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Income Tax Appellate Tribunal, [ DELHI BENCH “I–1”: NEW DELHI ]
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH “I–1”: NEW DELHI ] BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (Through Video Conferencing) ITA. No. 8229/Del/2018 & 8143/Del/2019 (Assessment Years: 2014-15 & 2015-16) Microsoft India (R & D) Pvt. Ltd., DCIT, 807 – New Delhi House, Vs. Circle : 16 (2) Barakhamba Road, New Delhi. New Delhi – 110 001. PAN: AABCM6358F (Appellant) (Respondent)
Assessee by : Shri Nageswar Rao, Advocate; & Ms. Sherry Goyal, Advocate. Department by: Shri Surender Pal [CIT] – DR; Date of Hearing : 31/08/2021 Date of pronouncement : 24/09/2021
O R D E R PER PRASHANT MAHARISHI, A. M. 1. These are two appeals filed by the assessee for assessment year 2014 – 15 and 2015 – 16 involving common grounds of appeal, both the parties argued together and also stated that the facts of the case are similar for both the years, therefore, both these appeals are disposed of by this common order. 2. We first come to the appeal for assessment year 2014 – 15. This appeal is filed by the assessee against the assessment order passed by the ld Dy. Ld. Commissioner of Income Tax, Circle-16(2), New Delhi (ld AO) passed u/s 143(3) read with section 144C of the Income Tax Act, 1961 (the Act) dated 31.10.2018 for Assessment Year 2014-15 wherein, the original return of income was filed by the assessee on 29.11.2014 at Rs. 2,59,00,06,780/- assessed at Rs. 4,86,64,97,120/-. Majorly the addition of Rs. 2,24,82,44,566/- was made on account of transfer pricing adjustments. Further, the solitary dispute surviving in this appeal is that income from letting out of the property along with amenities and equipments whether it is chargeable to tax under the head income from house property or income from other sources. The assessee offered it under the head income from other sources and the learned assessing officer taxed this as income from house property.
The assessee has raised the following grounds of appeal for Ay 2014-15 and similar grounds are also for AY 2015-16:- ITA. No. 8229/Del/2018 (Assessment year: 2014-15) : “1. The order passed by the Assistant Commissioner of Income Tax, Transfer Pricing- 2(2)(2) („Ld. TPO‟), draft assessment order passed by Deputy Commissioner of Income Tax, Circle -16(2), New Delhi („Ld. AO‟) and the final assessment order passed, on the directions of the Hon‟ble Dispute Resolution Panel („Hon‟ble DRP‟), by the Ld. AO are bad in law. 2. The Ld. AO has erred on facts and in law in determining the total income of the Appellant at INR 486,64,97.120 as against a returned income of INR 252,08,79,880. Part I - Transfer Pricing Matters 3. That on facts and in law, the Hon'ble DRP and the Ld. TPO/ Ld.AO erred in making an adjustment of INR 1,67,01,69,169 and INR 57,80,75,397 to the returned income of the Appellant in respect of the international transactions pertaining to contract software development services („SWD‟ or „Impugned Transaction I‟) and provision of IT enabled services („ITES‟ or „Impugned Transaction II') respectively. 4. The transfer pricing adjustments made to the Impugned Transactions by the Ld. AO based on the order of Ld. TPO giving effect to the directions issued by the Hon‟ble DRP is bad in law inter-alia for the reason that: a) the order of the Ld. TPO is bad in law in as much as based on an invalid reference made by the Ld. AO without complying with the statutory requirements; b) the Appellant‟s AE being chargeable to tax at a higher rate in the US, there was no question of shifting of any profit from a low tax paying country to a high tax paying country. 5. That on facts and in law, the Hon‟ble DRP and the Ld. TPO/ Ld. AO have erred by not appreciating the correct functional profile of the Appellant and drawing an erroneous conclusion that the Appellant is engaged in providing high-end software services. 6. That on facts and in law, the Hon'ble DRP and the Ld. TPO/ Ld. AO have erred by not accepting the economic analysis undertaken by the Appellant in accordance w1 provisions of the Income-tax Act, 1961 („the Act‟) read with the Income Tax Rules, Rules/Rules'), and modifying the economic analysis for the determination of the arm‟s length price of Impugned Transaction I and Impugned Transaction II and holding that both the impugned transactions are not arm‟s length. 7. That on facts and in law, the Hon'ble DRP and the Ld. TPO / Ld. AO have erred by : a. Using single year data of companies to determine the arm‟s length price of the impugned transaction and disregarding the Appellant‟s claim for use of multiple year data for computing the arm‟s length price; and b. Rejecting the data used by the Appellant which was available to it at the relevant time and proceeding to use the data which was available only at the time of transfer pricing audit. 8. That on facts and in law, the Hon‟ble DRP and the Ld. TPO/ Ld. AO erred in rejecting certain comparables by applying arbitrary filters without any rationale: a. Rejection of comparable companies having turnover less than INR 865 crores and INR 20 crores from the Impugned Transaction I and Impugned Transaction II respectively. b. Rejection of companies having different financial year ending (i.e. not 31 March 2014) or if data of the company do not fall within 12 month period i.e. 01-04-2013 to 31-03-2014. Without prejudice to the other arguments, the Hon‟ble DRP and the Ld. TPO/ Ld. AO have also ignored the fact that financial data for several companies for the year ended 31 March 2014 is available in public domain. c. Rejection of companies having export sales less than 75% of the sales. Page | 2
d. Rejection of companies having employee cost less than 25% of the sales. e. Rejection of companies which have persistent losses for last two years out of three years including FY 2013-14 9. The Hon‟ble DRP and the Ld. TPO/ Ld. AO erred in facts and in law, by wrongfully rejecting certain companies and adding certain companies to the final set of comparables for the impugned transactions of the Appellant, on an adhoc basis. Thus, they have resorted to cherry picking of comparables to determine ALP for the impugned transactions. 10. Ld. TPO erred in considering only those companies having generated patents in USA or in India in the field of software R&D for Impugned Transaction I as comparables and Hon‟ble DRP has erred in upholding the same.s 11. That on facts and in law, the Hon‟ble DRP and the Ld. TPO/ Ld. AO have grossly computing the operating profitability of the comparable companies incorrectly. 12. The Hon‟ble DRP and the Ld. TPO/ Ld. AO erred in law and in facts by selecting certain companies which are earning super normal profits, as being comparable to the Appellant. 13. That on facts and in law, the Hon‟ble DRP and the Ld. TPO/Ld. AO have grossly erred by not appreciating the fact that the Appellant operates as a risk free service provider and all the risks associated with the Impugned Transactions were borne by the foreign AE and not by the Appellant, thus, the Appellant is entitled to suitable adjustments to account for differences in its risk profile vis-a-vis the comparables 14. The Hon‟ble DRP has erred in confirming that the Ld. TPO has discharged his statutory onus to establish that the conditions specified in clause (a) to (d) of Section 92C(3) of the Act have been satisfied before disregarding the ALP determined by the Appellant and proceeded to determine the ALP himself. Part II - Corporate tax matters 15. That on the facts and in law, the Ld. AO and the Hon‟ble DRP was not justified and have erred by taxing gross composite rental income of Rs.23,67,03,600 received from let out building space along with inbuilt infrastructure and other amenities under the head „Income from House Property' instead of „Income from Other Sources‟ completely disregarding the provisions of Section 56 of the Act and decisions of Hon'ble Jurisdictional High Court. a. That on the facts and in law, the Ld. AO and Hon‟ble DRP erred in not allowing proportionate tax depreciation and expenses under section ('u/s') 57 of the Act amounting to Rs.16,99,83,107. b. That on the facts and in law, the Ld. AO and Hon'ble DRP erred in applying res judicata which is not applicable in income tax proceedings and erred in not correcting mistakes made in earlier years. 16. Without prejudice to our contention that unrealized foreign exchange gain / loss should not be adjusted from the WDV of the assets as observed by the Supreme Court in the case of CIT vs Honda Siel Power Products Ltd. (312 ITR 024) and plain reading of provisions of Section 43A of the Act, the Ld. AO/Hon‟ble DRP have erred in not allowing the depreciation on unrealized foreign exchange loss on capital creditors amounting to Rs. 89,24,613 in view of the position taken by Ld. AO/ Hon‟ble DRP in the earlier years. 17. That on the facts and in law, the Ld. AO was not justified and has erred in addition of Dividend Distribution Tax („DDT‟) amounting to Rs.44,30,50,434 to the total tax payable of the Appellant, without considering the fact that such DDT liability pertains to AY 2015-16 and has been duly discharged by the Appellant in AY 2015- 16. 18. That on the facts and in law, the Ld. AO was not justified and has erred in not Page | 3
granting credit of tax deducted at source amounting toRs.3,86,54,414. 19. That on the facts and in law, the Ld. AO was not justified and has erred in levying interest under section 234A of the Act amounting to Rs. 43,30,448 even when the return of income for the AY was filed within the due date specified under section 139(1) of the Act. 20. That on the facts and in law, on disposal of this appeal material adjustment would be required in computing total income, tax, interest under section 234B of the Act. Necessary directions may please be given to the Ld. AO in this regard. 21. That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty under section 271(1)(c ) of the Act. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute, withdraw any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. ”
Ground Nos. 1 and 2 are general in nature and ground Nos. 3 to 14 our with respect to the transfer pricing adjustment . There was no argument raised on ground number 1 and 2 but it was stated that these are general in nature, therefore, same are dismissed. With respect to ground number 3 – 14 were also not pressed as assessee has reached the Advance Pricing Agreement in relation to the international transactions. Therefore, learned authorised representative seeks to withdraw the same. Accordingly, ground Nos. 3 to 14 of the appeal are dismissed. 5. Ground No. 15 relates to the rental income of Rs. 23.67 crores from letting out building space along with inbuilt infrastructure and other amenities, which is offered by the assessee as income from other sources whereas the learned assessing officer treated it as income from house property, and therefore, the assessee is aggrieved. 6. On this issue, the ld AR submitted that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee‟s own case for Assessment Year 2011-12 dated 14.06.2021. He further submitted that there is no change in the facts and circumstances and therefore, the order of the coordinate bench covers the issue in favour of the assessee. 7. The ld DR referred to the page No. 12 of order of the ld AO and submitted that the assessee has received rent receipts from its associates enterprises for last so many years but has never claimed such receipts as income from other sources and always offered for taxation Under the head income from house property. For Assessment Year 2011-12 for the first time it has claimed in revised return that the above income is required to be taxed under the head „income from other sources‟. He submitted that the assessee has been consistently disclosing the above receipts as income from house property and there is no change in the facts and circumstances of the case and therefore, the change made by the assessee is not correct. It was further stated that merely because the rent is inseparable to the letting out of building and furniture and fixtures etc, it cannot be held as income from other sources. It was further Page | 4
stated in substances the assessee has given building on rent only. He relied several judicial precedents. 8. In rejoinder, the ld AR submitted that while deciding the case of the assessee for Assessment Year 2011-12, all these decisions were considered by the coordinate bench. He further submitted that the coordinate bench has followed the decision of the Hon'ble Delhi High Court in case of Garg Dyeing and Processing Industries as well as Jay Metals. In view of this he submitted that issue is squarely covered in favour of the assessee. 9. We have carefully considered the rival contentions and perused the orders of the lower authorities. On careful analysis of the facts and circumstances, we find that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee‟s own case for Assessment Year 2011-12, wherein, on identical facts and circumstances, issue has been decided by coordinate bench and it held that income earned by the assessee form letting out of the building space and other amenities is chargeable to tax under the head „income from other sources‟. The reasons of the coordinate bench are as under:- “7. The relevant grounds for A.Y 2011-12 in ITA No. 1479/DEL/2016, which need adjudication as per the directions of the Hon'ble High Court of Delhi [supra], are as under: “20. That on the facts and in law, the Hon'ble DRP and the Ld. AO were not justified and have erred by taxing gross composite rental income of Rs. 17,22,16,198 received from let out building space alongwith inbuilt infrastructure and other amenities under the head „Income from House Property‟ instead of „Income from Other Sources‟ completely disregarding the provisions of section 56 of the Act and Hon'ble Jurisdiction High Court judgment. 20.1 That on the facts and in law, the Ld. AO be directed to tax the composite rental income of Rs. 17,22,16,198 under the head come from Other Sources‟ after allowing/considering proportionate tax depreciation and expenses u/s 57 of the Act amounting to Rs.16,29,82,109 pertaining to let out building space/inbuilt infrastructure/ other amenities as claimed in the Return of Income.” 8. It would be pertinent, at this point, to consider the decision of the Hon'ble High Court of Delhi in the case of Jay Metal Industries Pvt Ltd 84 Taxmann.com 11 wherein a similar issue was considered and decided. 9. The question involved in this case reads as under: “The question of law that is sought to be urged is whether the ITAT was right in confirming the order of the Assessing Officer ('AO') and reversing the order of the Commissioner of Income Tax ['CIT (A)'] and holding that the income received by the Assessee from letting of the premises in question had to be assessed as 'income from other sources' under Section 56 (2) (iii) of the Act and not as 'income from house property'?” Page | 5
The Hon'ble High Court, while deciding the aforementioned question of law, observed as under: “17.1 The basic test for determining whether a lease for the letting of a building together with fixtures etc is a composite one was laid down by the Supreme Court in Sultan Bros. (P) Limited v. CIT (1964) 51 ITR 353. In the above decision, the Supreme Court was dealing with Section 12 (3) and (4) of the Indian Income Tax Act, 1922 which correspondence Section 56 of the Act. There the Assessee had constructed a building for the purpose of running a hotel and for certain ancillary purposes. With this objective, the Assessee equipped with the building, furniture and fixtures. The lease deed in that case provided for a monthly rent of Rs. 5,950 for the building and hire of Rs. 5,000 for the furniture and fixtures. 17.2 The Department disallowed the claim of the Assessee stating that the entire sum received under the lease was to be treated as 'income from other sources'. While the rent receipt for the building was treated as 'income from house property', the rent received on account of furniture and fixtures alone was held to be admissible under 'income from other sources'. 17.3 However, the Supreme Court accepted the Assessee's claim by holding that 'when a building, plant, machinery or furniture are inseparably let, the Act contemplates the rent for the building as a residuary head of income'. The Court observed as under: "It seems to us that the inseparability referred to in sub-Section (4) is an inseparability arising from the intention of the parties. That intention may be ascertained by framing the following questions: Was it the intention in making the lease - and it matters tot whether there is one lease or two, that is separate leases in respect of the furniture and the building - that the two should be enjoyed together? Was it the intention to make the letting of the two practically one letting? Would one have been let alone and a lease of it accepted without the other? If the answers to the first two questions are in the affirmative, and the last in the negative then, in our view, it has to be held that it was intended that the lettings would be inseparable. This view also provides a justification for taking the case of the income from the lease of a building out of Section 9 and putting it under Section 12 as a residuary head of income. It then becomes a new kind of income, not covered by Section 9, that is income not from the ownership of the building alone but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it." 18. Section 56 (2) (iii) of the Act reads as under: 56. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely: ... (iii) where an Assessee lets on hire machinery, plant or machinery belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head "Profits and gains of business or profession." Page | 6
In the present case, the preamble clauses clause of the lease deed, extracted hereinbefore, make it plain that what was given on rent to the Lessee was not just the basement, ground floor, first floor and second floor of the building but also the fixtures, furniture which included the air- conditioning and power backup through a 200 KVA diesel generator set. In particular, Clause 2 (d) makes it clear that the Lessor had to hand over the office "with furniture & fixture, 200 KIVA diesel generator and adequate air conditioners to the Lessee in good working condition." 20. There can be no manner of doubt that the Lease Deed was a composite one and the rental receipts thereunder answered the description in Section 56 (2) (iii) of the Act.” 11. In light of the aforementioned findings of the Hon'ble High Court, we will now consider the facts of the case in hand. 12. During the course of scrutiny assessment proceedings, vide show cause notice dated 17.12.2014, the assessee was asked to show causeas to why income offered to tax as “Income from house property” should not be treated as “Rental income”. 13. The assessee filed detailed submissions vide letter dated 26.02.2014 explaining the contents of the lease agreement and pointing out that it is a composite agreement and the amount received by the assessee is not simply for the let out of building simplicitor i.e. only towards the letting out of the building space but the same is composite rent received towards composite/inseparable letting of building, furniture and fixtures, equipments air conditioners, etc. It was explained that it is a case of renting of the premises with a host of facilities by way of infrastructure/amenities and maintenance. 14. Strong reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Sultan Brothers Pvt Ltd vs CIT 51 ITR 353. It was brought to the notice of the Assessing Officer that relying on the judgement of the Hon'ble Supreme Court [supra], the Hon'ble Jurisdictional High Court in the case of Garg Dyeing & Processing Industries in ITA No. 319 of 2012 has held that where the rent is received towards the composite let out i.e. letting out of building, furniture, fixtures, fittings, air conditioning plants etc, the same shall be taxable as “Income from other sources”. 15. After considering these submissions and judicial decisions relied upon by the assessee, the Assessing Officer observed as under: “4.2 The above submission of the assessee has been perused alongwith the details and case laws submitted by it. It is an accepted fact that the assessee has not claimed the above treatment of income received from letting of the buildings either in the original return of income and has made the claim in the revised return of income. In the previous years the assessee has made this claim during assessment proceedings only, which has been duly rejected because of the below stated reason: - Assessee is receiving the rent receipts from its Associated Enterprise/ related party since last so many financial years and the assessee has never claimed the above receipts as 'income from other sources'. - There is plethora of judgments on the 'consistency'. Since, the assessee has been consistently disclosing the above receipts as 'income from house Page | 7
property' which were accepted by the Department, hence, there is absolutely no justification for changing the treatment of above receipts especially considering the fact that the assessee is providing the same building premise and other amenities to the same lessee since last so many years. - The submission of the assessee that the above receipts have been disclosed as 'income from house property‟ due to inadvertence is highly misleading. The assessee has disclosed the above receipts as 'income from house property‟ in the original return of income as well as in the revised return of income. It is evident that is an afterthought to take benefit of the recent decision of jurisdictional High Court given in the case of GARG DYEING & PROCESSING INDUSTRIES on 22.11.2012. It is strange that the assessee realized that the above rent is a 'composite rent' only after the above judgement. - The submission of the assessee that the receipts of Rs. 17,22,16,198/- from Microsoft Global Services Center (India) Private Limited are composite rent received towards inseparable letting of building, furniture and fixtures, equipments, air conditioners etc. is also factually incorrect. - 4.3 In the current year also the facts of the case are similar to that of the earlier years. The cases relied upon by the assessee are also factually different from the case of the assessee. The Hon'ble Supreme Court in the case of Sultan Brothers (relied upon by the assessee) has held that few tests are required to be conducted to ascertain whether the rent has been received towards inseparable letting of building, furniture and fixtures etc. The relevant extract of the above judgment is reproduced below:- “It seems to us that the inseparability referred to in subsection (4) is an inseparability arising from the intention of the parties. That intention may be ascertained by framing the following questions: Was it the intention in making the lease—and it matters not whether there is one lease or two, that is, separate leases in respect of the furniture and the building—that the two should be enjoyed together? Was it the intention to make the letting of the two practically one letting? Would one have been let alone and a lease of it accepted without the other? If the answers to the first two questions are in the affirmative, and the last in the gative then, in our view, it has to be held that it was intended it the lettings would be inseparable. " Few relevant provisions of the Lease Agreement are reproduced below to understand the nature of agreement: - > The LESSEE shall pay to the LESSOR monthly rent of Rs.29,93,050/- (Rupees Twenty Nine Lakhs Ninety Three Thousand Fifty Only) calculated at the rate of Rs.50/- per square feet for the super built up area of 59,861 square feet of the LEASED PREMISES (hereinafter referred to as "Rent"). The rent shall be payable monthly in advance subject to deduction of applicable taxes at source as is required by law, starting from April 2010. The rent payable in arrear shall be payable by cheque/ DD/ Pay Order by the Tenth (1&h) of each month of the Lease Term. No rent shall be payable for unused period in any month.
> The LESSOR hereby agrees and confirms that the LESSEE shall have the right to modify, renovate and refurbish the LEASED PREMISES at its own cost and expense and shall also have the right to change flooring, wall finish, install partitions, airconditioning unit or units, other electrical or electronic appliances and the like as may be required by the LESSEE. The LESSEE shall also be entitled to carry out all modifications and alterations in the LEASED PREMISES, wherever and whenever required, to install any equipment for its use including wiring and electrical fittings as may be required by the LESSEE and for such purpose to do ducting and the like. The LESSEE shall maintain the permanent structure, facade and aesthetics of the BUILDING and the inbuilt infrastructural facilities. The LESSEE may employ contractors selected by the LESSEE. > The LESSOR has agreed that during the term of this LEASE DEED, including the extended term, the LESSOR shall, without any extra or additional cost and charges, allocate a minimum space of fifty (50) sq. ft. at the roof top/terrace of the BUILDING ("Antenna Site"), to the LESSEE for installation of its own dish or other microwave equipment/ V Sat Link equipment/ tower/ dish antennae and/ or satellite, etc. of such size and dimension as may be required by the LESSEE. The LESSOR shall be liable for all cost, charges and taxes, including Municipal Coloration taxes for installation of such dish or other microwave equipment, V Sat Link equipment, tower, dish antennae, and, or, satellite the LESSEE. > The LESSOR has agreed to provide the following services to the LESSEE in the LEASED PREMISES during both the Initial Term and the Extended Term: i) Power back up - The LESSOR shall provide 50 KW diesel generator set power back up for the LEASED PREMISES at no additional cost. The running cost for the said 50 KW diesel generator set, during the Initial Term and Extended term, shall be payable as mutually agreed upon by the Parties. (ii) Air conditioning - The LESSOR shall provide 25 TR airconditioning for the LEASES Premises at no additional cost. The LESSOR will ensure an ambient temperature of +/-1 degree from 23 degree Celsius. Now we are in a position to conduct the tests suggested by the Hon‟ble Apex Court. > Was it the intention to make the letting of the two practically one letting? No, as the assessee has computed the rent only on the basis of the space and not on the basis of the amenities provided by it. > Whether the assessee would have given the lease to its related party if the related party had not agreed for the furniture & fixtures etc.? Yes, as the above transaction is not between independent parties and the assessee would have given its unutilized space to one of its related party for proper utilization of commercial space.
> Why separate leases were not provided? Because, the assessee has no intention for charging for the amenities provided by it. Thus, it is evident on the basis of the above tests, recommended by the Hon'ble Apex Court, that the assessee is not receiving 'composite rent'. It is extremely pertinent to mention that the above lease deed is between two related parties and not between two independent parties. From the bare perusal of the above provisions of lease deed it is evident that the rent is primarily for the space as the rent has been computed @ Rs.50 per square feet. The fact that the assessee is charging monthly rent at such a paltry amount despite the fact that the property is located at a premium locality at Hyderabad clearly proves that the above transaction is not at arm's length. If cost of maintenance of the above property is taken into account then the rate of rent will become abysmally low. Hence, the assessee is apparently not charging for the amenities being provided by it from its related party. 4.4 In view of the above facts, the claim of deduction of the above amount is rejected. Additions of Rs. 10,72,58,335/- i.e. being the difference of income claimed as 'Income from house property' and income claimed as 'income from other sources', (Rs.11,64,92,424/- - Rs.92,34,089/-) is being made to the computation of income. 4.5 Without prejudice to the above discussion, it is further held that the claim of the assessee regarding other expenses of Rs. 16,29,82,109/- u/s 57(iii) of the Income- tax Act is rejected as the assessee has neither furnished any evidence regarding its allow ability u/s 57(iii) nor the assessee has charged the above expenses from the lessee. The income from house property is assessed at Rs. 17,22,16,198/- as disclosed by the assessee in its original return of income.” 16. We have given thoughtful consideration to the findings of the Assessing Officer but we do not concur with the findings. There is no dispute that the lease agreement is a composite lease agreement which included the inbuilt infrastructural facilities provided which included central air conditions with ducting, DG power supply, net work equipments, access control equipments, electrical equipments, VAVs and controllers, smoke detectors and occupancy sensors. 17. The agreement also included other amenities, namely installation of dish antenna/satellite, parking space, repair and maintenance which includes repairs, interior or exterior, electrical and plumbing work, repair and maintenance of common and open areas and facilities provided at the building like compounds, gardens, passage, elevators, lifts, terrace, DG sets etc and also 100% power backup and centralized air conditioning. 18. In our considered opinion, for similar set of amenities/facilities, the Hon'ble Supreme Court in the case of Sultan Brothers [supra] has laid down certain tests which have been followed by the Hon'ble High Court of Delhi in the case of Garg Dyeing & Processing Industries [supra] and later on in the case of Jay Metals [supra]. We are of the considered view that in light of the facts discussed hereinabove, there can be no doubt that lease deed was composite one and rental receipt thereunder answered the description u/s 56(2)(iii) of the Income tax Act, 1961.
We find that the main thrust in rejecting the claim of the assessee by the Assessing Officer is that it is a related party transaction. The undisputed fact is that the assessment was subject to transfer pricing assessment for determination of ALP with AE and no such determination has been done by the TPO. We further find that though the Assessing Officer has discarded the claim of the assessee stating that it is a related party transaction, but the provisions of section 40A(2) of the Act have never been invoked. 20. In fact, the Assessing Officer himself has extracted the relevant clauses of lease deed himself showing that the lessor has agreed to provide services which have been enumerated hereinabove elsewhere. Therefore, considering the facts of the case in hand, we find that letting is not merely of the building but a composite let out of both the building as well as equipment/furniture etc and thereby section 56(2)(iii) of the Act is attracted. 21. Respectfully following the ratio laiddown by the Hon'ble Supreme Court in the case of Sultan Brothers [supra] and the Hon'ble High Court of Delhi in the case of Jay Metals [supra], we direct the Assessing Officer to treat the income from letting out of the building as income under the head “Income from other sources”. 10. We do not find any reason to deviate from the same. Therefore, respectfully following the decision of the coordinate bench, as stated above , we decide ground No. 15 in favor of the assessee holding that such composite rental income of Rs. 23.67 crores is chargeable to tax in the hands of the assessee under the head „Income from other sources‟. 11. Ground No. 16 to ground No. 21 were not pressed and therefore, same were dismissed. 12. In the result, appeal of the assessee is partly allowed. ITA. No. 8143/Del/2019 (Assessment year : 2015-16) : 13. The appeal for Assessment Year 2015-16 filed by the assessee is also on similar line. Ground Nos. 1 and 2 are general in nature and therefore, same are dismissed. 14. Ground Nos. 3 to 13 are Transfer pricing issue which have been settled in advancing pricing agreement entered into by the assessee and applicable for this year therefore, same were not pressed and hence dismissed. Ground Nos. 15 to 19 were not pressed and therefore, same are also dismissed. 15. The only ground left with us is only Ground No. 14 wherein, the identical issue is involved, that whether the rent received of Rs. 23.67 crores from letting out building space along with inbuilt infrastructure and other amenities is chargeable to tax under the head „income from house property or income from other sources‟ . As per statement of both the parties, facts relating to this issue are identical to the facts decided in case of the assessee for Assessment Year 2011-12 and their argument are also similar. 16. We have carefully considered the rival contentions and perused the orders of the lower authorities. This ground is identical to ground No. 14 in case of the appeal of the assessee for Assessment Year 2014-15 wherein, we have held that such income is chargeable to tax under
the head „income from other sources‟. Respectfully following the decisions of the coordinate bench in assessee‟s own case for Assessment Year 2011-12 for this year also, and for similar reasons for this year also, we hold that such receipts against the letting out of the property along with amenities and other assets is chargeable to tax under the head „income from other sources‟. Accordingly, ground No. 14 of the appeal of the assessee is allowed. 17. In the result, appeal of the assessee for Assessment Year 2014-15 and 2015-16 is partly allowed. Order pronounced in the open court on 24/09/2021.
-Sd/- -Sd/- ( KUL BHARAT ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 24/09/2021. *AK KEOT* Copy forwarded to 1. Appellant; 2. Respondent 3. CIT 4. CIT (Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, New Delhi