TMI Blog2021 (6) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the case of Garg Dyeing Processing Industries [ 2012 (12) TMI 191 - DELHI HIGH COURT] and later on in the case of Jay Metals [ 2017 (7) TMI 618 - DELHI HIGH COURT] . 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. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he face of clear, unambiguous and express finding by Transfer Pricing Officer that It is emphasized that Transfer Pricing study was not rejected at all ? (b) Whether conclusion in impugned order classifying software development services rendered by Appellant as High end in nature for purposes of Chapter X of the Act is (a) contrary to facts and law as also material on record, (b) perverse as it does not consider all relevant material on record, selectively considers statements recorded by Respondent in the course of Advance Pricing Agreement proceedings and (c) unlawful and unsustainable in law as same arises from gross misinterpretation of facts, law and agreement between parties? (c) Whether impugned order, to the extent it finally upholds rejection of several companies as being not comparable to Appellant for determination of arm s length price of international transaction, is bad in law, unjust and unsustainable as interalia such conclusion arises from total misinterpretation of facts and law including impact and relevance of patents registration by and in the name of Overseas Associated enterprise, as also relevance and impact of research development activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the jurisdictional high court was available for deciding the issue urged by the Assessee, the Tribunal ought to have arrived at a conclusion rather than remanding the matter back to the Assessing Officer. 13. Accordingly, we partly allow the appeal of the Assessee on question (d) and direct the learned ITAT to take up and decide the corporate tax grounds urged by the Assessee in its appeals. Thus, the appeal of the Assessee is restored to the file of the ITAT for AY 2011-12 to the limited extent , noted above. 5. Similarly, same directions were given by the Hon'ble High Court in ITA No. 652 of 2019 and 710 of 2019 for A.Y 2012-13. 6. Representatives of both the sides fairly conceded that the under lying facts in the impugned issues are identical in both the A.Ys under consideration i.e. 2011-12 and 2012-13. Therefore, for the sake of convenience, we decided to consider the facts of A.Y 2011-12. 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 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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:- lt 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide 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 am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance 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 centralised 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. 19. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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