TMI Blog2021 (12) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee : Shri Nageswar Rao, Advocate; Ms. Sherry Goyal, Advocate. For the Department : Shri Surender Pal [CIT] DR; ORDER 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 ₹ 2,59,00,06,780/- assessed at ₹ 4,86,64,97,120/-. Majorly the addition of ₹ 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 eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the Ld. AO and the Hon ble DRP was not justified and have erred by taxing gross composite rental income of ₹ 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 ₹ 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astructure/ 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'? 10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SOR 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality 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 ₹ 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', (₹ 11,64,92,424/- - ₹ 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 ₹ 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 ₹ 17,22,16,198/- as disclosed by the assessee in its original return of income. 16. We have given thoughtful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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