Shri M M Creations, New Delhi V. ACIT, New Delhi

ITA 5641/DEL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3293 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 18-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Search and seizure; Salary income; Rule of consistency; Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 5641/DEL/2012 (ASSESSMENT YEAR: 2008-09) & ITA NO. 6550/DEL/2013 (ASSESSMENT YEAR: 2009-10) M . M . CREATIONS T-481A, BALJEET NAGAR BEHIND PATEL NAGAR POLICE STATION NEW DELHI. VS. AC IT CIRCLE-24(1), NEW DELHI PAN : AA E FM9802A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. R. S. SINGHVI SH. SATYAJEET GOYAL, CAS. RESPONDENT BY : SH. RAJESH KUMAR, SR. DR DATE OF HEARING : 25.04.2017 DATE OF PRONOUNCEMENT : 05.05.2017 O R D E R PER BENCH : 1. THE PRESENT APPEALS HAVE BEEN FILED BY ASSESSEE AG AINST ORDER DATED 29.06.2012 AND 26.12.2012 PASSED BY LD. CIT(A)- XXIII, NEW DELHI FOR ASSESSMENT YEARS 2008-09 AND 2 009-10 ON FOLLOWING GROUNDS OF APPEAL: ITA NO. 5641/DEL/2012 1. THE LOWER AUTHORITIES HAVE ERRED IN NOT ASSESSIN G THE RENTAL INCOME FROM PROPERTY NO.8 & 9, UDYOG VIHAR INDUSTRIAL AREA, PHASE TV, GURGAON WHICH WAS LET OUT TO M/S. AGILENT TECHNOLOGIES (INTERNATIONAL ) 2 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 PVT. LTD. AS PER THE LEASE DEED UNDER THE HEAD PROPERTY INCOME. 2. THE LOWER AUTHORITIES HAVE ERRED IN NOT CONSIDER ING THAT THE LESSEE WAS DEDUCTING TAX AT SOURCE, IN RESPECT OF THE RENTAL INCOME OF THE PROPERTY. 3. THE ASSESSING OFFICER ERRED IN ASSESSING THE INCOME FROM THIS PROPERTY UNDER THE HEAD BUSINESS INCOME WITHOUT ALLOWING THE DEPRECIATION. 4. THE CIT(A) HAS ERRED IN ASSESSING THE INCOME FR OM THIS PROPERTY UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA NO. 6550/DEL/2013 1. THE LOWER AUTHORITIES HAVE ERRED IN NOT ASSESSIN G THE RENTAL INCOME FROM PROPERTY NO. 8 & 9, UDYAG VIHAR INDUSTRIAL AREA, PHASE IV, GURGAON WHICH WAS LET PUT TO M/S AGILENT TECHNOLOGIES (INTERNATIONAL) PVT. LTD. AS PER THE LEASE DEED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 2. THE LOWER AUTHORITIES HAVE ERRED IN NOT CONSIDER ING THAT THE LESSEE WAS DEDUCTING TAX AT SOURCE, IN RESPECT OF THE RENTAL INCOME OF THE PROPERTY. 3. THE ASSESSING OFFICER ERRED IN ASSESSING THE INCOME FROM THIS PROPERTY UNDER THE HEAD LUSINESS INCOME WITHOUT ALLOWING THE DEPRECIATION. 4. THE CIT(A) HAS ERRED IN ASSESSING THE INCOME FRO M THIS PROPERTY UNDER THE HEAD INCOME FROM OTHER SOURCES U/S 56 OF THE INCOME TAX ACT. 5. THE LOWER AUTHORITIES HAVE ERRED IN IGNORING THE SETTLED POSITION IN THE LIGHT OF THE PRECEDING THRE E ASSESSMENT ORDER I.E 2004-05 TO 2007-08 WITHOUT BRINGING ON RECORD ANY FRESH MATERIAL TO DEVIATE FR OM THE PRINCIPLE OF CONSISTENCY BY HOLDING THAT INCOME FROM RENTAL INCOME WOULD BE ASSESSED UNDER THE HEAD BUSINESS INCOME / INCOME FROM OTHER SOURCES. 3 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 2. THE MAIN ISSUES INVOLVED IN BOTH THESE ASSESSMENT YEARS ARE IN RESPECT OF ASSESSING THE RENTAL INCOME RECEI VED FROM PROPERTY NO. 8 AND 9, UDYOG VIHAR INDUSTRIAL AREA, P HASE- 4, BUDHGARH, WHICH WAS LET OUT TO M/S AGILENT TECHNOLO GIES (INTERNATIONAL) PVT. LTD., AS BUSINESS INCOME OR IN COME FROM HOUSE PROPERTY. SINCE IT IS COMMON IN BOTH THE YEAR S THEY ARE BEING DISPOSED OFF WITH COMMON ORDER. 3. BRIEF FACTS OF CASE ARE AS UNDER: ASSESSEE IS ENGA GED IN BUSINESS OF MANUFACTURE AND EXPORT OF READY-MADE GA RMENTS AND HIRE OF MACHINERY AND BUILDING. DURING THE YEAR S UNDER CONSIDERATION SCRUTINY ASSESSMENT PROCEEDINGS WERE UNDERTAKEN BY ASSESSING OFFICER WHO NOTED THAT RS.2,89,65,739/- AND RS.1,80,15,978/- FOR ASSESSMEN T YEAR 2008-09, RS.2,89,67,736/- AND RS.1,80,15,978/- FOR ASSESSMENT YEAR 2009-10 WERE CREDITED TO PROFIT AND LOSS ACCOUNT UNDER HEAD FIT OUT HIRING CHARGES AND BU ILDING RENT RESPECTIVELY. (ITA NO. 5641/DEL/12) ASSESSMENT YEAR 2008-09 4. ON EXAMINATION OF DETAILS LD. AO OBSERVED THAT ASSE SSEE HAD LEASED OUT A PORTION OF PREMISES AT PLOT NO. 8 AND 9, UDYOG VIHAR, BUDHGARH TO M/S AGILENT TECHNOLOGIES (INTERNATIONAL) PVT. LTD., ALONGWITH THE FIT OUTS I NSTALLED IN PREMISES. ASSESSEE HAD DISCLOSED RENT RECEIVED FROM THE HIRING OF BUILDING UNDER HEAD INCOME FROM HOUSE PROPERTY A ND HAD CLAIMED DEDUCTION UNDER SECTION 24. HOWEVER, RENT R ECEIVED FROM FIT OUTS WAS DISCLOSED AS INCOME FROM BUSINESS . LD. AO 4 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 WAS OF OPINION THAT RENT IS DERIVED FROM SAME PREMI SES AND THAT OF BUILDING WAS IN SEPARABLE FROM HIRE OF THE FIT OUTS. LD. AO INCLUDED RENT FROM LEASE OF BUILDING AS INCOME F ROM BUSINESS AND DISALLOWED DEDUCTION CLAIMED BY ASSESS EE UNDER SECTION 24 AND ADDED IT BACK TO TOTAL INCOME. 5. AGGRIEVED BY ASSESSMENT ORDER ASSESSEE PREFERRED A PPEAL BEFORE LD. CIT(A). LD. CIT (A) HELD AS UNDER: THE ASSESSING OFFICER HAS CORRECTLY OBSERVED THAT THE INCOME DERIVED FROM FITOUTS HIRING AT RS. 2,89,65,7397- A IS CONSIDERABLY HIGHER THAN THE BUILDING RENT OF RS. 1,80,15,978/-. HOWEVER, THE ASSESSING OFFICER HAS ERRED IN HOLDING THAT THE REN TAL INCOME FROM THE BUILDING IS TO BE ASSESSED AS INCOM E FROM BUSINESS, IN ADDITION TO THE INCOME FROM LEASE OF EQUIPMENTS. THE LETTING OF THE BUILDING IS INSEPARA BLE FROM THE LETTING OF THE MACHINERY, PLANT AND FURNIT URE AND IS THEREFORE, ASSESSABLE UNDER SECTION 56(2)(III). AS HELD BY THE SUPREME COURT IN THE CASE OF SULTAN BROS PVT LTD. (SUPRA), THE INSEPARABILITY REFERRED TO IN SECTION 56(2)(III) IS ONE THAT ARISES FROM THE INTENTION OF THE PARTIES. IT I S CERTAIN THAT THE TENANT IN THIS CASE WOULD NOT HAVE ACCEPTED THE LEASE OF THE BUILDING WITHOUT THE LEAS E OF THE EQUIPMENTS. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY TO ASSESS THE COMPOSITE RENT FROM BUILDING AND EQUIPMENTS AS INCOME FROM OTHER SOURCES. THE APPELLANT IS ENTITLED TO THE DEDUCTION S ENUMERATED IN SECTION 57(II), INCLUDING ACTUAL EXPENDITURE ON REPAIRS & INSURANCE, AND DEPRECIATIO N ON WDV OF THE BUILDING AND OTHER ASSETS, AND T HE APPELLANT SHALL PROVIDE THE NECESSARY EVIDEN CES TO THE ASSESSING OFFICER IN SUPPORT OF THE SAME. 6. LD. CIT(A) TREATED INCOME FROM LETTING OFF OF BUIL DING AS INCOME FROM OTHER SOURCES. 5 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 7. AGAINST ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 8. LD. AR SUBMITTED THAT ASSESSEE ENTERED INTO TWO SE PARATE AGREEMENTS FOR LEASE OF BUILDING, AND LEASE OF FIT- OUTS, THE DETAILS OF WHICH ARE AS UNDER: LEASE OF BUILDING S. NO. PARTICULARS OF AGREEMENT PERIOD COVERED 1. AGREEMENT DATED 25/08/2003 (COMPOSITE LEASE AGREEMENT) 25/08/2003 TO 28/08/2006 2. REVISED AGREEMENT DATED 12/04/2004 01/12/2003 TO 13/11/2006 3. AGREEMENT DATED 30/12/2006 01/12/2006 TO 13/11/2 009 LEASE OF FIT OUTS S.NO. PARTICULARS OF AGREEMENT PERIOD COVERE D 1. AGREEMENT DATED 01/12/2003 01/12/2003 TO 31/11/2 006 2. AGREEMENT DATED 20/08/2004 01/02/2005 TO 31/01/2 008 3. AGREEMENT DATED 07/02/2008 01/02/2008 TO 31/01/2 011 9. LD. AR SUBMITTED THAT, DURING YEAR UNDER CONSIDERA TION ASSESSEE HAS RENEWED LEASE AGREEMENT OF BUILDING WI TH AGILENT TECHNOLOGIES, VIDE AGREEMENT DATED 13.12.2006 AND L EASE AGREEMENT OF FIT OUT VIDE AGREEMENT DATED 20.08.200 4 AND 07.02.2008 (UNEXPIRED 2 MONTHS PERIOD FOR THE RELEV ANT ASSESSMENT YEAR). HE SUBMITTED THAT RENTALS RECEIVE D FROM LEASE OF FIT OUTS HAS BEEN OFFERED AS BUSINESS INCO ME WHEREAS RENTAL RECEIVED FROM LEASE OF BUILDING HAS TO BE CO NSIDERED AS 6 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 INCOME FROM HOUSE PROPERTY, AS IT DOES NOT INVOLVE ANY COMMERCIAL ACTIVITY. IN THE PAPER BOOK LD. AR PLACE D RELIANCE UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF KAYRAM HOTELS PVT. LTD., REPORTED IN (2015) 373 ITR 494 AND DECISION HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SHAMBHU INVESTMENTS PVT. LTD., REPORTED IN (2001) 249 ITR 47 WHICH HAS BEEN SUBSEQUENTLY APPROVED BY HONBLE SUPREME COURT IN SHAMBHU INVESTMENTS PVT. LTD VS. CIT REPORTED IN (2003) 263 ITR 143. 10. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSEE IS INTO BUSINESS OF HIRING OF BUILDING AND THEREFORE, RENT RECEIVED FROM AGREEMENT TO LEASE OF BUILDING WOULD AMOUNT TO BUSINESS INCOME IN THE HANDS OF ASSESSEE. HE SUBMITTED THAT AGILENT INTERNATIONAL LESSEE WOULD NOT HAVE TAKEN BUILDING ON LEASE WITHOUT FIT OUTS, AS IT APPEARS FROM COMPOSITE AGRE EMENT ENTERED INTO BY ASSESSEE AND LESSEE DATED 25.08.200 3 WHICH IS PLACED AT PAGE 1 TO 34 OF THE PAPER BOOK. HE PLACED RELIANCE ON THE FINDINGS OF LD. AO. 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US AND JUDICIAL DECISIONS RELIED UPON BY THEM. 12. WE REFER TO DECISION RELIED UPON BY LD. AR IN THE CASE OF KEYRAM HOTELS PVT. LTD., VS DCIT (SUPRA) WHEREIN HONBLE MADRAS HIGH COURT , HAS REITERATED THAT METHODOLOGY THAT MUST BE APPLIED TO IDENTIFY TRUE NATURE OF RECEIPTS ON L ETTING OUT OF 7 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 BUILDING BY RELYING ON THE DECISION OF HONBLE SUPR EME COURT THEREIN. THE SAME IS REPRODUCED HEREIN BELOW: 11. THE SUPREME COURT IN THE DECISION OF (1) UNIVE RSAL PLAST LTD., (2) GUNTUR MERCHANTS COTTON PRESS CO. L TD. V. CIT [1999] 237 ITR 454 (SC) LAID DOWN THE FOLLOW ING RATIO (PAGE 461): '(1) NO PRECISE TEST CAN BE LAID DOWN TO ASCERTAIN WHETHER INCOME (REFERRED TO BY WHATEVER NOMENCLATURE, LEASE, AMOUNT, RENTS, LICENCE FEE) RECEIVED BY AN ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS WOULD FALL UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFES SION'; (2) IT IS A MIXED QUESTION OF LAW AND FACT AND HAS TO BE DETERMINED FROM THE POINT OF VIEW OF A BUSINESSMAN IN THAT BUSINESS ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE, INCLUDING TRUE INTERPRETATION OF THE AGREEMENT UNDER WHICH THE ASSETS ARE LET OUT ; (3) WHERE ALL THE ASSETS OF THE BUSINESS ARE LET OU T, THE PERIOD FOR WHICH THE ASSETS ARE LET OUT IS A RELEVA NT FACTOR TO FIND OUT WHETHER THE INTENTION OF THE ASS ESSEE IS TO GO OUT OF BUSINESS ALTOGETHER OR TO COME BACK AND RESTART THE SAME ; (4) IF ONLY A FEW OF THE BUSINESS ASSETS ARE LET OU T TEMPORARILY, WHILE THE ASSESSEE IS CARRYING OUT HIS OTHER BUSINESS ACTIVITIES, THEN IT IS A CASE OF EXP LOITING THE BUSINESS ASSETS OTHERWISE THAN EMPLOYING THEM FOR HIS OWN USE FOR MAKING PROFIT FOR THAT BUSINESS ; BUT IF THE BUSINESS NEVER STARTED OR HAS STARTED BU T CEASED WITH NO INTENTION TO BE RESUMED, THE ASSETS ALSO WILL CEASE TO BE BUSINESS ASSETS AND THE TRANSACTION WILL ONLY BE EXPLOITATION OF PROPERTY B Y AN OWNER THEREOF, BUT NOT EXPLOITATION OF BUSINESS ASS ETS.' 13. WHILE LAYING DOWN AFORESAID GENERAL PRINCIPLES AND SUMMARIZING LEGAL POSITION, HONBLE SUPREME COURT CONSIDERED ITS PREVIOUS DECISIONS, VIZ., (1) CEPT V. SHRI LAKSHMI SILK MILLS LTD. [1951] 20 ITR 451 ; (2) NARAIN SWADESHI WEAVING MILLS V. 8 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 CEPT [1954] 26 ITR 765 ; (3) CIT V. CALCUTTA NATIONA L BANK LTD. [1959] 37 ITR 171 ; (4) SULTAN BROTHERS P. LTD. V. CIT [1964] 51 ITR 353 ; (5) NEW SAVAN SUGAR AND GUR REFINING CO. LTD. V. CIT [1969] 74 ITR 7 AND (6) CIT V. VIKRAM COTTON MILLS L TD. [1988] 169 ITR 597 . 14. KEEPING IN MIND AFORESAID LEGAL POSITION, WE SHALL NOW ADVERT TO FACTS OF PRESENT CASE MORE PARTICULARLY T HE COMPOSITE LEASE AGREEMENT DATED 25.08.2003. THIS AGREEMENT IS ENTERED INTO BETWEEN ASSESSEE AS LESSEE AND AGILENT TECHNOL OGIES (INTERNATIONAL) PVT. LTD. AS LESSOR, INTER ALIA RECORDS THAT: 2. BASE RENT THE RENT IS PAYABLE BY THE LESSEE OF A TOTAL SUM OF RS. 9,32,737.50 /- (RUPEES NINE LACS THIRTY TWO THOUSAND SEVEN HUNDRED AND THIRTY SEVEN AND PAISE FIFTY ONLY) CALCULATED AS RS. 22.50 PER SQ.FT. PER MONTH ON SUPER AREA, PAYABLE QUARTERLY IN ADVANCE FROM 01 ST DECEMBER'2003 OR DATE OF 'COMPLETION' OF FITOUTS, WHICHEVER IS' EARLIERT. FOR THE PURPOSE OF THIS AGREEMENT, THE FITOUT 'COMPLETION' IS DEFINED AS INTERIORS COMPLETED IN ALL RESPECTS AS PER SPECIFICATIONS DEFINED IN ANNEXURE 'B'. IN ADDITION , THE BUILDING SHOULD HAVE OPERATIONAL AIR-CONDITIONIN G, POWER BACKUP, AND ALL ESSENTIAL SERVICES OF THE BUILDING LIKE CONNECTED RAW POWER, LIFTS, FIRE SERV ICES, WATER SUPPLY IN PERFECT WORKING CONDITION. ALL PAYMENTS MADE BY THE LESSEE UNDER THIS AGREEMENT TO LEASE SHALL BE MADE BY ACCOUNT PAYEE CHEQUE IN FAVOUR OF THE LESSOR AND SHALL BE SUBJECT TO DEDUCTION OF TAX AT SOURCE, WHERE REQUIRED UNDER TH E INCOME-TAX ACT, 1961. THE LESSEE SHALL PROMPTLY DELIVER THE TAX DEDUCTION CERTIFICATE TO THE LESSOR. 9 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 THE BASE RENT IS INCLUSIVE OF THE COST FOR 100% POWER BACKUP THROUGH THE GENERATOR SETS. IN ADDITION TO THE RENT PAYABLE FOR THE DEMISED PREMISES AS STIPULATED IN_THIS AGREEMENT TO LEASE, THE LESSOR AND LESSEE AGREES TO SHARE 50% (FIFTY PERCENT)/ HALF, IN RESPECT OF DEMISED PREMISES, AND ONLY FROM THE DATE OF POSSESSION, ALL KINDS OF FRES H IMPOSITIONS THEREOF INCLUDING THE INCREASES, IF ANY , AS APPLICABLE ON THE SITE/DEMISED PREMISES TO PAY~ANY INCREASE DUE TO VARIATION AND ANY STATUTORY INCREASE(S) IN OR IF FRESH LEVIES, TAXES, CHARGES, RATES, CESSES, AND FEES ETC, AS MAY RELATE TO THE DEMISED PREMISES ARE IMPOSED BY GOVERNMENT AND/OR MUNICIPAL AND/OR LOCAL AUTHORITIES FROM TIME TO TIME . PROVIDED HOWEVER, THE MUNICIPAL TAXES WILL BE SHARE D BETWEEN THE LESSOR & THE LESSEE AS PER CLAUSE 9 (H) OF THIS AGREEMENT TO LEASE. 3. FITOUT LESSOR SHALL BE RESPONSIBLE TO FURNISH THE AREA LEA SED BY THE LESSE. LESSOR SHALL INCUR TO A MAXIMUM OF RS. 5,83,00,000/-(RUPEES FIVE CRORE AND EIGHTY THREE LACS ONLY), ESTIMATED AS PER ANNEXURE 'B' (PLUS OR MINUS 5% ON RS. 5,83,00,000/- TO BE VALIDATED BY ARCHITECT FOR TIME AND COST),, ESTIMATED AS PER ANNEXURE 'B', [COST INCLUDES THE COMPLETE FURNITURE AND FIXTURES, AIR-CONDITIONING - PACKAGE UNITS OF A TOTAL OF 250 TR (CONFIGURATION AS DECIDED BETWEEN TH E LESSOR AND LESSEE), NETWORKING, ELECTRICAL CABLING ALONG WITH AMF AND LT AND OR HT PANELS, SERVO REGULATORS /TRANSFORMERS WITH TAP CHANGERS AND ALL OTHER FITMENTS AS MAY BE NECESSARY TO HAVE A ROBUST AND SEAMLESS INFRASTRUCTURE]. _THE SPECIFICATIONS A ND QUALITY IS DECIDED BY LESSEE AS PER ANNEXURE B. LESSOR IN CONJUNCTION WITH LESSEE SHALL DECIDE THE ARCHITECT FOR THE PROJECT. THE VENDORS FOR THE PROJE CT SHALL BE DECIDED BY THE LESSOR EXCEPT THE VENDORS WHO ARE AUTHORISED TO EXCLUSIVELY WORK WITH LESSEE 10 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 ON A GLOBAL BASIS, SHALL BE USED ON LESSEE'S ADVISE . IT IS HOWEVER CLEARLY UNDERSTOOD THAT THE COST, QUALIT Y AND TIME FRAME FOR DELIVERY OF PROJECT SHALL BE THE RESPONSIBILITY OF THE LESSOR AND DUE PENALTIES AGRE ED AT RS. 50,000/-/DAY SHALL BE LEVIED FOR EACH DAYS DELAY BEYOND 7 TH DEC 03 SHALL BE IMPOSED BY THE LESSEE ON LESSOR. IT IS ESTIMATED THAT BY SPENDING A FITOUT COST OF RS. 5,83,00,000/- (RUPEES FIVE CRORE AND EIGHTY THREE LACS ONLY), ON SUPER AREA THE LESSEE SHALL REIMBURSE THE LESSOR BY PAYING A MONTHLY RENT OF RS, 27.22 PER SQ. FT. PER MONTH FOR A PERIOD OF 6 YEARS CALCULATED @ 12% PER ANNUM, WITHOUT ANY ESCALATION, FROM THE DATE OF LESSOR HANDING OVER THE FULLY FITT ED OUT PROPERTY FOR LESSEE'S OCCUPATION. THE FITOUT RENTALS SHALL BE PAYABLE ONLY FOR A PERIOD OF SIX (6) YEARS FROM THE DATE OF EXECUTION OF THE LEASE AGREEMENTS. IN THE EVENT OF EARLY TERMINATION OF THE LEASE, LESSEE SHALL PAY THE RESIDUAL VALUE' OF THE FITOUTS AT THE TIME OF TERMINATION. THE RESIDUAL VA LUE BEING THE UNAMORTIZED VALUE OF FITOUTS FROM THE DAT E OF TERMINATION OF LEASE AGREEMENT (REFER ANNEXURE C). 4. SECURITY DEPOSIT 4.1 THAT THE LESSEE, AS SECURITY FOR ITS OBLIGATION S UNDER THE AGREEMENT TO LEASE, HAS DEPOSITED AND SHALL KEEP DEPOSITED WITH THE LESSOR, SO LONG AS THE AGREEMENT TO LEASE IS IN FORCE AND EFFECT, A SUM OF RS. 55,96,4257- (RUPEES FIFTY FIVE LACS NINETYSIX THOUSAND FOUR HUNDRED AND TWENTY FIVE ONLY)) AS AND BY WAY OF INTEREST-FREE REFUNDABLE SECURITY DEPOSIT (HEREINAFTER REFERRED TO AS 'THE S AID DEPOSIT'). THE SAID AMOUNT OF SECURITY DEPOSIT SHAL L BE RETURNED BY THE LESSOR ON THE EXPIRY OR EARLIER TERMINATION FOR ANY REASON WHATSOEVER OF THE AGREEMENT TO LEASE, BUT IN ANY CASE SIMULTANEOUSLY UPON THE LESSEE SURRENDERING ALL ITS 11 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 RIGHTS UNDER THE AGREEMENT TO LEASE IN RESPECT OF THE DEMISED PREMISES. THE LESSOR WILL DEDUCT ANY ARREARS/DUES/OBLIGATIONS PAYABLE ON ANY ACCOUNT WITH RESPECT TC DEMISED PREMISES, AS REASONABLY ASSESSED BY THE LESSOR, FRORN_TIIIS SECURITY DEPOSIT AMOUNT AT THE TIME OF SUCH REFUND. PAYMENT OF SECURITY DEPOSIT 4.1.1 RS. 20,00,OOOA (RUPEES TWENTY LACS) WITH 14 DAYS OF SIGNING OF THIS AGREEMENT TO LEASE. 4.1.2 BALANCE OF RS. 35,96,425/- (RUPEES THIRTY FIVE LACS NINETYSIX THOUSAND FOUR HUNDRED AND TWENTY FIVE ONLY) WITHIN 10 DAYS OF LESSOR HAVING DELIVERE D THE GENERATORS AT SITE. 4.2 NOTWITHSTANDING WHAT IS STATED HEREIN IT IS FUR THER AGREED THAT IF DURING THE PERIOD OF THE LEASE, THE LESSOR SHALL, SELL, OR CREATE ANY THIRD PARTY RIGHT IN THE WHOLE OR ANY PART OF THE DEMISED PREMISES/BUILDING, THEN AND IN THAT EVENT SUCH SALE SHALL BE SUBJECT TO THE TERMS AND CONDITIONS OUTLIN ED IN THIS AGREEMENT TO LEASE AND THE PURCHASER SHALL BE GIVEN NOTICE OF THIS AGREEMENT TO LEASE. FURTHER, SUCH SALE SHALL NOT IN ANY WAY PREJUDICE, JEOPARDIZ E OR DIMINISH THE RIGHT OF THE LESSEE UNDER THIS AGREEMENT TO LEASE OR ITS RIGHT TO RECOVER THE SAID AMOUNT AND ANY SALE IN FAVOUR OF A THIRD PARTY SHAL L ALWAYS BE SUBJECT TO THE LEASE IN FAVOUR OF THE LESSEE. NOTWITHSTANDING WHAT IS STATED HEREIN AND7OR IN ANY OTHER AGREEMENT OR DOCUMENT IT IS FURTHER AGREED THAT THE LESSOR WILL FURNISH AN ACKNOWLEDGEMENT OF THE RECEIPT OF THE SAID DEPOS IT AMOUNT TRANSFERRED TO THE PURCHASER A ND A COPY OF SUCH ACKNOWLEDGEMENT SHALL BE PASSED O N TO THE LESSEE. 4.3 THAT IT IS UNDERSTOOD BY THE PARTIES THAT THE SURRENDERING OF ALL RIGHTS OF THE LESSEE UNDER THE AGREEMENT TO LEASE IN RESPECT OF THE PREMISES SHALL 12 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 BE DONE SIMULTANEOUSLY WITH 1 THE RETURN OF THE SECURITY DEPOSIT AMOUNT THEN OUTSTANDING BY WAY OF BANK DRAFT/CHEQUE PAYABLE AT NEW DELHI, AFTER DEDUCTION OF ANY ARREARS/DUES TOWARDS ANY NON- PAYMENT OF BILLS OR ANY OTHER CHARGES PAYABLE BY TH E LESSEE IN RESPECT OF THE DEMISED PREMISES UNDER THE AGREEMENT TO LEASE. 4.4 THAT IT IS FURTHER UNDERTAKE N BY THE LESSOR THAT IN THE EVENT OF THE LESSOR DEFAULTING IN RETURNING THE SECURITY DEPOSIT, THE LESSEE MAY CONTINUE TO RETAIN POSSESSION AND USE OF THE DEMISED PREMISES WITHOUT PAYMENT OF ANY FURTHER RENT, FEE, COMPENSATION, OUTGOINGS, WHATSOEVER UNTI L THE LESSOR DULY REFUNDS THE AMOUNT OF SECURITY DEPOSIT, SUBJECT TO DEDUCTIONS AS CONTEMPLATED IN CLAUSE 3.1. FURTHER, THE LESSOR SHALL REFUND WITH INTEREST THEREON CALCULATED AT 18% PER ANNUM TO BE COMPUTED FROM THE DATE ON WHICH THE LESSOR WAS LIABLE TO REFUND THE SAID DEPOSIT AS PROVIDED HEREINABOVE UNTIL PAYMENT THEREOF. SUCH RETENTION O F POSSESSION BY THE LESSEE IN THE DEMISED PREMISES IN CASE OF NON-REFUND OF THE SECURITY DEPOSIT SHALL BE DEEMED TO BE AN ACT OF TRESPASS AND SHALL NOT BE CONSIDERED AS ILLEGAL OR RIZED. 5. LEASE TERM THE LEASE TERM IS FOR A PERIOD FROM 25 TH AUGUST' 2003 TO AUGUST 24 TH , 2006 ('LEASE TERM). THE LESSEE SHALL NOT HAVE THE RIGHT TO TERMINATE THIS AGREEMENT TO LEASE TO AUGUST 24 TH , 2006 ('FIXED TERM'). ON EXPIRY OF THE FIXED TERM THIS T TO LEASE MAY BE RENEWED FO R SUCH PERIOD AND ON SAME TERMS AND AS DESCRIBED HEREIN (EXCEPT THE INCREASE IN BASE RENT)BETWEEN TH E PARTIES AFRESH AGREEMENT/LEASE DEED SHALL BE EXECUTED AND REGISTERED AT THE COST OF THE ON EXPIR Y OF THIS LEASE TERM OF 3 YEARS, AT ONLY LESSEE'S CHOICE , THE LEASE RENEWED FOR ANOTHER TWO TERMS OF 3 YEARS EACH . SHOULD LESSEE WANTS, IT CAN AGREEMENT TO LEASE BY SERVING A 6 MONTH NOTICE FROM THE DATE OF EXPIRY OF LEASE TERM. 13 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 6. BASE RENT ESCALATION THERE SHALL BE AN ESCALATION IN THE BASE RENTAL ONL Y, AFTER EVERY THREE (3) YEAR LEASE TERM. THIS ESCALAT ION SHALL HAVE A LOWER AND UPPER LIMIT OF 10% TO 15% RESPECTIVELY. THE EXACT RATE OF ESCALATION AS PER S AID PARAMETER SHALL BE MUTUALLY DECIDED BY THE FEE END OF EACH THREE (3) YEAR LEASE TERM. SHOULD THE LESSOR AND LESSEE NOT REACH AT AN AGREEABLE RATE OF ESCALATION, THEY SHALL APPOINT CUSHMAN AND WAKEFIELD OR ANY OTHER REPUTABLE MULTINATIONAL REAL ESTATE FIRM, AS A MEDIATOR WHO SHALL DETERMINE RATE OF ESCALATION AS PER THE MARKE T CONDITIONS EXISTING AT THE TIME. IN ALL CIRCUMSTANC ES THE RATE OF ESCALATION SHALL BE WITHIN THE PARAMETE RS AS MENTIONED ABOVE 15. THE PARTIES EXTENDED- THE LEASE VIDE AGREEMENT DAT ED 12.04.2004 WHICH WAS VALID TILL 30.11.2006 UNDER FO LLOWING AGREED TERMS: BASE RENT IT IS MADE CLEAR THAT RENT COMMENCES ONLY FROM DECEMBER'2003 AND NO RENT HAS BEEN PAID OR IS PAYABLE BEFORE DECEMBER'2003. THE RENT IS PAYABLE BY THE LESSEE OF A TOTAL SUM OF RS. 9,32,737.50 /- (RUPEES NINE LACS THIRTY TWO THOUSAND SEVEN HUNDRED AND THIRTY SEVENAND PAISE FIFTY ONLY) CALCULATED AS RS. 22.50 PER SQ.FT. PER MONTH ON SUPER AREA OF 41,455 SQ.FT., PAYABLE FROM 01 ST DECEMBER 2003 ONLY FOR ONE QUARTER I.E. DECEMBER '2003, JANUARY 2004 AND FEBURARY'2004. STARTING MARCH'2004 THE RENT PAYABLE SHALL BE RS1296810/- (RUPEES TWELVE LACS NINETY SIX THOUSAND EIGHT HUNDRED AND TEN ONLY PER MONTH), CALCULATED AS RS. 22.50 PER SQ. FT. PER MONTH ON CONSOLIDATED SUPER AREA OF 57,636 SQ. FT., PAYABLE EVERY QUARTER 14 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 BY THE 10 DATE OF START MONTH OF EVERY QUARTER. ALL PAYMENTS MADE BY THE LESSEE UNDER THIS AGREEMENT TO LEASE SHALL BE MADE BY ACCOUNT PAYEE CHEQUE IN FAVOUR OF THE LESSOR AND SHALL BE SUBJECT TO DEDUCTION OF TAX AT SOURCE, WHERE REQUIRED UNDER THE INCOME-TAX ACT, 1961. THE LESSEE SHALL PROMPTLY DELIVER THE TAX DEDUCTION CERTIFICATE TO THE LESSOR. THE BASE RENT IS INCLUSIVE OF THE COST FOR 100% POWER BACKUP THROUGH THE GENERATOR SETS. IN ADDITION TO THE RENT PAYABLE FOR THE DEMISED PREMISES AS STIPULATED IN THIS AGREEMENT TO LEASE, THE LESSOR AND LESSEE AGREES TO SHARE 50% (FIFTY PERCENT)/ HALF, IN RESPECT OF THE DEMISED PREMISES, AND ONLY FROM THE DALE OF POSSESSION, ALL KINDS OF FRESH IMPOSITIONS THEREOF INCLUDING THE INCREASES, IF ANY, AS APPLICABLE ON THE SITE/DEMISED PREMISES TO PAY ANY INCREASE DUE TO VARIATION AND ANY STATUTORY INCREASE(S) IN OR IF FRESH LEVIES, TAXES, CHARGES, RATES, CESSES, AND FEES ETC. AS MAY RELATE TO THE DEMISED PREMISES ARC IMPOSED BY GOVERNMENT AND/OR MUNICIPAL AND/OR LOCAL AUTHORITIES FROM TIME TO TIME. PROVIDED HOWEVER, THE MUNICIPAL TAXES WILL BE SHARED BETWEEN THE LESSOR & THE LESSEE AS PER CLAUSE 9 (H) OF THIS AGREEMENT TO LEASE. SECURITY DEPOSIT THAT THE LESSEE, AS SECURITY FOR ITS OBLIGATIONS UNDER THE AGREEMENT TO LEASE, HAS ALREADY DEPOSITED AND SHALL KEEP DEPOSITED WITH THE LESSOR, SO LONG AS THE AGREEMENT TO LEASE IS IN FORCE AND EFFECT, A SUM OF RS, 55,96,425/- (RUPEES FIFTY FIVE LACS NINETY SIX THOUSAND FOUR HUNDRED AND TWENTY FIVE ONLY)) AS AND BY WAY OF INTEREST-FREE REFUNDABLE SECURITY DEPOSIT. LESSEE SHALL ADDITIONALLY PAY A SUM OF RS. 2184435/- 15 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 (RUPEES TWENTY ONE LACS EIGHTY FOUR THOUSAND FOUR HUNDRED AND THIRTY WITH INTEREST THEREON CALCULATED AL 18% PER ANNUM TO BE COMPUTED FROM THE DATE ON WINCH THE LESSOR WAS LIABLE LO REFUND THE SAID DEPOSIT AS PROVIDED HCREINABOVE UNTIL PAYMENT THEREOF. SUCH RETENTION O F POSSESSION BY THE LESSEE IN THE DEMISED PREMISES IN CASE OF NON-REFUND OF THE SECURITY DEPOSIT SHALL NOT BE DEEMED TO BE AN ACT OF TRESPAS S AND SHALL NOT BE CONSIDERED AS ILLEGAL OR UNAUTHORIZED, 4. LEASE TERM THE LEASE TERM IS FOR A PERIOD FROM 01 ST DECEMBER' 2003 TO 30 TH NOVEMBER' 2006 ('LEASE TERM'). THE LESSEE SHALL NOT HAVE THE RIGHT TO TERMINATE THIS 'AGREEMENT TO LEASE PRIOR TO 30 TH NOVEMBER'2006 ('FIXED TERM'). ON EXPIRY OF THE FIXED TERM THIS AGREEMENT TO LEASE MAY BE RENEWED FOR SUCH PERIOD AND ON SAME TERMS AND CONDITIONS AS DESCRIBED HEREIN (EXCEPT THE INCREASE IN BASE RENT) BETWEEN THE PARTIES AND A FRESH AGREEMENT/LEASE DEED SHALL BE EXECUTED AND REGISTERED AT THE COST O F THE LESSEE. ON EXPIRY OF THIS LEASE TERM OF 3 YEARS , AT ONLY LESSEE'S CHOICE, THE LEASE MAY BE RENEWED FOR ANOTHER TWO TERMS OF 3 YEARS EACH. SHOULD LESSEE WANTS, IT CAN EXIT THIS AGREEMENT TO LEASE BY SERVING A 6 MONTH NOTICE FROM THE DATE OF EXPIRY OF THE FIXED LEASE TERM. 5. BASE RENT ESCALATION THERE SHALL BE AN ESCALATION IN THE BASE RENTAL ONL Y, AFTER EVERY THREE (3) YEAR LEASE TERM. THIS ESCALAT ION SHALL HAVE A LOWER AND UPPER LIMIT OF 10% TO 15% RESPECTIVELY. THE EXACT RATE OF ESCALATION AS PER SAID PARAMETER SHALL BE MUTUALLY DECIDED BY THE PARTIES AT THE END OF EACH THREE (3) YEAR LEASE TER M. 16 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 SHOULD THE LESSOR AND LESSEE NOT REACH AT AN AGREEABLE RATE OF ESCALATION, THEY SHALL APPOINT CUSHMAN AND WAKEFIELD OR ANY OTHER REPUTABLE MULTINATIONAL REAL ESTATE FIRM, AS A MEDIATOR WHO SHALL DETERMINE THE RATE OF ESCALATION AS PER THE MARKET CONDITIONS EXISTING AT THAT TIME. IN ALL CIRCUMSTANCES THE RATE OF ESCALATION SHALL BE WITHI N THE PARAMETERS AS MENTIONED ABOVE. 6. PERMISSION FOR LEASING 6.1 THE LESSOR HAS OBTAINED A PERMISSION TO LEASE DATED 02.04.2004 FROM THE ESTATE OFFICER, HSDC, GURGAON FOR LEASING THE DEMISE PREMISES TO THE LESSEE, 6.2 ALL THE TERMS AND CONDITIONS OF THIS AGREEMENT TO LEASE SHALL BE OPERATIVE FOR THE PERMISSIBLE ARE OF THE DEMISED PREMISES INCLUDING THE ENTIRE SECURITY DEPOSIT AMOUNT AS DEFINED UNDER CLAUSE 3 ABOVE. 16. THEREAFTER, LEASE WAS AGAIN EXTENDED VIDE AGREEMEN T DATED 13.12.2006 WHICH WAS VALID TILL 30.11.2009 ON FOLLOWING AGREED TERMS: 17 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 18 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 17. FURTHER PERUSAL OF BALANCE SHEET PLACED AT PAGES 8 1 TO 110, IT IS OBSERVED THAT ASSESSEE INCLUDED THE SAID BUILDING IN SCHEDULE OF FIXED ASSETS FOR THE YEAR UNDER CONSIDE RATION DETAILS OF WHICH ARE AT PAGE 105 TO 106 OF PAPER BO OK. AT PAGE 108 OF THE PAPER BOOK ASSESSEE HAS PLACED ASSESSMEN T ORDER FOR ASSESSMENT YEAR 2004-05, WHEREIN ASSESSING OFFI CER RECORDS ABOUT A HIGH-RISE BUILDING, CONSTRUCTED ON PLOT NO. 8 AND 9, UDYOG VIHAR INDUSTRIAL AREA PHASE-IV, GURGAON AND AFTER EXECUTING COMPLETE FURNISHING TO EXTENT OF RE ADY TO MOVE IN WORKSTATIONS, HAS LET IT OUT TO A CALL CENTRE, Y IELDING SEPARATELY RENT FROM PROPERTY AS WELL AS FITTINGS A ND FIXTURES PROVIDED FROM DECEMBER 2003 ONWARDS LD. AO THEREIN ALSO RECORDS THAT AS EVIDENT FROM RENT/LEASE AGREEMENT, PROPERTY WAS FINALLY COMPLETED IN FEBRUARY 2004, WHICH RESUL TED IN ENHANCEMENT OF RENT FROM MARCH 2004. 18. FOR THE YEAR UNDER CONSIDERATION IT IS OBSERVED TH AT ASSESSEE HAS PURCHASED PLANT AND MACHINERY, EQUIPME NT AND FIT OUTS SUCH AS HT DISTRIBUTION TRANSFORMER, ST SW ITCHGEAR, LT PANEL AND ASSOCIATED SWITCHGEAR, SERVER STABILIS ER, INSULATIONS TRANSFORMERS, UPS, DG SETS, EASY PLANTS AND CONTROL PANELS, ADDITIONAL SAFETY FEATURES AND LIFT S ETC. ON READING OF CLAUSE 3 OF ORIGINAL COMPOSITE AGREEMENT (WHICH HAS BEEN REPRODUCED HEREINABOVE), IT IS OBSERVED TH AT THE LESSOR IS RESPONSIBLE FOR OBTAINING/MAINTAINING SPE CIFICATIONS AND QUALITY DECIDED BY LESSEE AS PER ANNEXURE-B THE REIN IN RESPECT OF THE FIT OUTS. IT IS ALSO OBSERVED THAT I N THE EVENT THE 19 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 LESSOR DEFAULTS ON THE COST, QUALITY AND TIMEFRAME FOR DELIVERY OF FIT OUT, LESSOR SHALL PAY A PENALTY OF RS. 50,00 0/-, FOR EACH DAY DELAY BEYOND 07.12.2003. 19. THE SEQUENCE OF EVENTS REVEALS THE INTENTION OF AS SESSEE WHICH WAS TO COMMERCIALLY EXPLOIT THE BUILDING. IT IS FOR THAT REASON THAT ASSESSEE HAD FIT IN FITTINGS, AS PER PR ESCRIBED SPECIFICATIONS OF LESSOR, MORE SPECIFICALLY DETAILE D IN ANNEXURE- B TO ORIGINAL COMPOSITE AGREEMENT AT PAGE 22- 34 OF PAPER BOOK. IT IS SEEN THAT EACH AND EVERY FITTINGS FROM OFFICE CABINETS TO ELECTRICAL WIRES, EVEN SANITARY WARE TI LES AND DOOR LOCK SYSTEM WERE SPECIFICALLY DETAILED BY LESSEE. WE ARE AFRAID SUBMISSIONS OF LD. AR CANNOT BE ACCEP TED UNDER THESE CIRCUMSTANCES. FROM THE FACTS THAT EMER GES FROM AGREEMENT DATED 25.08.2003, MORE THAN CLEAR THAT AG REEMENT BETWEEN ASSESSEE AND AGILENT TECHNOLOGIES RELATED T O BUILDING, THAT WAS READY FOR THE PURPOSES OF BEING USED AS OF FICE. THE AGREEMENT DOES NOT RELATE TO BARE TENEMENT BUT IS I N RESPECT OF A FULLY EQUIPPED OFFICE BUILDING. THAT SAID BUIL DING WAS COMPLETE WITH FITTINGS AND FIXTURES AND READY FOR C OMMENCING IS APPARENT FROM AGREEMENT. IF IT WAS NOT SO, IT WO ULD NOT HAVE BEEN MENTIONED IN THE AGREEMENT THAT AGILENT TECHNO LOGIES SHALL HAVE RIGHT TO ADVISE ASSESSEE FOR PURCHASE OF FITTINGS, FIXTURES INSTALLATIONS FROM EXCLUSIVE AND FOR ARCHI TECTS ON A GLOBAL BASIS IN THE BUILDING. IT IS TRUE THAT, FROM NAME GIVEN TO AGREEMENT, ONE CANNOT DECIDE TRUE NATURE OF INCOME EARNED. HOWEVER, WHAT IS IMPORTANT IS THE INTENTION OF PART IES. THE 20 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 AGREEMENT PROVIDES THAT UPON EXPIRATION OF TERMS OF AGREEMENT OR SOONER DETERMINATION THEREOF, AGILENT TECHNOLOGIES SHALL SURRENDER VACANT POSSESSION OF B UILDING AND HAND OVER ENTIRE BUILDING WITH FURNITURE FITTIN GS AND INSTALLATIONS TO ASSESSEE. IF THE AGREEMENT BETWEEN ASSESSEE AND AGILIANT TECHNOLOGIES, WAS A SIMPLE LEASE OR A LICENCE OF BUILDING, AS IS SOUGHT TO BE CONTENDED BY LD. AR, T HERE WOULD NOT HAVE BEEN COVENANT PROVIDING THAT ON EXPIRY OF TERM OF AGREEMENT OR SOONER DETERMINATION, AGILENT TECHNOLO GIES SHALL HAND OVER VACANT POSSESSION OF BUILDING ALONGWITH F URNITURE FITTINGS AND INSTALLATIONS AS IS WHERE IS BASIS. IT IS TRUE THAT PERIOD FOR WHICH BUSINESS ASSETS ARE LET OUT IS ALW AYS A RELEVANT FACTOR IN FINDING OUT WHETHER INTENTION OF ASSESSEE IS TO LET OUT A BUSINESS ASSETS AND IF ASSESSEE HAD NE VER STARTED BUSINESS, AN INFERENCE MAY BE DRAWN THAT ASSESSEE I NTENDED TO EXPLOIT PROPERTY AND NOT BUSINESS ASSETS BUT INT ENTION OF PARTIES HAS TO BE GATHERED FROM OVERALL FACTS AND N OT ISOLATED CIRCUMSTANCES. IN THE FACTS OF PRESENT CASE ASSESSE E HAD ALREADY CONSTRUCTED BUILDING IN THE ASSESSMENT YEAR 2004-05 AS RECORDED IN THE ASSESSMENT ORDER REFERRED HEREIN ABOVE. 20. IT IS SETTLED LEGAL POSITION THAT EACH CASE HAS TO BE DECIDED ON ITS OWN FACTS INCLUDING CONSTRUCTION OF THE AGREEMENT, UNDER WHICH ASSETS HAVE BEEN LET OUT OR HANDED OVER TO A THIRD PARTY AND NO PRECISE TEST CAN BE AP PLIED TO ASCERTAIN, AS TO UNDER WHICH HEAD INCOME RECEIVED B Y ASSESSEE FROM LEASING OR LETTING OUT OF ASSETS SHOU LD FALL. THE 21 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 LONGER DURATION OF AGREEMENT COULD HAVE BEEN FOR MA NY REASONS. THE FACT THAT ALL LICENCES, PERMISSIONS AN D NO OBJECTION CERTIFICATES REQUIRED FOR LEASING THE BUI LDING TO BE OBTAINED IN THE NAME OF ASSESSEE IS A POINTER TO AS PECT THAT ASSESSEE INTENDED TO EXPLOIT BUSINESS ASSETS. 21. SECTION 22 OF INCOME-TAX ACT DEALS WITH INCOME FRO M HOUSE PROPERTY AND IT READS THUS: 22. INCOME FROM HOUSE PROPERTY.THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH A RE CHARGEABLE TO INCOME-TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 22. IT NEEDS NO EMPHASISE THAT WHEN A SPECIFIC HEAD OF CHARGE IS PROVIDED FOR INCOME FROM HOUSE PROPERTY, RENTS OR OTHER INCOME FROM OWNERSHIP OF HOUSE PROPERTY HAS T O BE UNDER THIS HEAD AND NO OTHER HEAD. HOWEVER, FOR AN INCOME FROM HOUSE PROPERTY IT SHOULD BE COVERED BY SECTION 22. BY A CATENA OF DECISIONS, COURTS, TIME AND AGAIN, HAVE H ELD THAT WHERE SUBJECT MATTER THAT IS LET OUT OR GIVEN ON LI CENCE IS NOT A BARE TENEMENT BUT IS A COMPLEX ONE LIKE THE ONE IN PRESENT FACTS AND CIRCUMSTANCES, INCOME DERIVED THEREFROM W HICH IS NOT SEPARABLE AS INCOME FROM LETTING OUT BUILDING A ND INCOME LETTING OUT FROM FURNITURE, PLANT AND MACHINERY, E TC., SUCH 22 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 COMPOSITE INCOME SHALL NOT BE COVERED BY INCOME FRO M HOUSE PROPERTY. IN THE PRESENT CASE RENTAL INCOME RECEIVE D FROM LEASE OF BUILDING IS NOT DERIVED EITHER WHOLLY OR E VEN SUBSTANTIALLY FROM THE OWNERSHIP OF THE PROPERTY. T HE INCOME IS NOT DERIVED FROM MERE LETTING OF A TENEMENT BUT INCOME IS DERIVED FROM A COMPLEX OF LETTING SUBSTANTIAL PART OF WHICH IS OTHER THAN BARE TENEMENT. IT IS FURTHER OBSERVED FR OM BARE READING OF AGREEMENTS THAT ARRANGEMENT IN THE PRESE NT CASE, IS IN THE COURSE OF AND AS A PART OF BUSINESS OF CO MPANY AND ENTERPRISE WHICH IT HAS ENTERED UPON IS OF PROVIDIN G SPECIAL FACILITIES. 23. WE ALSO FIND THAT DECISION HONBLE CALCUTTA HIGH C OURT IN CIT VS. SHAMBHU INVESTMENT PVT. LTD REPORTED IN 249 ITR 47 , WHICH WAS APPROVED BY HONBLE SUPREME COURT IN JUDGMENT REPORTED AT 263 ITR 143 , THEIR LORDSHIPS HAD AN OCCASION TO ELABORATELY DEAL WITH JUDICIAL PRECEDENTS ON WHETHE R RENTAL INCOME COULD BE TAXED UNDER HEAD BUSINESS PROFITS, AND THEIR LORDSHIPS CONCLUDED AS FOLLOWS: TAKING A SUM TOTAL OF AFORESAID DISCUSSIONS, IT CLEARLY APPEARS THAT MERELY BECAUSE INCOME IS ATTACHED TO ANY IMMOVABLE PROPERTY CANNOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPERTY; WHAT HAS TO BE SEEN IS WHAT WAS THE PRIMARY OBJECT OF THE ASSESSEE WHILE EXPLOITING THE PROPERTY. IF IT IS FOUND, APPLYING SUCH TEST, THAT MAIN INTENTION IS FOR LETTING OUT THE PROPERTY, OR ANY P ART THEREOF, THE SAME MUST BE CONSIDERED AS RENTAL INCOME OR INCOME FROM PROPERTY. IN CASE, IT IS FOUN D THAT THE MAIN INTENTION IS TO EXPLOIT THE IMMOVABLE 23 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, I N THAT EVENT, IT MUST BE HELD AS BUSINESS INCOME. 8. IT IS THUS CLEAR THAT WHEN A PROPERTY IS EXPLOIT ED BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, INCOME SO EARNED BY EXPLOITING THE PROPERTY IS TO BE TAXED AS BUSINESS INCOME. VIEWED IN THIS PERSPECTIVE, AND HAVING REGARD TO THE FACT THAT IT IS NOT A CASE OF SIMPLICITOR RENTING OF PREMISES BUT SIGNIFICANT VAL UE ADDITION TO PREMISES BY PROVIDING ALL INCIDENTAL AN D SUPPORT SERVICES TO FACILITATE CINE SHOOTING AND RELATED ACTIVITIES, THE INCOME IS EARNED BY COMPLEX COMMERCIAL ACTIVITIES WHICH CAN ONLY BE TAXED UNDER THE HEAD BUSINESS INCOME. THE FACT THAT IT IS CLEAR LY A COMMERCIAL ADVENTURE, INVOLVING MARKETING AND PROMOTIONS AS ALSO APPROPRIATE IMPROVISATIONS ON A CASE TO CASES BASIS, TAKES THESE RECEIPTS OUT OF TH E AMBIT OF INCOME UNDER THE HEAD PROPERTY INCOME. SIMILARLY, AS REGARDS CLASSIFICATION OF THE NATURE OF PAYMENTS IN THE TDS CERTIFICATES, NOTHING ON TURNS ON THE SAME BECAUSE THE NATURE OF PAYMENT, AS THE LAW IS WELL SETTLED, NEED NOT BE THE SAME IN THE HANDS OF THE RECIPIENT AS IN THE CASE OF THE PAYER. THAT APA RT, IT IS ONLY ELEMENTARY THAT DEFINITION OF RENT IN SECTION 194I IS NOT CONCLUSIVE OF TAXABILITY OF THE RELATED INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE CONCLUSIONS ARRIVED AT BY THE LD. CIT (A) THUS DO NOT CALL FOR ANY INTERFERENCE. 24. RESPECTFULLY FOLLOWING DECISION OF HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT PVT. LTD VS CIT (SUPRA) AND DISCUSSIONS HEREIN ABOVE, WE ARE OF CONSIDERED OPINION THAT RENTAL INCOME EARNED BY ASSESSEE FROM LEASE OF BUIL DING WOULD BE TAXABLE UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. LD. AO IS DIRECTED TO GRANT DEPRECIATI ON ON BUILDING WHILE COMPUTING INCOME FROM BUSINESS AS PE R LAW. 24 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 ACCORDINGLY GROUND NO. 1 AND 2 RAISED BY ASSESSEE S TANDS DISMISSED. 25. GROUND NO. 3 HAS NOT BEEN ARGUED BY LD. AR. ACCORDINGLY THIS GROUND IS LEFT UNANSWERED. 26. GROUND NO. 4 IS GENERAL IN NATURE AND THEREFORE DOES NOT CALL FOR ANY ADJUDICATION. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2008-09 STANDS DISMISSED. ITA NO. 6550/D/13 (ASSESSMENT YEAR 2009-10) 27. GROUND NO. 1, 2, 3 & 5 DEALS WITH ISSUE OF TREATMENT OF RENTAL INCOME BY LD. AO AS BUSINESS INCOME VIS-A-VI S INCOME FROM HOUSE PROPERTY AS CLAIMED BY ASSESSEE. 28. AS WE HAVE DEALT WITH THIS GROUND IN DETAIL FOR ASSESSMENT YEAR 2008-09, FOLLOWING DISCUSSIONS HERE INABOVE, WE DISMISS THESE GROUNDS RAISED BY ASSESSEE. 29. GROUND NO. 4 DEALS WITH FINDINGS OF LD. CIT(A) AND ASSESSING RENTAL INCOME UNDER HEAD INCOME FROM OTHE R SOURCES. AS THERE IS A SPECIFIC HEAD THAT CAN BE AS SIGNED TO INCOME EARNED BY ASSESSEE FROM LEASING OF BUILDING, IT NEED NOT BE CONSIDERED UNDER MISCELLANEOUS HEAD BEING I NCOME FROM OTHER SOURCES. IN OUR CONSIDERED VIEW, THOSE INCOME WHICH CANNOT BE FIT IN ANY OF HEADS OF INCOME BEING INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY, INCOME FRO M BUSINESS AND PROFESSION AND INCOME FROM CAPITAL GAI NS, ONLY THEN IT COULD BE CONSIDERED UNDER HEAD INCOME FROM OTHER SOURCES. 25 ITA NO. 6550/DEL/2013 AND ITA NO. 6541/DEL/2011 IN THE PRESENT CASE WE HAVE ALREADY DECIDED HEREINA BOVE THAT RENTAL INCOME EARNED FROM LEASING OF BUILDING WOULD BE CONSIDERED AS INCOME FROM BUSINESS. THEREFORE, WE D O NOT AGREE WITH FINDINGS OF LD. CIT(A). ACCORDINGLY, THI S GROUND RAISED BY ASSESSEE STANDS ALLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2009-10 STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY 2017. SD/- SD/- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 05.05.2017 @M!T