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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI R.K. PANDA & MS. SUCHITRA KAMBLE
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI (Through Video Conferencing) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 6515/Del/2018 Asstt. Year 2015-16 ACIT Vs. Thatai Consultancy Services LLP Cent. Circle 29(1) B-16, Okhla Industrial Area, New Delhi. Phase-II, New Delhi – 110 020 PAN AAJFT1317Q (Appellant) (Respondent)
CO. No. 221/Del/2018 Asstt. Year 2015-16 Thatai Consultancy Services LLP Vs. ACIT B-16, Okhla Industrial Area, Cent. Circle 3 Phase-II, New Delhi New Delhi – 110 020 PAN AAJFT1317Q (Appellant) (Respondent
Department by: Shri Bhopal Singh, Sr. DR Assessee by : Shri U.N. Marwah, CA Date of Hearing 03/11/2021 Date of 10/11/2021 pronouncement
ITA No. 6515/Del/2018 CO No. 221/Del/2018 O R D E R PER SUCHITRA KAMBLE,JM
This appeal is filed against the order dated 27.7.2018 passed by the CIT (A)-10, New Delhi by the revenue for Assessment Year 2015-16.
The grounds of appeal are as under :-
“1. “On the facts and circumstances of the case, the Ld. CIT(A) has erred in law on facts in not appreciating the findings of the AO during the course of the assessment proceeding. 2. The Ld. CIT(A) erred in not appreciating the provisions of section 56(2) (iii) of the I.T. Act, 1961 and in allowing appeal of the assessee by deleting addition of Rs. 6,50,24,511/- (Rs. 2,44,02,060/- + 4,06,22,450/- interest). 3. The Ld. CIT(A) erred in not appreciating the finding of the AO during the course of assessment proceedings that assessee grossly failed to furnish cogent documentary evidences to show that any purchases of material were procured from these parties. 4. “The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal. :
The assessee purchased a commercial property bearing unit no. 1503, The Capital’, Plot No. C-70, G Block, Bandra Kurla Complex at Bandra (East), Mumbai from the promoter M/s Wadhwa Group Housing Pvt. Ltd. on 09/05/2014. Before
ITA No. 6515/Del/2018 CO No. 221/Del/2018 purchase, the said property was rented out by Wadhwa Group Housing Pvt. Ltd to Roche Products (India) P. Ltd. vide leave and license agreement dated 06/01/2014. The property continued to be let out to Roche Products (India) P. Ltd even after it was purchased by the assessee. The assessee signed Deed of Adherence with M/s Wadhwa Group Housing Pvt. Ltd. (hereinafter referred to as the WHPL’) and the tenant Roche Products (India) P. Ltd. (hereinafter referred to as the ‘RPIPL’) dated 09/05/2014 agreeing to the terms of Leave and License Agreement with certain modifications. During the year under consideration, gross rental income of Rs.8,13,40,200/- was received by the assessee and after deduction of interest expenses of Rs.4,06,22,451/- on loan taken and standard deduction u/s 24 at Rs.2,44,02,060/-, income under house property at Rs. 1,63,15,690/- was shown in the return of income. During the course of assessment proceedings, the AO came to the conclusion that the rental income was of the nature of the composite rent and he invoked the provisions of section 56(2)(iii) of the Act relying on the decision of the Hon’ble Supreme Court in the case of Sultan Brothers P. Ltd. v CIT (1964) 51 ITR 353 (SC). The AO inter alia referred to clause (i) of para 5.2.1 of Leave and License
ITA No. 6515/Del/2018 CO No. 221/Del/2018 agreement dated 06/01/2014 in respect of common area maintenance charges and clause (ii) of para 5.2.1 in respect of electricity charges and other utilities. The AO disallowed the claim of deduction of Rs.2,44,02,060/- claimed u/s 24 and interest expenses of Rs.4,06,22,451/-.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A) and the CIT(A) partly allowed the appeal of the assessee.
The Ld. DR submitted that the CIT(A) erred in not appreciating the provisions of section 56(2)(iii) of the Income Tax Act, 1961. The Ld. DR submitted that the AO has rightly made addition of Rs. 6,50,24,511/- (Rs. 2,44,02,060/- + 4,06,22,450/- interest). The Ld. DR further submitted that the CIT(A) has not taken cognizance of the finding of the Assessing Officer that the assessee has grossly failed to furnish cogent documentary evidences to show that any purchases of material were procured from these parties.
Ld. AR relied upon the assessment order and order of the CIT(A).
We have heard both the parties and perused all the relevant materials available on record. The CIT(A) has given a categorical 4
ITA No. 6515/Del/2018 CO No. 221/Del/2018 finding that the assessee purchased bare office space in bare shell condition and as per the Leave and Licence Agreement/Deed of Adherence all the fit out works including furniture, fittings and fixture etc. were required to be executed by the licensee and there was no rent element in respect of furniture, fitting, fixtures etc. It is a clear case of rental income of the assesee received from letting out the house property which can be subject to tax u/s 22 of the Act. Thus the CIT(A) has rightly allowed the interest expenses and partly allowed the portion which is made as per total addition towards Rs. 6,50,24,511/-. Thus the appeal of the revenue is dismissed.
As regards the cross objections filed by the assessee, the Ld. AR submitted that the rent agreement of the property was examined and it was noticed that the total rent received was that of Rs. 8,13,40,200/-. The CIT(A) has categorically observed that all the fit out workings including furniture, fitting, fixtures etc. were required to be executed by the licensee. The observations made by the CIT(A) are in consonance with the Leave and Licence Agreement and no contrary evidence was put up before us or before any revenue authorities by the assesee. Therefore, there is
ITA No. 6515/Del/2018 CO No. 221/Del/2018 no need to interfere with the order of the CIT(A). Hence cross objection of the assesse is dismissed.
In the result, both the appeal of the revenue as well as cross objection of the assessee are dismissed.
Order pronounced in the open court in presence of both the parties on 10th November, 2021.
sd/- sd/- (R.K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 10/11/2021 Veena Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi