TaxTMI 
TaxTMI 
2020 (7) TMI 537
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....) of the Income-tax Act, 1961 (in short 'the Act') in the case of the assessee was completed on 12/12/2014. The said assessment order was subjected to proceedings under section 263 of the Act by the Commissioner of Income-Tax and it was set aside by the Commissioner of Income Tax vide order under section 263 of the Act dated 08/03/2017 holding the order of the Assessing Officer to be erroneous and prejudicial to the interest of the revenue on multiple issues including the issue that standard deduction under section 24(a) of the Act was wrongly allowed by the Assessing Officer. Consequently, the Assessing Officer taken up the proceedings and found that assessee has shown rental income from following parties under the head "income from house property" as under: 1. Rental income of Rs. 2,50,000 per month/- from M/s Professional Management Counseltant Ltd. for leasing of 50 workstations, at the rate of Rs. 5000 per workstation in the building located at W-23, Sector 11, Noida 2. Rental income of Rs. 1,60,000 per month from M/s Key Electronics and System Private Limited in respect of leasing of ground and first floor of building located at W- 23, sector-11, Noida ....
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....ted that the intention of the assessee was to rent out the demised premises and the building i.e. superstructure but not the furniture. The Learned Counsel relied on the decision of the Hon'ble Supreme Court in the case of M/s Shambhu investment private limited versus CIT 263 ITR 143 (SC) and submitted that only intention and privacy object is required to be looked into. According to him the present case the prime object was to let out the building and not to exploit the property for commercial business activities, and therefore the rental income received from M/s. Professional Management Consultant Ltd must be assessed under the head "income from house property" and the deduction under section 24(a) should be allowed to the assessee. 4. On the contrary, learned DR relied on the order of the lower authorities and submitted that intention of the assessee was of leasing of workstation only, which is evident from various clauses of the agreement placed on pages 1 to 13 of the paper-book of the assessee and therefore, learned CIT(A) has correctly upheld the action of the Assessing Officer. 5. We have heard rival submission of the parties advanced through videoconferencing and ....
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....e in the sub-section means that the plant, machinery or furniture are affixed to a building. It seems to us that the inseparability referred to in sub-s. (4) is an inseparability arising from the intention of the parties. That intention may be ascertained by framing the following questions: Was it the intention in making the lease-and it matters not whether there is one lease or two, that is, separate leases in respect of the furniture and the building-that the two should be enjoyed together? Was it the intention to make the letting of the two practically one letting? Would one have been let alone a lease of it accepted without the other? If the answers to the first two questions are in the affirmative, and the last in the negative then, in our view, it has to be held that it was intended that the lettings would be inseparable. This view also provides a justification for taking the case of the income from the lease of a building out of s. 9 and putting it under s. 12 as a residuary head of income It then becomes a new kind of income, not covered by s. 9, that is, income not from the ownership of the building alone but an income which though arising from a building would no....
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....t one separately from the other. Before we conclude we think we should refer to two other covenants. First, there is a lessor's covenant No. 11 (b) to renew the lease of the demised premises which term, it may be conceded, means the building only, for a further term of six years. This clause says nothing about the renewal of any lease in respect of furniture or fixtures. Likewise, cl. III(2) provides that if the demised premises, that is to say,the building, be destroyed or damaged by fire it shall be the option of the lessee to determine the lease and in any event the rent shall be suspended until the premises shall again be rendered fit for occupation and use. Here also there is no mention of the furniture. It was said on behalf of the respondent that these two clauses indicate that the building and the furniture were being treated separately and there- fore the lettings of them were not inseparable. We are unable to accept this contention. As regards renewal of the lease of the building, there is cl. (II)d making substantially a similar provision in respect of the furniture and fixtures. it requires the lessor to provide at all times during the continuance ....
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....main intention is to exploit the immovable property by way of complex commercial activities, in that event, it must be held as business income." 5.5 In background of the legislative and judicial position, on examination of facts of the instant case, we find that in the lease agreement between the parties, the demised premises have been mentioned as "workstations in the building". The relevant clauses of the agreement are reproduced as under: "A. The Lessor is absolute, legal owner and in physical possession of leasehold rights of industrial plot no. W-23 Sector-11 Noida, measuring 800 sq.mtr along with superstructure standing thereupon comprising of basement, ground floor, first floor and second floor with terrace, (hereinafter referred to as the "Building"). B. The Lessee has now approached the Lessor to take on 50 Workstations on lease in the building (hereinafter referred to as the "Demised Premises"), and on request of Lessee the Lessor has agreed to grant on lease the Demised Premises on "as is where is basis" with easements and rights which the Lessor has in common areas, for use by the Lessee for carrying out its business of IT Enabled Services, ("servic....