Microsoft India (R&D) P.Ltd, New Delhi V. DCIT, Circle-16(1), New Delhi

ITA 1483/DEL/2022

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3225 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I
• Next Hearing Date: 26-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 23-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Depreciation; Set aside
• Section: 56; 43B; 143(3); 143(1); 274; 22

Judgement Text

ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 1 of 12 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘I’: NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS ASTHA CHANDRA, JUDICIAL MEMBER ITA Nos:- 1483 & 1640/Del/2022 ( Assessment Years: 2017-18 & 2018-19) Microsoft India (R & D)Private Limited. New Delhi. Vs. Deputy Commissioner of Income Tax, Circle 16(1), New Delhi. PAN No: AABCM6358F APPELLANT RESPONDENT Assessee by : Shri Nageswar Rao & Parth, Adv. Revenue by : Shri Rajesh Kumar, CIT(DR) Date of Hearing : 27.03.2024 Date of Pronouncement : 28.03.2024 ORDER PER N.K. BILLAIYA, AM ITA Nos.-1483/Del/2022 and 1640/Del/2022 are two separate appeals by the Assessee preferred against two separate orders dated 26.04.2022 and 27.05.2022 framed u/s 143(3) read with Section 144C(13) of the Act. Since common issues are involved, both these appeals were ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 2 of 12 heard together and are disposed of by this common order for the sake of convenience and brevity. ITA No.- 1483/Del/2022 for A.Y. 2017-18 2. The grievances of the assessee read as under: “1. Draft assessment order passed by the Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, Delhi and Final assessment order passed pursuant to directs of Dispute Resolution Panel (Hon'ble DRP) by order Commissioner of Income Tax, Circle 16(1), Delhi. ('Ld. AO') are bad in law. 2 Impugned final assessment order dated 26-04-2022 is passed in contravention to provisions of section 144B of the Income Tax Act, 1961 ('the Act') read with order dated 13-08-2020 passed by Central Board of Direct Taxes ('CBDT"), thus being null and void and deserves to be quashed/ set aside. 3 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 INR 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 3.1 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 INR 22,94,79,442. 3.2 That on the facts and in law, the Ld. AO erred in completely ignoring the order passed by the Honorable Income Tax Appellate Tribunal ('Hon'ble ITAT') dated 14-06-2021 and 24-09- 2021 in the Company's own case for AY 2011-12, 2012-13 and 2014-15, 2015-16 respectively wherein it was held that the rental income received by the Company is in the nature of composite rental income and accordingly the same to be treated as Income from other sources and not as Income from house property. 4. That on the facts and in law, the Ld. AO erred in not deciding the legal and factual issues arising out of the adjustments made vide intimation u/s 143(1) ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 3 of 12 of the Act of Rs 12,53,64,240 and merely repeating the additions made u/s 143(1) when it's a well settled law that assessment made u/s 143(1) subsumes into assessment u/s 143(3) and the Ld. AO should assess the returned income and not income assessed under 143(1). 4.1 That on the facts and circumstances of the case, the Ld. AO has grossly erred in disallowing an amount of Rs. 47,01,114 u/s 40(a)(iib) without considering the fact that the same has already been disallowed by the Company in the revised and modified return of income filed leading to double disallowance of the said amount. 4.2. That on the facts and circumstances of the case, the Ld. AO has grossly erred in law as well as in facts in making addition of Rs. 4,56,310 on account of income offered from APCPDCL offered to tax on accrual basis leading to double taxation of the same amount. 4.3 That on the facts and circumstances of the case, the Ld. AO has grossly erred in law as well as in facts in disallowing an amount of Rs. 12,02,06,817 u/s 36(1) (va) towards payment of PF beyond the due date as per the respective Act, without considering the fact that the same has been deposited before the due date of filing the return as per the Act. 5. That on the facts and in law, the Ld. AO was not justified and has erred in not considering the taxes paid to the extent of Rs. 6,88,92,071. 6. The Ld. AO was not justified and rather grossly erred in law and in facts by initiating penalty proceedings under section 270A of the Act read with section ('r.w.s.) 274 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. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.” 3. Grounds no. 1 and 2 are general in nature and were not pressed. 4. Ground no. 3 relates to taxing gross composite rental income of Rs. 23,67,03,600/- received from let out building space along with inbuilt ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 4 of 12 infrastructure and other amenities under the head ‘Income from House Property’ instead of ‘Income from other Sources’. 4.1 During the course of scrutiny assessment proceedings, the assessee was specifically asked to furnish justification and complete details in respect of composite rent received from Microsoft Global Services Centre India Private Limited. The assessee filed a detailed reply giving full detail sought by the AO. The assessee explained why it is treating the income under the head ‘income from other sources’. The explanation / details did not find any favour with the AO who was of the firm belief that the said income has to be taxed under the head ‘income from house property’. Drawing support from the past history of the assessee, the AO treated the impugned income as ‘income from house property’. 4.2 The assessee challenged the addition before the CIT(A) but without any success. Before us, the Counsel for the assessee drew our attention to the orders of this Tribunal in assessee’s own case since A.Y. 2011-12 to A.Y. 2016-17 and pointed out that this quarrel has been decided by this Tribunal in favour of the assessee and against the Revenue. The DR strongly supported the findings of the lower authorities. The DR relied ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 5 of 12 upon the very same judgement which had been considered by the lower authorities. 4.3 We have carefully considered the orders of the authorities below. We find force in the contention of the Counsel that the impugned quarrel is coming from earlier assessment years wherein it has been decided in favour of the assessee and against the Revenue. The latest decision of the Co-ordinate Bench is in ITA No. 602/Del/2021 for A.Y. 2016-17, the relevant findings read as under: “12. We appreciate the efforts made by the Ld. DR to convince us that the lease deed in question is not composite and that the rental receipt does not answer the description under section 56(2)(iii) of the Act. We, however, do not subscribe to the views expressed by him in his written submission which are nothing but reiteration of what the Ld. AO has said in the assessment order which has been duly considered by the Tribunal in the order (supra). The Tribunal in para 18 has observed that for similar set of amenities/facilities, the Hon'ble Supreme Court in Sultan Brothers Pvt. Ltd. (supra) has laid down certain tests which have been followed by the Hon'ble Delhi High Court in Garg Dyeing & Processing Industries vs. ACIT (2012) (ITA 319/2012) (Del) and later in Jay Metals (supra). Testing the facts of the assessee's case on the touchstone of the decisions (supra) the 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) of the Act. Another objection of the Revenue that it is related party transaction has also been 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. ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 6 of 12 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 expenses and depreciation under section 57 of the Act extracted by the Tribunal in para 22 of its order (supra) for AY 2011-12 and 2012-13. We order accordingly." 12. Respectfully following the coordinate Bench order in assessee's own case for AY 2013-14 (supra), the issue is decided in favour of the assessee with the same directions to the AO as above.” 4.4 On finding parity of facts, respectfully following the decision of the Co-ordinate Bench (supra), we order accordingly. Ground no. 3 with its sub-grounds are allowed. 5. Ground no. 4 and its sub-grounds relate to the addition /disallowance made by the AO which have been added /disallowed while processing the return u/s 143(1) of the Act. 5.1 The representatives of both the sides were heard at length. The case records were carefully perused and the relevant documentary evidences brought on record were duly considered in the light of Rule 18(6) of the ITAT, Rules. ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 7 of 12 5.2 At the very outset, we have to state that the intimation passed u/s 143(1) of the Act goes into oblivion once this scrutiny assessment is framed. The intimation passed u/s 143(1) of the Act can be questioned u/s 154 of the Act by way of a rectification application. The assessee can also file an appeal against the said intimation before the First Appellate Authority. In the case under consideration, we find that though the assessee has preferred rectification application before the CPC / AO but has not received any plausible reply / order. We are of the considered view that the remedy is available elsewhere and as the assessee has triggered the available remedy it would be appropriate to consider the remedy there. In our humble opinion, the remedy sought by the assessee is not available from this forum as per the relevant provision of the Act. 5.3 We, therefore decline to interfere with the findings of the DRP. Ground no. 4 with its sub-grounds are dismissed. However, we expect Revenue Authority to consider the grievance of the assessee and dispose the rectification application expeditiously. 6. Ground no. 5 relates to the non-granting of full tax credit. ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 8 of 12 6.1 The AO is duty bound to allow the tax credit of all the taxes paid by the assessee for the year under consideration. Therefore, we direct the AO to give full tax credit after due verification as per the provision of the law. Ground no. 5 is allowed for statistical purpose. 7. Ground no. 6 is premature and needs not be decided now. 8. In the result, the appeal of the assessee is partly allowed. ITA No.- 1640/Del/2022 for A.Y. 2018-19 9. The grievance of the assessee reads as under: “1. Draft assessment order passed by the Additional /Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, Delhi and Final assessment order passed pursuant to directions of Dispute Resolution Panel (Hon'ble DRP) by Deputy Commissioner of Income Tax, Circle 16(1), Delhi. (Ld. AO) are bad in law. 2 Ld. AO has erred on facts and in law in determining total income of the Appellant at INR 8,88,04,19,920 as against a returned income of INR 8,15,16,56,110 as per the Modified Return of Income filed in pursuance of the bilateral APA. 3. Impugned final assessment order dated 27.05.2022 is passed in contravention to provisions of section 144B of the Income Tax Act, 1961 ('the Act') read with order dated 13.08.2020 and 06.09.2021 passed by Central Board of Direct Taxes ('CBDT), thus being null and void and deserves to be quashed/ set aside. 4. That on the facts and in law, the Ld. AO and the Hon'ble DRP were not justified and have Cane erred by taxing gross composite rental income of INR 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 ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 9 of 12 provisions of Section 56 of the Act and decisions of Hon'ble Jurisdictional High Court. 4.1 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 INR 20,67,92,793. 4.2 That on the facts and in law, the Ld. AO erred in completely ignoring the order passed by the Honorable Income Tax Appellate Tribunal (Hon'ble ITAT') dated 14-06-2021 and 24-09- 2021 in the Company's own case for AY 2011- 12, 2012-13 and 2014-15, 2015-16 respectively wherein it was held that the rental income received by the Company is in the nature of composite rental income and accordingly the same to be treated as Income from other sources and not as Income from house property. 5. That on the facts and in law, the Ld. AO erred in not deciding the legal and factual issues arising out of the adjustments made vide intimation u/s 143(1) of the Act and merely repeating the additions made u/s 143(1) when it's a well settled law that assessment made u/s 143(1) subsumes into assessment u/s 143(3) and the Ld. AO should assess the returned income and not income assessed under 143(1). 5.1 That on the facts and circumstances of the case, the Ld. AO has grossly erred in law as well as in facts in making addition of Rs. 2,16,660 on account of income from Central Power Distribution of AP Ltd ('APCPDCL') offered to tax on face income from Central Power taxation of the same amount. 5.2 That on the facts and circumstances of the case, the Ld. AO has grossly erred in law as well as in facts in disallowing an amount of Rs. 55,54,73,980 u/s 36(1) (va) towards payment of PF beyond the due date as per the respective Act, without considering the fact that the same has been deposited before the due date of filing the return as per the Act. 5.3 That on the facts and in law, the Ld. AO has grossly erred in disallowing an amount of Rs. 3,84,01,400 u/s 43B of the Act towards interest of PF without considering the fact that the interest on PF partakes the nature of PF and that the same is allowed as deduction in the year of payment. 6. That on the facts and in law, the Ld. AO was not justified and has erred in not considering the taxes paid to the extent of Rs. 58,25,30,903. 7. That on the facts and in law, on disposal of this appeal material adjustment would be required in computing total income, tax, interest u/s 234B of the Act. Necessary directions may please be given to the Ld. AO in this regard. ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 10 of 12 8. The Ld. AO was not justified and rather grossly erred in law and in facts by initiating penalty proceedings under section 270A of the Act read with section ('r.w.s.') 274 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. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case.“ 10. Grounds no. 1 , 2 and 3 are general in nature and need no separate adjudication. 11. The issues raised vide ground no. 4 are similar to the issues considered by us in ITA No. 1483/Del/2023 (supra) vide ground no. 3 of this appeal, with a detailed discussion therein. This ground is allowed. 12. Ground no. 5 with all its sub grounds relate to adjustment vide intimation u/s 143(1) of the Act vis-a-vis the impugned assessment order. 12.1 A similar issue has been considered by us in ITA No. 1483/Del/2022 (supra) vide ground no. 4 with all its sub-grounds therein, with a detailed discussion therein. This ground is dismissed. 13. Ground no. 6 relates to the non-granting of taxes paid. At the time of hearing, the Counsel did not press this ground and the same is dismissed. ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 11 of 12 Ground no. 7 relates to the charging of interest. Levy of interest is mandatory; the AO is directed to charge interest as per the provision of law. 14. Ground no. 8 is premature and needs no separate adjudication at this stage. 15. In the result, appeal of the assessee is partly allowed. Order pronounced in the Open Court on 28.03.2024 Sd/- Sd/- (ASTHA CHANDRA) (N.K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28/03/2024. Pooja/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA nos.- 1483 & 1640/Del/2022 Microsoft India (R&D) Pvt. Ltd. Page 12 of 12 Date of dictation 27.03.2024 Date on which the typed draft is placed before the dictating Member 27/03/2024 Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order