TaxTMI 
TaxTMI 
2016 (2) TMI 160
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the rented building, therefore, the AO was correct and justified in treating the rental receipts of the assessee as composite rent as per provisions of section 56(2)(iii) of the Act. Ld. DR further submitted that the AO rightly followed the provisions of the Act in disallowing deduction of Rs. 32,76,000 which was claimed by the assessee u/s 24(a) of the Act. Ld. DR further pointed out that the CIT(A) granted relief to the assessee by following order of his predecessor in assessee's own case for AY 2008-09 dated 25.2.2011 in Appeal No. 121/2010-11 which is perverse and incorrectly based upon misinterpretation of the provision of section 56(2)(iii) of the Act. Ld. DR vehemently contended that the CIT(A) has repro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld 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 to the above submissions of the assessee and submitted that where letting of building and fixtures, fittings, airconditioning plant, furniture and generator set etc. were inseparable part of the rented premises, then the rental income is composite rent which should be assessed as income from other sources and CIT(A) was not correct in treating the same as income from house property. 7. On careful consideration of above submissions of both the sides, at the very outset, we find it appropriate to reproduce provisions of section 24(a) and section 56(2)(iii) of the Act which red as under:- "24. Deduction from income from house property Income chargeable under the head "Income from house property" shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w of the above, an amount of Rs. 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 Rs. 24,73,500/-. Penalty proceedin.9s under section 271 (1)(c) are initiated separately for furnishing inaccurate particulars of income. (Addition of Rs. 24,73,500/-)" 9. From the vigilant reading of the impugned order, we note that the CIT(A) has granted relief to the assessee for the year under consideration i.e A. Y 2009- 10 while passing the impugned order by following order of his predecessor for AY 2008-09 (supra) wherein it was held as under:- "I have considered the submission of the appellant findings of the AO and the facts on record. Perusal of the facts on record show that this issue on identical facts was decided by my predecessor in favour of the appellant in A.Y 2008-09 vide order dated 25/02/2011 in Appeal No. 121/2010-11. While deciding the issue in favour of the appellant the CIT(A)-VII, had held as under:- "3.1 I have considered ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot 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 the Act as per provisions of section 56(2)(iii) of the Act. During first appellate proceedings, the CIT(A) allowed the claim of the assessee following the order of his predecessor for AY 2008-09 as per conclusion in para 3.1 as reproduced hereinabove. For AY 2009-10, the AO made similar disallowance and addition by following the assessment order of AY 2008-09 and in the similar fashion, the CIT(A) granted relief to the assessee following the order of his predecessor in favour of the assessee appellant for AY 2008-09 dated 25.2.11 (supra). The main controversy revolves around the question whether the rental income received by the assessee during relevant financial per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 furniture are inseparable from a building and both are let, etc. The language however is not that the two must be inseparably connected when let but that the letting of one is to be inseparable from the letting of the other. The next objection is that there can be no case in which one cannot be separated from the other. In every case that we can conceive of, it may be possible to dismantle the machinery or plant or fixtures from where it was implanted or fixed and set it up in a new building. As regards furniture, of course, they simply rest on the floor of the building in which it lies and the two indeed are always separable. We are unable, therefore, to accept the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w 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 16.2.2010 and submissions before us (supra) pointed out that the earlier tenant M/s ISMART PANACHE (India) got the said premises centrally airconditioned and created wooden cabins and installed other furniture and fixtures. The said tenant vacated the premises in June, 2007, leaving behind the centrally air conditioning plant and other furniture and plant intact and the assessee paid value of these assets to Rs. 7,47,300 to the said tenant as there was no point in disrupting these items and it did not have such value. The ld. Counsel further explained that the assessee has further let out the said building in September 2007 to the present tenant M/s Feedback Ventures P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 letting rental income be assessed as ' income from other sources' which resulted in the disallowance u/s 24 of the Act. Their lordships in para 7 extensively and chronologically referred to dicta of Hon'ble Calcutta High Court in the case of Shambhu Investments (P) Ltd. and they also considered provision of section 56(2)(iii) of the Act, thus, we have no hesitation to hold that the contentions of ld. Counsel are misplaced and the facts of the case of Garg Dyeing (supra) are similar to the extant case as in the present case, the assessee earned rental income from composite letting of building along with wooden cabins, central air-conditioning plant sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g No. 811, comprising basement, ground floor, first floor and second floor which was leased out during AY 2008-09 on monthly amount of Rs. 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 not chargeable to tax under the head of "profits and gains of business or profession", then the income therefrom shall be chargeable to tax under the "head income from other sources". 17. In the above noted facts of the present case, when we analyse the conclusion of the AO in the light of section 56(2)(iii) of the Act along with the ratio of the judgment of Hon'ble Jurisdictional High Court in the case of Garg Dying and Processing Industries vs ACIT (supra), we are inclined to hold that the AO rightly held that the letting of building with the aforesaid amenities was a conscious act of the letting of the building which was inseparable from the letting of sai....