2019 (6) TMI 698 - AT - Income Tax

Income from Fit-Out Hire Charges - business income OR income from house property - AO alleged that there is no direct nexus with so called fixture/feelings/equipments - HELD THAT - From the perusal of the Rent Agreement dated 30/08/2007, it can be seen that it is with the sole purpose for rent in respect of the entire building to the Multi National company IBM. The Fit Out Agreement dated 18/01/2008 was entered between the parties for the sole purpose 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 dated 23rd September, 2009, the parties have agreed that the assessee will provide the fixtures in the said premises lease by IBM at a much lower rate than to the estimated cost of ₹ 1,500/-. Thus, in-fact the assessee has disclosed all the materials before the AO and it is not an evasion of tax. The case laws referred by the DR also not relevant as the same are distinguishable in facts. In case of Shambhu Investment there is no separate charges included in the agreement, but in the present case there are two separate agreements and each terms have been expressed in the agreement. Thus, the CIT(A) has rightly considered the income from Fit-Out Hire Charges as business income as held in A.Y. 2008-09. - Decided against revenue.

Summary

Issues:
1. Treatment of income from fit-out hire charges as business income.
2. TDS deduction on fit-out hire charges.
3. Submission of details of fixtures in the fit-out hire agreement.

Analysis:
1. The Revenue appealed against the CIT(A)'s order treating income from fit-out hire charges as business income for Assessment Year 2011-12. The Revenue argued that the charges were akin to rent and lacked a direct nexus with fixtures/equipments. The CIT(A) partly allowed the appeal, leading to further contention. The Assessing Officer disallowed expenses related to fit-out hire charges, resulting in an assessed income of &8377; 9,36,57,960/-. The CIT(A) upheld the treatment of fit-out hire charges as business income, prompting the Revenue's appeal.

2. The Revenue contended that TDS deduction at 10% on fit-out hire charges indicated rent payment under section 194, not contractual services under section 194C. The Revenue highlighted the non-submission of fixture details and cited relevant case laws. However, the assessee argued for consistency, citing previous years' assessments and clear demarcation in agreements. The Tribunal noted the separate nature of the rent and fit-out agreements, dismissing the Revenue's appeal based on the agreements' distinct terms and lack of tax evasion motive.

3. The Tribunal's analysis focused on the agreements' purpose and the absence of tax evasion intent. The Supplementary Agreement clarified fixture charges below estimated costs, demonstrating transparency to the Assessing Officer. The Tribunal distinguished cited case laws, emphasizing the separate nature of agreements and expressed terms. Relying on previous assessments and legal precedents, the Tribunal upheld the CIT(A)'s decision on treating fit-out hire charges as business income, dismissing the Revenue's appeal and affirming the consistency principle.

In conclusion, the Tribunal's detailed analysis upheld the treatment of fit-out hire charges as business income, considering the agreements' distinct terms and lack of tax evasion motive. The decision emphasized transparency in disclosing fixture charges and consistency in assessments, ultimately dismissing the Revenue's appeal.