RECLAMTION REAL ESTATE (I) P.LTD, MUMBAI V. ASST CIT RG 10(1), MUMBAI

CO 200/MUM/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8578 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 08-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RUPINDER BRAR
• Keywords: Notional interest; Condonation of delay

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI ! . ' , $ %&' % BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM % ./I.T.A. NO.7778/M/2010 ( ( ) *) / ASSESSMENT YEAR :2007-2008) ASST. COMMISSIONER OF INCOME TAX, RANGE-10(1), MUMBAI. / VS. M/S. RECLAMATION REAL ESTATE CO. (I) PVT. LTD., 1, ICICI PRULIFE TOWER, APPASAHEB MHATRE MARG, PRABHADEVI, MUMBAI-400025. '+ $ % ./PAN :AAAC 14974 N ( +, /APPELLANT) .. ( -.+, / RESPONDENT) CROSS OBJECTION/ -. NO.200/M/2012 ( ( ) *) / ASSESSMENT YEAR :2007-2008) M/S. RECLAMATION REAL ESTATE CO. (I) PVT. LTD., 1, ICICI PRULIFE TOWER, APPASAHEB MHATRE MARG, PRABHADEVI, MUMBAI-400025. / VS. ASST. COMMISSIONER OF INCOME TAX, RANGE- 10(1), MUMBAI. ( )/0 1 2 % / ASSESSEE BY : SMT. ARATI VISSANJI 3' 1 2 % / REVENUE BY : MRS. RUPINDER BRAR, CIT-DR % 1 0$ /DATE OF HEARING :8.4.2013 4* 1 0$ /DATE OF PRONOUNCEMENT :26.4.2013 &5 &5 &5 &5 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. ITA NO. 7778/M/2010 IS FILED BY THE REVENUE AND THE CO NO. 200/M/2012 IS FILED B Y THE ASSESSEE. BOTH OF THEM ARE FILED AGAINST THE ORDER OF THE CIT (A)-21, MUMBAI DATED 25.08.2010 FOR THE ASSESSMENT YEAR 2007-2008. AS A MATTER OF RULE, BO TH THE APPEALS ARE CLUBBED AND ADJUDICATED IN THIS CONSOLIDATED ORDER. APPEAL WIS E AND GROUND WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2 2. BEFORE US, AT THE OUTSET, SMT. ARATI VISSANJI, L D COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE CROSS OBJECTION OF THE ASSESSEE AND MENTIONED THAT THE SAME WAS FILED BELATEDLY. FOR DEMONSTRATING THE REA SONABLE CAUSE JUSTIFYING THE DELAY, LD COUNSEL MENTIONED THAT THE ASSESSEE WAS O N THE BONA FIDE BELIEF THAT THE CIT (A) GRANTED COMPLETE RELIEF TO THE ASSESSEE IN THE APPEAL. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 6 OF THE IMPU GNED ORDER, WHEREIN IT WAS WRITTEN AS IN THE RESULT APPEAL IS ALLOWED. IN CONTINUATION, LD COUNSEL ALSO BROUGHT OUR ATTENTION TO THE PRAYER OF THE ASSESSEE FOR CONDONATION OF DELAY AND MENTIONED THAT THE ORDER OF THE CIT (A) WAS WRONGLY DELIVERED AT THE OLD ADDRESS AT THE LAXMI TOWERS, BKC, MUMBAI AND THE SAME WAS SUBS EQUENTLY FORWARDED TO THE NEW ADDRESS OF THE ASSESSEE. IN THIS REGARD, LD COU NSEL FOR THE ASSESSEE READ OUT THE PARAS 6 & 7 OF THE ASSESSEES SUBMISSION DATED 31.8.2012 AND THE SAME READ AS UNDER: 6. I SUBMIT THAT THE CROSS OBJECTIONS WERE NOT FIL ED ON RECEIPT OF THE DEPARTMENTAL APPEAL MEMO ON ACCOUNT OF A BONA FIDE BELIEF THAT THE APPEAL WAS FULLY ALLOWED BY THE LD CIT (A). IT WAS ONLY DURING THE COURSE OF THE CONFERENCE WITH THE COUNSEL, THAT IT WAS OBSERVED THAT THE CIT (A) HAD NOT GIVEN FULL RELIEF AND THE CROSS OBJECTIONS ARE REQUIRED TO BE FILED. 7. THE AFFIDAVIT OF MS. RUSHNA DARUWALLA, MANAGER TAX TEAM HANDLING T HE TAX MATTERS OF RECLAMATION REAL ESTATE COMPANY PVT. LTD . EXPLAINING THE FACTS OF THE CASE IS ATTACHED. 3. ON THE OTHER HAND, AS MATTER OF DUTY, LD DR OPPO SED THE SAID DEMAND OF THE ASSESSEE FOR CONDONATION. 4. WE HAVE HEARD THE PARTIES ON THIS PRELIMINARY IS SUE RELATING TO CONDONATION OF DELAY. WE HAVE ALSO PERUSED THE IMPUGNED ORDER AND FIND THAT THE CIT(A) FINDING IN PARA 6 IMPORTED ABOVE IS PRIMA FACIE MISLEADING IN NATURE. IT IS NATURAL TO ANY APPELLANT-ASSESSEE TO REMAIN SATISFIED WHEN HE READ S THAT HIS APPEAL IS ALLOWED. NEED FOR FILING CO AROSE ONLY AFTER THE INTERVENTIO N OF THE TAX MANAGERS. ASSESSEE ALSO FILED AN AFFIDAVIT IN THIS REGARD. IN OUR OPIN ION, ASSESSEE HAS A BONA FIDE REASON TO BELIEF THAT THE APPEAL IS ALLOWED IN HIS FAVOUR BY THE FIRST APPELLATE AUTHORITY AND THE SAME CAN CONSTITUTE A REASON FOR EXPLAINING THE DELAY OF 70 DAYS FILING OF CROSS OBJECTION. ACCORDINGLY, WE CONDONE THE SAID DELAY OF 70 DAYS. THUS APPEAL IS 3 ADMITTED AND THE ADJUDICATION ON THE ISSUES RAISED BY THE PARTIES ARE TAKEN IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. 5. REGARDING THE MERITS OF THE CASE, LD COUNSEL MEN TIONED THAT THE ISSUE IN BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE RELATES TO THE CORRECTNESS OF THE ALV OF THE PROPERTY, WHICH WAS RENTED OUT. IN THIS REGARD, LD COUNSEL M ENTIONED THAT THE ALV OF THE PROPERTY IN QUESTION SHOULD BE TAKEN AT RS. 2,90,65,962/- BEING THE RENT AS PER THE EARLIER LEAVE AND LICENSE AGREEMENT INSTEAD OF THE RENT OF RS. 2,03,41,632/- RECEIVED AS PER THE REVISED LEAVE AND LICENSE AGREEMENT DATED 16.6.2005 FOLLOWING HIS ORDER OF THE PRECEDING ASSE SSMENT YEAR 2006-07. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE AGREEMENT APP LICABLE TO THE YEAR IN QUESTION MUST BE CONSIDERED AND NOT THE REVISED LICENSE AGRE EMENT DATED 16.6.62005. FURTHER, REFERRING TO THE GROUNDS RAISED BY THE REV ENUE, LD COUNSEL MENTIONED THAT THE AO ERRONEOUSLY ADOPTED THE RENTAL FIGURE OF RS. 5,31,92,376/-, WHICH WAS DETERMINED IN THE CASE OF TWO OTHER ASSESSEES. LD COUNSEL MENTIONED THAT THE ACTUAL RENTAL INCOME TO BE ASSESSED IS ONLY RS. 2,0 3,41,632/-. AO HAS CONSIDERED THE RENTAL ADVANCE AND THE NOTIONAL INTEREST THEREO N FOR ARRIVING AT THE ALV. IN THIS REGARD, LD COUNSEL MENTIONED THAT AN IDENTICAL ISSU E CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL FOR THE AY 2004-05 VIDE ITA NO. 1413/MUM/2007 AND FOR THE AY 2006-07 VIDE ITA NO.1579/MUM/2010. PARA 4 FROM T HE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL FOR THE AY 2006-07 IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004- 05 AND VIDE ITS ORDER DATED 26.11.2010 PASSED IN IT A NO. 1413/MUM/2007, IT WAS HELD BY THE TRIBUNAL THAT WHEN THE RENT ACTUALLY RECEIVED B Y THE ASSESSEE IS MORE THAN THE MUNICIPAL VALUATION OR STANDARD RENT, THE SAME ALONE HAS TO B E TAKEN AS ANNUAL VALUE FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESSEE UNDER THE H EAD INCOME FROM HOUSE PROPERTY. IT WAS HELD THAT NO FURTHER ADDITION ON ACCOUNT OF NOT IONAL INTEREST ON INTEREST FREE DEPOSIT, ETC. CAN BE MADE IN SUCH CASE. THE LD DR IN THIS R EGARD HAS CONTENDED, INTER ALIA, THAT THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. DECCAN TECHNICAL SERVICES PVT. LTD. (126 TTJ 453), TAKING A DIFFERENT VIEW IN FAVO UR OF THE REVENUE HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE DIVISION BENCH OF THE TRIBUNAL WHILE DECIDING THE ASSESSEES CASE INVOLVING SIMILAR ISSUE IN THE ASSESSMENT YEAR 2004 -05. IT IS OBSERVED THAT A SIMILAR CONTENTION WAS SOUGHT TO BE RAISED ON BEHALF OF THE REVENUE IN THE ASSESSEES OWN CASE ON THE SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2004-05, BUT THE SAME HAS BEEN REJECTED BY THE COORDINATE BENCH OF THIS TRIBUNAL AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE 4 VIDE ITS ORDER DATED 28.1.2011 PASSED IN ITA NO.306 6/MUM/2008 FOR THE FOLLOWING REASONS GIVEN IN PARA 5 TO 8 OF THE SAID ORDER. 5. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS, WE HOLD AS FOLLOWS: 6. THE UNDISPUTED FACT IN THE CASE IS THAT THE ACTU AL RENT RECEIVED BY THE ASSESSEE, IS IN EXCESS OF THE RATABLE VALUE / ANNUAL VALUE DETERMIN ED BY THE MUNICIPAL CORPORATION. THE ISSUE IS WHETHER THE ANNUAL VALUE / RATABLE VALUE D ETERMINED IN MUNICIPAL VALUATION, CAN BE DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIG HT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE HONBLE CALCUTTA HIGH COUR T IN THE CASE OF CIT VS. PRABHATI BANSAL (SUPRA) HELD AS FOLLOWS. THE ASSESSEE WAS THE OWNER OF ONE-EIGHTH SHARE OF A HOUSE PROPERTY IN BOMBAY WHICH WAS PARTLY IN THE OCCUPATION OF TENANTS AND P ARTLY IN THE OCCUPATION OF LICENSEES UNDER A LEAVE AND LICENSE AGREEMENT. THE TENANTS P AID A RENT OF RS. 86,036/- FOR AN AREA OF 19,787 SQ.FT. OCCUPIED BY THEM WHEREAS THE LICENSES PAID RS. 1,58,511/- AS LICENSE FEE FOR AN AREA OF 11,159 SQ.FT OCCUPIED BY THEM. THE ITO SOUGHT TO TREAT THE ACTUAL AMOUNT RECEIVED AS THE ANNUAL VALUE OF THE B UILDING. THE ASSESSEE CLAIMED THAT THE ANNUAL VALUE OF THE PROPERTY SHOULD BE DETERMIN ED NOT WITH REFERENCE TO THE ANNUAL RECEIPTS BUT SHOULD BE CALCULATED ON THE BAS IS OF THE RENT PAID BY THE TENANTS BUT THIS WAS NOT ACCEPTED BY THE ITO. THE TRIBUNAL DIRECTED THE ITO TO DETERMINE THE PROPERTY INCOME ON THE BASIS OF ITS ANNUAL VALUE WI TH REFERENCE TO THE RATABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. ON A REFE RENCE: HELD, THAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING TH AT THE AGGREGATE AMOUNT RECEIVABLE FROM THE TENANTS IN OCCUPATION UNDER REGULAR TENANC Y AGREEMENTS AND PARTLY FROM LICENSES IN OCCUPATION UNDER THE LEAVE AND LICENSE SYSTEM COULD NOT BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY . THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ITO TO DETERMINE THE ANNUAL VALUE OF THE PROPERTY AFRESH W ITH REFERENCE TO ITS RATABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. THIS JUDGMENT WAS FOLLOWED BY THE JURISDICTIONAL HI GH COURT IN THE CASE OF M.V. SONAWALA 177 ITR 246 (BOM) WHERE AT PARA 5 IT IS HE LD AS FOLLOWS: 5. IN THIS CONTEXT, IT MAY BE DESIRABLE TO REFER T O THE CALCUTTA HIGH COURT DECISION IN THE CASE OF CIT VS. PRABHABATI BANSALD D(1982) 2 9 CTR (CAL) 15; (1983) 141 ITR 419 (CAL). ONE OF THE QUESTIONS INVOLVED IN THAT CASE WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ITO TO RE-DETERMINE THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1) AFRESH WITH REFERENCE TO ITS RETEABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. THE QUESTION WAS ANSWERED IN THE AFFI RMATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON TH E BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY LET FROM YEAR TO YEAR OR AND THE ANNUAL MUNICIPAL VALUE. 7. THE WORDING IN SECTION 23(1)(A) HAS NOT CHARGED FROM THE YEAR 1961. THUS, THE PLEA THAT DUE TO SUBSEQUENT AMENDMENTS, THE JUD GMENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M.V. SONAWALA IS NOT BINDING, I S DEVOID OF MERIT. WHEN THERE IS A JURISDICTIONAL HIGH COURT, THE TRIBUNAL IN THE ASSE SSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR HAS RIGHTLY FOLLOWED THE SAME. THU S, UNDER SECTION 23(1)(A), THE ANNUAL VALUE AS DETERMINED IN MUNICIPAL VALUATION I S TO BE CONSIDERED AS THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR. AS THE ANNUAL RENTAL VALUE IS LESS THAN THE ACTUAL RENT RE CEIVED SECTION 23(1)(B) COMES INTO OPERATION IN THIS CASE. THUS, NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT / RENT RECEIVED, IN ADVANCE, CANNOT BE ADDED TO THE RENT R ECEIVED ON A NOTIONAL BASIS, IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS (BOMBAY) LTD (SUPRA), WHICH IS CONFIRMED BY THE HON BLE SC.IT IS NO BODIES CASE THAT THE RENT CONTROL REGULATION APPLIES. 8. IN VIEW OF THE ABOVE DISCUSSION, WE SEE NO REASO N TO DEVIATE FROM THE DECISION OF THE COORDINATE BENCH ON THE VERY SAME ISSUE IN A SSESSEES OWN CASE. WE RESPECTFULLY FOLLOW THE SAME AND DISMISS THIS APPEA L OF THE REVENUE. 5 6. THE HOUSE PROPERTY IN QUESTION IS ONE AND THE SA ME AS THAT OF THE ONE DISCUSSED IN THE TRIBUNALS ORDER FOR THE AY 2004-0 5 AND 2006-07. THE APPLICABLE LEAVE AND LICENSE AGREEMENT IS ALSO THE SAME. CONSI DERING THE ABOVE SETTLED NATURE OF THE ISSUE AND THE IDENTICAL NATURE OF THE PROPER TY IN QUESTION, WE ARE OF THE OPINION THAT THE RATABLE MUNICIPAL VALUED BASED COM PUTATION OF ALV OF THE PROPERTY, WHICH IS RS. 2,03,41,632/-, SHOULD ONLY BE TAKEN FO R TAX PURPOSE IN THIS YEAR TOO. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE HAVE TO BE DISMISSED AND THE CROSS OBJECTION RAISED BY THE ASSESSEE HAS TO BE ALLOWED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND ASSESSEES CROSS OBJECTION IS ALLOWED. / 06 3' 1 $/3 78( )/0 -. ' 9 0 1 30 ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2013. &5 1 4* $ ;&6 26.4.2013 1 < SD/- SD/- ( D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT $ %&' / ACCOUNTANT MEMBER MUMBAI; ;& DATED : 26/4/2013 . ( . % ./ OKK , SR. PS &5 1 -(0=> ?>*0 / COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. > A< -(0( , , / DR, ITAT, MUMBAI 6. 0 -(0 //TRUE COPY// 8888888888888888888888888888888888888888888&5 % / BY ORDER, / % 3 (DY./ASSTT. REGISTRAR) , / ITAT, MUMB