High Court of Delhi · Judgments and reasoned final orders
Principal Commissioner of Income Tax, Delhi-4 v. Microsoft India (R&D) Pvt. Ltd.
ITA 458/2026 & ITA 459/2026 ·
Classification of rental income from a composite, inseparable letting of building premises together with fitted fixtures and equipment under 'Income from Other Sources' (Section 56(2)(iii)) rather than 'Income from House Property' (Section 22), applying Sultan Brothers Pvt. Ltd. v. CIT (1964) 51 ITR 353 (SC) and the coordinate bench decision dated 19.03.2024 in the assessee's own case (ITA 507/2022).
1. FACTS OF THE CASE
After condoning a 1,222-day delay in re-filing, the High Court heard ITA 458/2026 and ITA 459/2026 filed by the Revenue challenging the ITAT orders holding that rent received by Microsoft India (R&D) Pvt. Ltd. from letting out premises inseparably with fixtures was assessable under 'Income from Other Sources' rather than 'Income from House Property'.
2. DISCUSSION BY THE COURT
The Division Bench reproduced its coordinate bench judgment dated 19.03.2024 in the assessee's own case (ITA 507/2022), which applied the Constitution Bench test in Sultan Brothers Pvt. Ltd. v. CIT (1964) 51 ITR 353 (SC) and CIT v. Jay Metals to hold that the lease agreement was composite in character and the letting of the building was inseparable from the letting of the fixtures attached to it, rendering the rental receipts assessable under 'Income from Other Sources'. Junior Standing Counsel for the Revenue could not dispute that there was no factual change in the years under consideration.
3. JUDICIAL DECISION
Holding that both appeals lacked merit, the High Court dismissed ITA 458/2026 and ITA 459/2026.
4. OUTCOME
Assessee - Both Revenue appeals dismissed; assessment of composite lease rent under 'Income from Other Sources' upheld.
5. AKHB REVIEW POINT
Where a lease agreement establishes that the intention of the parties is an inseparable letting of premises together with specialized fixtures and equipment, the rental income is assessable under Section 56(2)(iii) ('Income from Other Sources') rather than Section 22.
Source and verification
3-page official High Court of Delhi judgment PDF (DLHC011086912023_1_2026-05-26.pdf, 103,533 bytes).
Original PDF: 3 pages · SHA-256: bea124b9c5ba877e68d2d1ed9b4fa6e3ce1d0f3fa02d2dfc890d489b03db89a5
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies Sections 22 and 56(2)(iii) of the Income-tax Act, 1961. Income-tax Act, 2025 equivalence is not verified.
Full 3-page primary judgment PDF text read and verified page-by-page. Follows Sultan Brothers Pvt. Ltd. v. CIT (1964) 51 ITR 353 (SC), CIT v. Jay Metals (2018) 302 CTR 241 (Del), and the assessee's own earlier years' ruling in ITA 507/2022 dated 19.03.2024.
AI disclosure and professional disclaimer
AI-assisted source review. Independent human approval is not represented.
General research only. Read the complete judgment and verify applicable law and subsequent treatment before reliance.