DCIT, New Delhi V. M/s. United Info Planet Pvt. Ltd., New Delhi

ITA 2608/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4713 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N SHASTRY
• Keywords: Business income; Rule of consistency; TDS
• Section: 143(1)

Judgement Text

1 ITA NO. 2608/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESID ENT AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 2608/DEL/2 015 (A.Y 2011-12) DCIT CIRCLE-27(1), ROOM NO. 193, C.R. BUILDING NEW DELHI AACU7498R (APPELLANT) VS UNITED INFO PLANET PVT. LTD. SHOP NO. 26, COMMUNITY CENTRE, SUKHDEV VIHAR NEW DELHI AAACU7498R (RESPONDENT) APPELLANT BY SH. N. K. BANSAL, SR. DR RESPONDENT BY SH. M. P. RASTOGI, ADV & SH. P. N. SHASTRY, AR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 27/02/2015 PASSED BY CIT(A)-22, NEW DELHI FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE INCOME FROM FIT-OUT HIRE CHARGES AS BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT FIT-OUT HIRE CHA RGES IN CALCULATED @ RS 25 PER SQR. FT OF THE PROPERTY WHICH SUBSTANTIATE THAT IT IS IN THE NATURE OF RENT AND HAS NO DIRECT NEXUS WITH THE SO CALLED FIXTURE/ FILLINGS/EQUIPMENTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. DATE OF HEARING 04.04.2019 DATE OF PRONOUNCEMENT 30.05.2019 2 ITA NO. 2608/DEL/2015 CIT(A) HAS ERRED IN TREATING THE INCOME FROM FIT-OU T HIRE CHARGES AS BUSINESS INCOME IGNORING THE FACTS THAT ON SUCH INCOME TDS H AS BEEN DEDUCTED @ 10% WHICH IS APPLICABLE FOR THE PAYMENT MADE ON ACCOUNT OF RENT U/S 194 AND NOT ANY CONTRACTUAL PAYMENT FOR SERVICES FOR WHICH THE PRESCRIBED RATE FOR TDS IS 2% U/S 194C. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE INCOME FROM FIT-OUT HIRE CHARGES AS BUSINESS INCOME WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAI LED TO SUBMIT THE DETAILS OF FIXTURES AS STATED TO BE AS ANNEXURE-1, TO THE FIT OUT HIRE AGREEMENT DATED 18.01.2008. 3. AS PER TAX AUDIT REPORT IN FORM 3CD, THE ASSESSE ES NATURE OF BUSINESS IS IT & ITES RELATED SERVICES. IN THE COMPUTATION O F INCOME, THE ASSESSEE HAS SHOWN INCOME FROM HOUSE PROPERTY, BUSINESS, CAPITAL GAINS AND OTHER SOURCES. RETURN OF INCOME WAS ELECTRONICALLY FILED ON 29/09/ 2011 DECLARING TOTAL INCOME OF RS. 8,21,26,950/- WHICH WAS PROCESSED U/S 143(1) . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) DATED 26/09/2012 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO NOTICE U/ S 143(2) AND 142(1), CA APPEARED ON BEHALF OF THE ASSESSEE COMPANY AND ATTE NDED ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND FILED SUBMISSIONS AND NECESSARY DETAILS WHICH WERE TAKEN ON RECORD BY THE ASSESSING OFFICER . THE ASSESSEES BUSINESS ACTIVITIES ON THE TOTAL INCOME WAS RELATING TO ACCE SSIBILITY OF FIT-OUT HIRE CHARGES AND ALLOWABILITY OF DEPRECATION AND EXPENSE S WHICH WAS QUESTIONED BY THE ASSESSING OFFICER TO THE ASSESSEE AND WAS DIS ALLOWED AT RS. 6,15,64,500/- AND FURTHER THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE IS HAVING ONLY RENTAL INCOME. THE INTEREST ON TERM LOAN OF RS. 2, 35,62,256/- IS HELD AS DEDUCTABLE U/S 24B WHILE COMPUTING INCOME FROM HOUS E PROPERTY AND THEREFORE, IT WAS NOT ALLOWED AS EXPENSE U/S 57 OF THE ACT WHILE COMPUTING INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER. THUS, THE ASSESSEES INCOME WAS ASSESSED AT RS. 9,36,57,960/-. 3 ITA NO. 2608/DEL/2015 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE FIL ED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF TH E ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT (A) ERRED IN T REATING THE INCOME FROM FIT-OUT HIRE CHARGES AS BUSINESS INCOME WITHOUT APP RECIATING THE FACT THAT FIT- OUT HIRE CHARGES IN CALCULATED AT RS.25 PER SQUARE FEET OF THE PROPERTY WHICH SUBSTANTIATED THAT IT IS IN THE NATURE OF RENT AND THERE IS NO DIRECT NEXUS WITH SO CALLED FIXTURE/FEELINGS/EQUIPMENTS. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) ERRED IN TREATING THE INCOME FROM FIT OUT HI GHER CHARGES AS BUSINESS INCOME IGNORING THE FACT THAT ON SUCH INCOME TDS HA S BEEN DEDUCTED AT 10% WHICH IS APPLICABLE FOR THE PAYMENT MADE ON ACCOUNT OF RENT U/S 194 AND NO ANY CONTRACTUAL PAYMENT FOR SERVICES FOR WHICH THE PRESCRIBED RATE FOR TDS IS 2% U/S 194C. THE LD. DR SUBMITTED THAT THE ASSESSE E FAILED TO SUBMIT THE DETAILS OF FIXTURES AS STATED TO BE AS ANNEXURE 1 T O THE FIT OUT HIRE AGREEMENT DATED 18/1/2008. THE LD. DR RELIED UPON THE DECIS ION OF THE HONBLE CALCUTTA HIGH COURT IN CASE OF CIT VS. SHAMBHU INVESTMENT PV T. LTD. 249 ITR 47 AS WELL AS KERALA HIGH COURT DECISION 177 TAXMAN 478. THE LD. DR RELIED UPON THE TRIBUNAL DECISION IN CASE OF SUGUNA KAPOOR VS. ACIT , ITA NO. 4117/DEL/2012 ORDER DATED 10/10/2012 WHEREIN IT IS STATED THAT EN TIRE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF TWO SEPARATE AGREEMENT IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. 6. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) A ND ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF ACIT VS. POONAM HASSIJA, NEHA HASSIJA ITA NO. 4320/DEL/2011, ITA NO. 5545/DEL/2012 AND 3429/D EL/2014 ORDER DATED 4/5/2018. IN THE EARLIER ASSESSMENT YEARS I.E. FOR 2008-09, 2009-10 & 2010- 11, THIS ISSUE HAS BEEN ATTAINED FINALITY BY NOT MA KING ANY ADDITION IN THIS RESPECT. THE LD. AR FURTHER SUBMITTED THAT SUPPLEM ENTARY AGREEMENT TO THE 4 ITA NO. 2608/DEL/2015 MAIN HIRE PURCHASE AGREEMENT HAS CLEARLY SET OUT TH E DEMARCATION OF THE RENTAL CHARGES FOR FIXTURES AND THE MAIN AGREEMENT AND THE FIT OUT HIGHER AGREEMENTS ARE TWO SEPARATE DOCUMENTS WILL DOES NOT HAVE ANY CONNECTION AT ALL. THE LD. AR RELIED UPON THE DECISION OF THE HO NBLE DELHI HIGH COURT IN CASE OF CIT VS. K. L. PURI 233 ITR 43. THE LD. AR SUBMITTED THAT THE RULE OF CONSISTENCY HAS TO BE FOLLOWED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE RENT AGREEMENT DAT ED 30/08/2007, IT CAN BE SEEN THAT IT IS WITH THE SOLE PURPOSE FOR RENT IN R ESPECT OF THE ENTIRE BUILDING TO THE MULTI NATIONAL COMPANY IBM. THE FIT OUT AGREEME NT DATED 18/01/2008 WAS ENTERED BETWEEN THE PARTIES FOR THE SOLE PURPOS E OF SMOOTH RUNNING OF THE BUSINESS OF THE LESSEE AND IT IS TOTALLY A SEPARATE LEGAL DOCUMENT. BOTH THESE AGREEMENTS DOES NOT HAVE ANY MOTIVE AS REGARDS THE EVASION OF THE TAX ASPECT. IN-FACT, WHEN WE SEE THE SUPPLEMENTARY AGREEMENT D ATED 23 RD SEPTEMBER, 2009, THE PARTIES HAVE AGREED THAT THE ASSESSEE WIL L PROVIDE THE FIXTURES IN THE SAID PREMISES LEASE BY IBM AT A MUCH LOWER RATE THA N TO THE ESTIMATED COST OF RS. 1,500/-. THUS, IN-FACT THE ASSESSEE HAS DISCLO SED ALL THE MATERIALS BEFORE THE ASSESSING OFFICER AND IT IS NOT AN EVASION OF T AX. THE CASE LAWS REFERRED BY THE LD. DR ALSO NOT RELEVANT AS THE SAME ARE DISTIN GUISHABLE IN FACTS. IN CASE OF SHAMBHU INVESTMENT THERE IS NO SEPARATE CHARGES INC LUDED IN THE AGREEMENT, BUT IN THE PRESENT CASE THERE ARE TWO SEPARATE AGRE EMENTS AND EACH TERMS HAVE BEEN EXPRESSED IN THE AGREEMENT. THUS, THE CIT(A) H AS RIGHTLY CONSIDERED THE INCOME FROM FIT-OUT HIRE CHARGES AS BUSINESS INCOME AS HELD IN A.Y. 2008-09. THERE IS NO NEED TO INTERFERE WITH THE FINDING OF T HE CIT(A). THUS, THE REVENUES APPEAL IS DISMISSED. 5 ITA NO. 2608/DEL/2015 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY, 2019 . SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER DATED: 30/05/2019 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 2608/DEL/2015 DATE OF DICTATION 04.04.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04.04.2019 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