Rental income from building space with infrastructure classified as income from other sources under section 56(2)(iii)

The ITAT Delhi ruled in favor of the assessee regarding classification of rental income from let out building space with infrastructure and amenities. The AO had disallowed the assessee's claim to treat rental income as "income from other sources" instead of "income from house property," despite the assessee filing a revised return. The Tribunal, following its earlier decision for AY 2011-12 and 2012-13 pursuant to Delhi HC directions, held that the lease deed was composite in nature and fell under section 56(2)(iii), directing the AO to allow the assessee's claim.

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Issues Involved:
1. Transfer Pricing Adjustments
2. Classification of Rental Income
3. Non-granting of Tax Deducted at Source (TDS)
4. Levying of Interest under Section 234A
5. Penalty under Section 271(1)(c)

Detailed Analysis:

1. Transfer Pricing Adjustments:
The assessee challenged the transfer pricing adjustments made by the Assessing Officer (AO) and Transfer Pricing Officer (TPO) based on the directions of the Dispute Resolution Panel (DRP). The grounds included errors in determining the total income, incorrect functional profile, and inappropriate selection of comparable companies. However, the assessee sought to withdraw these grounds as the issue was settled under the Mutual Agreement Procedure (MAP) filed by its Associated Enterprises (AE) before the USA Competent Authority. The Tribunal permitted the withdrawal, and these grounds were dismissed as not pressed.

2. Classification of Rental Income:
The AO questioned why the rental income from let-out building space with inbuilt infrastructure was shown as 'income from other sources' instead of 'income from house property.' The AO rejected the assessee's submission and added Rs. 12,26,86,304/- to the income. The Tribunal noted that in earlier years, the assessee's claim of treating rental income as 'income from other sources' was upheld. The Tribunal followed its previous decision, holding that the lease deed was composite and the rental income answered the description under Section 56(2)(iii) of the Income-tax Act, 1961. The Tribunal directed the AO to treat the rental income as 'income from other sources' and allow corresponding deductions under Section 57.

3. Non-granting of Tax Deducted at Source (TDS):
The assessee contended that the AO erred in not granting TDS to the extent of Rs. 1,69,948. The Tribunal directed the AO to examine this issue and decide as per law.

4. Levying of Interest under Section 234A:
The assessee argued that the AO erred in levying interest under Section 234A without considering that the return of income was filed within the due date specified under Section 139(1). The Tribunal did not specifically address this issue in the judgment.

5. Penalty under Section 271(1)(c):
The assessee contested the initiation of penalty proceedings under Section 271(1)(c). The Tribunal did not specifically address this issue in the judgment.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes. The grounds related to transfer pricing adjustments were dismissed as not pressed. The issue of rental income classification was decided in favor of the assessee, directing the AO to treat it as 'income from other sources' and allow deductions under Section 57. The AO was also directed to examine the issue of non-granting of TDS and decide as per law. The issues of levying interest under Section 234A and penalty under Section 271(1)(c) were not specifically addressed.

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