TMI Blog2022 (8) TMI 1502X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned disallowance which is confirmed by the Hon'ble DRP. We observe that this issue came up for consideration before the Tribunal pursuant to the directions of the Hon'ble Delhi High Court for AY 2011-12 and 2012-13. The Tribunal in its order [ 2021 (6) TMI 538 - ITAT DELHI] wherein Tribunal recorded its unequivocal finding that the lease deed under consideration was composite one and that it answered the description under section 56(2)(iii) - decided in favour of the assessee with the same directions to the AO as above. - HON'BLE JUDGES SHAMIM YAHYA, MEMBER (A) AND SAKTIJIT DEY, MEMBER (J) For the Appellant : Nageshwar Rao and Deepika Aggarwal, Advocates For the Respondents : Mahesh Shah, CIT (DR) ORDER SHAMIM YAHYA, MEMBER (A) 1. This appeal by the assessee is directed against the order of the Assessing Officer dated 30.03.2021 passed under section 143(3) r.w.s. 144C(13) r.w.s. 144C(13)/143(3A)/143(3B) of the Income-tax Act, 1961 (for short 'the Act') pursuant to the directions of the Dispute Resolution Panel (DRP). 2. The assessee has taken the following grounds of the appeal before the Tribunal:- 1. Orders passed by Transfer Pricing Officer-2(2)(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding favorable and material difference in facts and law considered in contrast to earlier years. 9. That on facts and in law, Hon'ble DRP and Ld. TPOI Ld. AO erred in rejecting certain comparables by applying arbitrary filters such as: a. Rejection of comparable companies having turnover less than INR 1,115 crores i.e. 50 percent of Appellant's turnover from software development services; b. Rejection of companies having different financial year ending (i.e. not 31 March 2016) or if data of the company do not fall within 12 month period i.e. 01-04-2015 to 31-03-2016. 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 2016 is available in public domain, c. Rejection of companies having export sales less than 75% of the sales; d. Rejection of companies having employee cost less than 25% of the operating cost; e. Selection of only those companies which have generated patents in USA or in India in the field of software R D for Impugned Transaction; f. Rejection of companies which have diminishing revenue for last three years upto and including F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation and expenses under section ('u/s') 57 of the Act amounting to Rs. 19,45,43,488. b. That on the facts and in law, the Ld. AO and Ld. DRP erred in applying res judicata which is not applicable in income tax proceedings and erred in not correcting mistakes made in earlier years, disregarding the directions of Hon'ble ITAT for AY 2012-13 i.e., without considering the judgment of Asit C Mehta (2006) 10 SOT 306 (Mum ITAT). c. That on the facts and in law, the Ld. AO and Ld. DRP erred in not finally deciding the characterisation of composite rental income considering the judgment of jurisdictional High Court in the case of Jay Metal Industries (P) Ltd. vs. CIT (2017) 396 ITR 194 (Del). 16. That on the facts and in law, the Ld. AO was not justified and has erred in not granting tax deducted at source to the extent of Rs. 1,69,948. 17. That on the facts and in law, the Ld. AO erred in levying interest u/s. 234A of the Act without considering the fact, that return of income for relevant assessment year has been furnished within due date as specified u/s. 139(1) of the Act. 18. That on the facts and in law, on disposal of this appeal, material adjustment would be requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's submissions and thereafter found that the facts are similar as in earlier years. He proceeded to reject the assessee's submission and concluded as under:- 5.4 In view of the above facts, the claim of deduction of the above amount is rejected. Addition of Rs. 12,26,86,304/- i.e. being the difference of income determined as 'income from house property' and income claimed as 'income from other sources' (Rs. 16,48,46,416/- Rs. 4,21,60,112/- as computed below is being made to the computation of income. 10. On this issue, Ld. counsel of the assessee submitted that in assessee's case for earlier years, identical issue was decided in favour of the assessee. However, Ld. DR for the Revenue sought to distinguish the order relied upon by the assessee. These submissions were already made by the Ld. DR in the aforesaid appeal for AY 2013-14 and before us, Ld. DR submitted that his submissions will be the same. 11. We note that ITAT had decided the issue in the appeal for AY 2013-14 (supra) as under:- 9. The Ld. AR submitted that the issue is covered in favour of the assessee by the order of the Tribunal in the assessee's own case for AY 2011-12 and 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubt and it is as follows:- (a) To use the demised premises and the said furniture and fixtures for the purpose of running hotel, barding and the lodging house, restaurant, confectionary and such other ancillary business in the said premises such as providing show-cases show windows, newspapers stall, dancing and other exhibition of arts, meeting rooms etc., and not for any other purpose without the previous permission in writing of the Lessors. It is clear from this clause that the building and the fixtures and furniture were to be used for one purpose, namely, for the purpose of running a hotel with them all tighter. Again cl.1 1(h) of the lessee's covenant provided that the lessee is not to remove any article of thing from the premises except for the purposes of and in the course of the hotel business which latter would be for effecting repairs to them or for replacing them where it was the duty of the lessee to do so under the lease. We think, therefore, that the lease clearly establishes that it was the intention of the parties to it that the furniture and fixture and the building should be enjoyed all tighter and not one separately from the other. The relevant clauses at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity Board. The water charges will be paid by the Lessee on the basis of the bill received from Haryana Water Authority. Both Electricity and water charges will be paid by the lessee directly to the departments on the basis of Bills 2(d) The Lessor shall hand over the office with furniture fixture 200 KVA diesel generator and adequate air conditioners to the Lessee in good working condition. The Lessee agrees to pay directly all charges towards maintenance of the premises including comprehensive maintenance of Generator. Air conditioner and other fixture and findings as per Annexure A'. At page 7 para 2- However, in the present case, as already discussed, i t is plain that letting is n ot merely of the building but a composite letting of both, the building as well as the equipment, furniture etc. and thereby Section 56 (2) (Hi) of the Act was attracted. Applying the test laid down in Sultan Bros, (supra) the income from the letting in the hands of the Assessee was a new kind of income which could be considered to be income from house property since the income not from the ownership of the building alone but an income which though arising from a building would not have arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (R D) Ltd. in the A.Y. 2013-14. The emphasis of the Ld. DR is that the rent is not composite as envisaged in section 56(2) of the Act. 10. We have carefully considered the rival submissions of the parties and perused the material available in the records. It is not in dispute that in preceding years the assessee has been claiming that the rental income earned by it from let out building space along with inbuilt infrastructure and other amenities is taxable as income from other sources and not as income from house property. The Revenue has been rejecting the assessee's claim on the flimsy ground that claim has not been made in the returns but the claim is made during the course of assessment proceedings. With a view to satisfy the Revenue and to overcome the above disability, the assessee after having filed the original return for AY 2013-14 filed revised return claiming therein that the rental income is assessable under the head 'income from other sources'. Adopting the reasons given in earlier years, analyzing the nature of lease agreement, holding that the assessee is not receiving composite rent as recommended by the Hon'ble Supreme Court in Sultan Brothers Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 building as well as equipment/furniture etc and thereby 56(2)(iii) of the Act is attracted. 21. Respectfully following the ratio laid down by the Hon'ble Supreme Court in the case of Sultan Brothers [supra] and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en rejected by the Tribunal by saying that no adverse view has been taken in determination of ALP with AE by the Ld. TPO nor provisions of Section 40A(2) have ever been invoked. 13. In subsequent AYs 2014-15 and 2015-16 also the same issue has been decided by the Tribunal in favour of the assessee in its order dated 24.09.2021 in ITA No. 8229/Del/2018 and 8143/Del/2019 wherein the Tribunal followed its decision dated 14.06.2021 for AY 2011-12 and AY 2012-13. 14. The AY under our consideration falls in between. 15. Admittedly, as Ld. AO says in para 4.3 of his order, in AY 2013-14 also the facts of the case are similar to that of the earlier years. On such admitted fact situation, the co-ordinate benches of the Tribunal have decided this issue in earlier years as also in subsequent years in favour of the assessee. Therefore, there is no reason for us to deviate from the same in the absence of any fresh adverse material in the records. Accordingly the modified ground No. 1, 2.1 and 2.2 are decided in favour of the assessee with the direction to the Ld. AO to follow the decision of the Hon'ble Delhi High Court in Jay Metals (supra) in respect of the assessee's claim of expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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