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TMI Blog2017 (7) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources’, is answered in the negative i.e., in favour of the Revenue and against the Assessee. Assessee said that in the event the entire income from the letting is treated as ‘income from source sources’ it cannot be deprived of the corresponding deduction in terms of Section 57 (iii) of the Act. The Revenue too has not disputed the fact that the Assessee has not claimed depreciation. Accordingly, it is directed that while giving the appeal effect, the AO will grant the Assessee the benefit of Section 57 (iii) of the Act. - ITA 308/2016 - - - Dated:- 13-7-2017 - S. Muralidhar And Prathiba M. Singh, JJ. For the Appellant : Mr. Salil Kapoor, Advocate with Ms. Soumya Singh, Ms. Ananya Kapoor, Mr. Sumit Lal Chandani, Advocates For the Respondent : Mr. Rahul Chaudhary, Senior Standing Counsel with Mr. Sanjay Kumar, Advocate ORDER Dr. S. Muralidhar, J. 1. The Appellant, Jay Metal Industries Private Limited, has filed an appeal under Section 260A of the Income tax Act, 1961 ( Act ) against the impugned order dated 18th December, 2015 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 4836/Del/2012 for the Assessment Year ( AY ) 2009-10. Que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand over the office with furniture fixture 200 KVA diesel generator and adequate air conditioners to the Lessee in good working condition. The Lessee agrees to pay directly all charges towards maintenance of the premises including comprehensive maintenance of Generator. Air conditioner and other fixture and findings as per Annexure A . Assessment proceedings 6. The Assessee filed its return of income for the AY 2009-10 on 22nd September, 2009 declaring income of ₹ 98,56,790. The return was picked up for scrutiny and notice was issued to the Assessee on 16th September, 2010 under Section 143 (2) of the Act. 7. The assessment order dated 5th December, 2011 passed by the AO noted that by an order dated 1st November, 2011, the Assessee was asked to show cause as to why income from letting out premises in question should not be treated as composite rent as per the provisions of Section 56 (2) (iii) of the Act. The AO further noted that no reply to the said question was received from the Assessee. The AO then proceeded to reproduce the observations of the AO on the same issue raised during the assessment proceedings for the AY 2008-09. The submissions of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The CIT(A) agreed that the Assessee as the owner of the building was exploiting the property by letting out the same and realizing income by way of rent. It was held that such rental income was liable to be assessed under the head of income from house property . Accordingly, the AO was directed to allow deduction under Section 24 (a) of the Act. Impugned order of the ITAT 11. The Revenue then went in an appeal before the ITAT. By the impugned order dated 18th December, 2015 allowing the appeal of the Revenue, the ITAT followed the decision of this Court in Garg Dyeing Processing Industries v. ACIT (2013) 212 Taxman 160 (Del) and held that the income from letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this plea, Mr. Kapoor relied upon the decision of the Karnataka High Court in CIT v. Mysore International Hotels Pvt. Ltd (2010) 322 ITR 116 (Kar). 15. Finally, Mr. Kapoor submitted that if the Revenue insisted that the rental income should be treated as income from house property , then the Assessee was entitled to the benefit of depreciation under Section 57 (iii) of the Act. Submissions of the Revenue 16. Mr. Rahul Chaudhary, learned Senior standing counsel for the Revenue, on the other hand, placed considerable reliance on the decision of this Court in Garg Dyeing Processing Industries v. ACIT (supra). Mr. Chaudhary pointed out that in the present case the lease deed itself made it clear that it was a composite one i.e., both for the land as well as the machinery and furniture. The Assessee had made a conscious choice as a result of which the entire rental income had to be treated as income from other sources. Mr. Chaudhary submitted that the Assessee could have considered entering into separate lease agreements, one for the building and the other for the machinery, furniture and fittings etc., in which case the Assessee could have treated the rent for the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot covered by Section 9, that is income not from the ownership of the building alone but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it. 18. Section 56 (2) (iii) of the Act reads as under: 56. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources , namely: ... (iii) where an Assessee lets on hire machinery, plant or machinery belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head Profits and gains of business or profession. 19. In the present case, the preamble clauses clause of the lease deed, extracted hereinbefore, make it plain that what was given on rent to the Lessee was not just the basement, ground floor, first floor and second floor of the building but also the fixtures, furniture which included the air-conditioning and power backup through a 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which could be considered to be income from house property since the income not from the ownership of the building alone but an income which though arising from a building would not have arisen if the plant, machinery and furniture had not also been let along with it. 23. The Court is, therefore, not persuaded to take a view different from that by the ITAT in the present matter. Consequently, the question urged, viz., whether the ITAT erred in holding that the rental income should be treated as income from other sources , is answered in the negative i.e., in favour of the Revenue and against the Assessee. No case for remand to the AO 24. On the further question as to whether the matter should be sent back to the AO for determination as to what extent of the rental income should be treated as income from other sources, the Court is of the view that this is a plea being taken for the first time by the Assessee as an alternative plea. It is, in fact, in this context that a categorical plea was taken by the Assessee in its written submissions before the ITAT, which reads thus: 5. The rent is entirely for the land and building as the facilities constitutes insignific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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