The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the income received from Fit-out Hire Charges would constitute “business income” under the income tax law.
The assessee is in the business of “IT & ITES related services.” While filing the income tax returns for the relevant year, the assessee has shown income from house property, business, capital gains and other sources.
During the assessment proceedings, the AO noted that the assessee’s business activities on the total income was relating to the accessibility of Fit-out Hire Charges and disallowed deprecation and expenses amounting Rs. 6,15,64,500/- to the assessee by holding that since the assessee is having only rental income.
On appeal, the first appellate authority granted relief to the assessee.
The department approached the Tribunal contending that the CIT (A) erred in treating the income from Fit-out Hire Charges as business income without appreciating the fact that Fitout Hire Charges in calculated at Rs.25 per square feet of the property which substantiated that it is in the nature of rent and there is no direct nexus with so-called fixture/feelings/equipment.
The Tribunal observed that from the perusal of the Rent Agreement dated 30/08/2007, it can be seen that it is with the sole purpose for rent in respect of the entire building to the Multi-National company IBM.
“The Fit-Out Agreement dated 18/01/2008 was entered between the parties for the sole purpose of the smooth running of the business of the lessee and it is totally a separate legal document. Both these agreements do not have any motive as regards the evasion of the tax aspect. In fact, when we see the Supplementary Agreement dated 23rd September 2009, the parties have agreed that the assessee will provide the fixtures in the said premises lease by IBM at a much lower rate than to the estimated cost of Rs. 1,500/-. Thus, in-fact the assessee has disclosed all the materials before the Assessing Officer and it is not an evasion of tax. The case laws referred by the Ld. DR also not relevant as the same are distinguishable in facts. In the case of Shambhu Investment, there are no separate charges included in the agreement, but in the present case there are two separate agreements and each term have been expressed in the agreement. Thus, the CIT(A) has rightly considered the income from Fit-Out Hire Charges as business income as held in A.Y. 2008-09. There is no need to interfere with the finding of the CIT(A). Thus, the Revenue’s appeal is dismissed,” the Tribunal said.
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