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TMI Blog2016 (2) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... erred against the order of CIT(A)-VIII, New Delhi dated 27.07.2012 passed in Appeal No. 402/2011-12 for AY 2009-10. 2. Ground No. 1 and 3 of the revenue are general in nature which need no adjudication. Remaining grounds of the Revenue containing sole issue/controversy read as under:- 2. On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting the addition of ₹ 32,76,000/- u/s 24(a) of the Act. 2.1 The CIT(A) ignored the finding recorded by the AO and the fact that the deduction u/s 24(a) is allowable only on building rent and not on the services provided like air conditioning, furniture, power back-up. 3. We have heard rival arguments of both the sides and carefully perused the relevant material placed on record before us, inter alia, assessment order appellate order and ratio of the judgements relied by the ld. Counsel of the assessee. 4. Ld. DR took us through the provisions of section 56(2)(iii) and section 24(a) of the Income Tax Act, 1961 (for short the Act). Ld. DR further submitted that the rented premises in question is furnished and centrally airconditioned with power back up which is an integral and inseparable part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly supporting the order of the first appellate authority submitted that the AO misinterpreted the facts and circumstances of the case which were rightly considered by the CIT(A) while granting relief to the assessee. Ld. Counsel further pointed out that air-conditioning plant with power back up, wooden cabins and wooden empanelling are common in nature which are to be provided to the tenants/lessees to carry out their day to day work by the landlord and without those the tenant cannot function. Ld. Counsel supporting the conclusion of the CIT(A) further submitted that the amenities are provided by the assessee to exploit the property in most profitable manner. Therefore, the rental income of the assessee cannot be held as composite rent only because some necessary amenities have been provided by the assessee to the tenant. Ld. Counsel finally prayed that the order of the CIT(A) is correct and justified and appeal of the revenue being devoid of merits may be dismissed. Ld. Counsel of the assessee has placed reliance on the ratio of the judgment of Hon'ble Supreme Court in the case of Sultan Brothers (P) Ltd. vs CIT (1964) 51 ITR 353 (SC). 6. Ld. DR also placed a rejoinder t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air conditioned with power backup. The furnishing of building is just ordinary and comprises of minor part of the whole value of the property. Similarly, centrally air conditioning is also an integral part of building. Since, the said property is owned by and belongs to the assessee, there is no question of treating the rental income as composite rental income. The submissions made by the assessee are examined and considered. The contention of the assessee is rejected and the rental income declared by the assessee at ₹ 82,45,000/- is held to be composite rent and assessed as per the provisions of section 56(2)(iii) of the Income Tax Act, 1961. In view of the above, an amount of ₹ 24, 73,500/- deduction claimed under section 24(a) of the Income Tax Act is disallowed and added back to the net taxable income of the assessee. I am satisfied that the assessee filed inaccurate particulars of its income and thereby concealed its income to the tune of ₹ 24,73,500/-. Penalty proceedin.9s under section 271 (1)(c) are initiated separately for furnishing inaccurate particulars of income. (Addition of ₹ 24,73,500/-) 9. From the vigilant reading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , electrical fitting etc. and the same goes for a commercial property-without some amenities such as provision for air-conditioning and cabins, it cannot be useful for any purposes. Therefore, just because there is something beyond the bare structure that is being provided, it cannot be said that these amenities are not part of the property itself. However, since these amenities are not separate assets such as Plant and Machinery, the provisions of Section 56(2) do not apply here. Further, in the case of letting of the machinery, plant or furniture, Section 56(2) (iii) of the Act is applicable, but only letting of building with certain amenities, this provision is not applicable and in that event, the income from letting out is chargeable under the head 'Income from house property' The rent for the building would not come under the purview of Section 56(2) (iii) of the Act. 10. From the order of the AO as well as order of the appellate authority for AY 2008-09, it is amply clear that the AO treated the rental income of the assessee from the premises situated at 811, Udyog Vihar, Phase-V, Gurgaon, Haryana as composite rental income and denied the deduction u/s 24(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been applied by the Tribunal, and rightly so is to see whether the letting is a composite or inseparable letting and if it is so, the rent falls for being assessed under the residual head of income and not under the head property . The order of the Tribunal and the finding that the letting out of the plant, machinery or furniture and the premises constituted a single, composite and inseparable letting is based on the tests laid down by the constitution bench of the Supreme Court in the case of Sultan Bros. (P) Ltd. (supra). Sarkar, J, speaking for the Court set out the principles that are applicable for deciding whether the letting is an inseparable letting in the following words: What, then, is inseparable letting? It was suggested on behalf of the respondent Commissioner that the sub-section contemplates a case where the machinery, plant or furniture are by their nature inseparable from a building so that if the machinery, plant or furniture are let, the building has also necessarily to be let along with it. There are two objections to this argument, In the first place, if this was the intention, the section might well have provided that where machinery, plant or furnit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facilities such as lift, lobby, staircases, corridors etc. in order that the property can be enjoyed effectively; there was no letting out of machinery; plant or furniture to Haldirams. However, in the disputed cases there was a letting of the fixtures, fittings, air-conditioning plant, furniture etc. together with the building and both were inseparable. This is what the Tribunal has found. It further found that the intention of the parties was that there was to be a single inseparable letting as evidenced by a composite lease deed for which a consolidated lease rent was fixed. In these circumstances, we are of the view that the substantial question of law has to be answered in the affirmative and against the assessee. (Emphasis respectfully supplied by us by underlining) 11. At the very outset, it would be necessary and relevant to consider written submissions dated 16.10.2015, and proposition laid down by ITAT Mumbai 'I' Bench in the case of AIPITA Marketing Pvt. Ltd. vs ITO (2008) 21 SOT 0302 (Mumbai Trib), as relied by the learned counsel of the assessee. Learned counsel of the assessee reiterating assessee's submissions before the CIT(A) dated 16.2.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income which had accrued to the assessee on letting of a building along with furniture, fixtures, centrally air conditioning plant and 200KWA generator set power back up being inseparable, then the rental income should be taxed under the head 'income from other sources' which further resulted in disallowance u/s 24 of the Act. Learned Departmental Representative submitted that the dicta laid down by ITAT Mumbai order in AIPITA (supra) case is not applicable to the present case. 13. On careful consideration of above, at the very outset, we note that the Tribunal order in AIPITA (supra) was rendered on 24.8.2007 whereas the order of Jurisdictional High Court in the case of Garg Dyeing (supra) was rendered on 22.11.12. In this order, the Hon'ble High Court considered following question of law:- was the Tribunal correct in holding that the rent received by the appellant was assessable as income from other sources? 14. Furthermore, in this order, their lordships, speaking for jurisdictional High Court, it was noticed that the Tribunal held that the letting of the plant, machinery or furniture and the premises constituted a single, composite and inseparable le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the building and the income from such letting of building shall be chargeable to income tax under the head income from other sources . Thus, as per facts and circumstances of the present case, as noted above, the observations and conclusion of the CIT(A) cannot be held as sustainable and in accordance with the provisions of the Act. 16. When we analyse the facts of the present case, it is amply clear from the factum recorded by the AO and the CIT(A) during assessment and appellant proceedings for AY 2008-09 that the assessee made a lease agreement on 5.10.2007 with M/s Feedback Ventures Industries Pvt. Ltd. in respect of the premises situated at Building No. 811, comprising basement, ground floor, first floor and second floor which was leased out during AY 2008-09 on monthly amount of ₹ 9,10,000 with the amenities like wooden cabins, central airconditioning, power back up through 200KVA diesel generator set. These facts have not been disputed by either of the parties. As per letter and spirit of provision of section 56(2)(iii) of the Act where the letting of building is inseparable from the letting of the machinery, plant or furniture, the income of such letting, if n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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