. The Revenue’s attempt to dissect that integrated arrangement into multiple taxable sources finds no support either from the contractual framework or from the settled principles governing composite letting. The impugned enhancement, therefore, cannot be sustained.

26 ITA No.1547 & 1869/Mum/2026 Redwood IT Services Private Limited 31. In the result, ITA No.1547/Mum/2026 for Assessment Year 2013-14 is allowed. Consequently, following the findings recorded hereinabove, ITA No.1869/Mum/2026 for Assessment Year 2014-15 is also allowed.

Order pronounced on 4th August, 2026.

Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 04/08/2026 KARUNA, sr.ps

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai

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