TIP TOP TYPOGRAPHY, MUMBAI V. ITO WD 12(3)(4), MUMBAI

ITA 1280/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7424 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: ARVIND SONDE
• Keywords: Period of limitation
• Section: 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JM AND SHRI T.R. SOOD , AM I.T.A. NO. 1280/M/2009 ASSESSMENT YEAR : 2005-06 M/S. TIP TOP TYPOGRAPHY, C/O. JITENDRA SANGHAVI & CO., 405, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI 400 020. PAN: AACFT 2182 Q VS. THE INCOME-TAX OFFICER, WARD 12(3)(4),AYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARVIND SONDE RESPONDENT BY : SHRI NAVEEN GUPTA O R D E R PER T.R. SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BU T AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI A.V. SON DE, SUBMITTED THAT THE ONLY DISPUTE INVOLVED IN THIS APPEAL IS REGARDING ACTION OF THE ASSESSING OFFICER FOR DETERMINING THE ANNUAL VALUE UNDER SECTION 23(1)(A) OF THE INCOME-TAX ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE OWNER OF THE COMMERCIAL PREMISES ADMEASURING ABOUT 8118 SQ.FT. SITUATED AT SETH HOUSE, NO. 2 FORBES STREET, 58 RUTHUR FIELD STREET, DR.V.B. GANDHI ROAD , MUMBAI 400 023. THE SAME WAS LET OUT TO M/S. RELIANCE INDUSTRIES LTD. FOR A PERI OD 33 MONTHS WITH EFFECT FROM 01.04.2004. AS PER THE LEASE AGREEMENT, THE RENT I NCLUSIVE OF WATER AND CAR PARKING CHARGES AGREED WAS RS. 30,000 PER MONTH. IN ADDITION TO THIS AN INTEREST FREE SECURITY AMOUNTING TO RS. 5,25,00,000/- WAS AL SO RECEIVED BY THE ASSESSEE. UPON ENQUIRY THAT HOW THIS HOUSE RENT WAS JUSTIFIED , IT WAS SUBMITTED THAT THE MUNICIPAL RATEABLE VALUE FOR THE SAID PREMISES WAS RS. 35,615/- PER ANNUM AND THE GROSS VALUE WOULD WORK OUT TO RS. 39,572/- PER ANNU M. THUS, THE RENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE ABOVE RATEABLE VALUE . SOME QUERIES REGARDING SECURITY DEPOSIT AND ITS UTILISATION WERE ALSO MADE FOR WHICH THE DETAILED REPLIES WERE GIVEN. SINCE WE ARE NOT CONCERNED WITH THAT AREA, THEREFORE, WE ARE NOT DISCUSSING ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 2 THAT ISSUE IN DETAIL. THE RENT RECEIVED WAS DECLA RED AS INCOME FROM HOUSE PROPERTY ACCORDINGLY. A FURTHER QUERY WAS RAISED WHY THE RE NT SHOULD NOT BE ESTIMATED BY REFERRING TO THE ANNUAL VALUE UNDER SECTION 23(1)(A ) OF THE ACT. IT WAS ALSO POINTED OUT TO THE ASSESSEE THAT IN SOME COMPARABLE CASES T HE RENT IS MUCH MORE. INITIALLY THE DOCUMENTS REGARDING COMPARABLE CASES WERE NOT P ROVIDED TO THE ASSESSEE AND THEREFORE, ASSESSEE SOUGHT THE SAME. LATER ON THES E DOCUMENTS WERE PROVIDED AND ASSESSEE TRIED TO DISTINGUISH THAT ON FACTS WHY ASS ESSEES RENT WAS REASONABLE. IT WAS FURTHER SUBMITTED THAT ONCE THE PROPERTY WAS LE T OUT THEN ONLY SUCH RENT WOULD BE CONSIDERED AS ANNUAL VALUE U/S. 23(1)(B). IT WA S FURTHER EXPLAINED THAT U/S.23(1)(A) WHICH DEALS WITH HYPOTHETICAL TENANT T HE FAIR RENT WOULD MEAN TO THE RENT DETERMINED BY THE MUNICIPAL AUTHORITIES AND IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SULTAN BROTHERS P.LTD. V. CIT (51 ITR 353) AND DEWAN DOLAT RAI KAPPPR V. NEW DELHI MUNICIPAL COMMITTEE (122 ITR 700). 3. RELIANCE WAS FURTHER PLACED ON CERTAIN TRIBUNAL DE CISIONS. HOWEVER THE ASSESSING OFFICER WAS OF THE VIEW THAT BOTH THE DEC ISIONS OF SULTAN BROTHERS P.LTD. V. CIT AND DEWAN DOLAT RAI KAPPPR V. NEW DELHI MUNICIP AL COMMITTEE (SUPRA) WERE NOT APPLICABLE BECAUSE THE SAME WERE RENDERED IN DI FFERENT CONTEXT FOR DETERMINATION OF HOUSE TAX. AFTER ELABORATE DISCUS SION AND PLACING RELIANCE ON VARIOUS CASE LAWS, THE ASSESSING OFFICER DETERMINED FAIR RENT U/S.23(1)(A) AT RS. 88/- PER SQ. FT. AND THUS THE ANNUAL VALUE WAS ARRIVED A T RS. 85,72,608/-. DEDUCTION FOR REPAIRS UNDER SECTION 24(A)WAS ALLOWED AT 30% AND I NCOME FROM HOUSE PROPERTY WAS CONFIRMED AT RS.60,00,826/-. 4. ON APPEAL, SINCE ASSESSEE DID NOT MAKE APPEARANC E THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT BASICALLY THE DISPUTE IS THAT WHAT IS THE MEANING OF FAIR RENT U /S.23(1)(A), WHICH IS PURELY A LEGAL ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 3 QUESTION, THEREFORE, THE TRIBUNAL ITSELF SHOULD DE TERMINE THE SAME AND THERE WAS NO NEED TO SEND BACK THE MATTER TO THE FILE OF THE FIR ST APPELLATE AUTHORITY. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT UPTO 31 ST MARCH, 1976 SECTION 23 ENVISAGED ONLY THE SUM FOR WHICH THE PRO PERTY MIGHT REASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR I.E. FAIR REN T. IT WAS NOTICED BY THE GOVERNMENT THAT IN SOME CASES, THE ACTUAL RENT RECEIVED OR REC EIVABLE IN CERTAIN CASES EXCEEDED THE MUNICIPAL VALUATION AND, THEREFORE, IN SECTION 2 SUB-CLAUSE (B) WAS ADDED BY WHICH WHERE THE PROPERTY WAS LET OUT THE ACTUAL REN T RECEIVED OR RECEIVABLE WAS MADE AS ANNUAL VALUE. HE REFERRED TO PAGE 2 OF THE PAPER BOOK WHICH IS THE COPY OF THE CIRCULAR NO. 204 EXPLAINING THE CLAUSES AND POI NTED OUT THAT AT PARA 9 WHICH EXPLAINS THE PURPOSE OF INSERTION OF SECTION 23(1)( B), THE FOLLOWING LINE IS MENTIONED: IN MANY CASES, HOWEVER, THE ACTUAL RENT RECEIVED O R RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERTY. 7. HE EMPHASIZED THAT USAGE OF THE TERM MUNICIPAL VALUATION CLEARLY SHOWS THAT EARLIER THE SUM FOR WHICH THE PROPERTY MIGHT B E REASONABLE EXPECTED TO LET BASICALLY REFERRED TO MUNICIPAL VALUE, OTHERWISE TH ERE WAS NO NEED TO USE THE EXPRESSION MUNICIPAL VALUATION. THE GOVERNMENT R EALIZED IN SOME CASES THE ACTUAL RENT RECEIVED WAS MORE THAN SUCH MUNICIPAL VALUATIO N AND THAT IS WHY THE ACT WAS AMENDED BY INSERTING CLAUSE (B) THROUGH WHICH IT W AS MADE MANDATORY THAT IN CASE WHERE PROPERTY WAS LET OUT THEN SUCH RENT WOULD BE TREATED AS ANNUAL VALUE. THEN HE REFERRED TO THE DECISION IN THE CASE OF PARKPAPE R INDUSTRIES PVT. LTD. VS. ITO (25 SOT 406) WHEREIN THE QUESTION WAS WHAT SHOULD BE TH E ANNUAL VALUE UNDER SECTION 23(1)(A). IN THAT DECISION ON THE BASIS OF THE ABOV E CIRCULAR NO.204, IT WAS OBSERVED THAT ANNUAL VALUE WAS EQUAL TO MUNICIPAL VALUATION OF THE PROPERTY (SEE PARAS 7 & 8 OF THAT DECISION). THEN HE ALSO REFERRED TO THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF DR. BALBIR SINGH VS. MUNICIPAL CORPORATION OF DELHI (152 ITR 388). HE PARTICULARLY REFERRED TO THE OBSERVATION M ADE AT PAGE 402 OF THE ABOVE ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 4 DECISION, WHEREIN IT WAS OBSERVED THAT RATEABLE VAL UE OF THE BUILDING COULD NOT EXCEED THE STANDARD RENT. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. SMITABEN N. A MBANI VS. CWT (181 TAXMAN 233). HE POINTED OUT THAT IN THIS CASE THE THIRD QU ESTION REFERRED TO THE HONBLE COURT WAS THAT WHETHER MUNICIPAL RATEABLE VALUE HAS TO BE ADOPTED INSTEAD OF STANDARD RENT FOR VALUING THE PROPERTY UNDER RULE 1 BB. HE POINTED OUT THAT THE DEFINITION OF GROSS MAINTAINABLE RENT GIVEN IN CLAU SE 2 OF RULE 1BB OF THE WEALTH-TAX RULES IS ALMOST SIMILAR TO THAT OF THE LANGUAGE OF SECTION 23(1)(A) UNDER INCOME-TAX ACT AND ULTIMATELY AFTER ANALYZING THE CASE LAW THE HONBLE COURT OBSERVED THAT SELF- OCCUPIED PROPERTY IS TO BE VALUED UNDER RULE 1BB OF THE WEALTH-TAX ACT AND FOR THAT MUNICIPAL RATEABLE VALUE HAS TO BE TAKEN AS GROSS M AINTAINABLE RENT. THUS THE ISSUE RAISED BEFORE US IS TOTALLY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT. 9. LASTLY, HE REFERRED TO THE DECISION OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT V. AKSHAY TEXTILES TRADING AND AGENCIES P. LTD. (304 ITR PAGE 401). IN THAT DECISION WHILE REFERRING TO SECTION 23(1)(B) T HE EXPRESSION RECEIVABLE WAS EXPLAINED AND IT WAS OBSERVED THAT EXPRESSION RECE IVABLE WOULD NOT MEAN RENT WHICH COULD HAVE BEEN RECEIVED. HE EXPLAINED THAT IN THAT CASE THE ASSESSEE HAD TAKEN A PREMISES ON RENT AND GIVEN ON SUB-LETTING T HE SAME TO ANOTHER FIRM AND THE ASSESSING OFFICER HELD THAT FOR THE PURPOSE OF SECT ION 23, THE ANNUAL VALUE OF THE PROPERTY SHOULD NOT BE ONE ENTERED INTO BY THE ASSE SSEE WITH ITS TENANT BUT THE AMOUNT RECEIVED BY THE TENANT FROM THE ULTIMATE PAR TY TO WHOM THE PREMISES WERE SUB-LET AND ULTIMATELY IT WAS OBSERVED THAT ANNUAL VALUE WOULD THE VALUE IN TERMS OF THE LEASE DEED OR ANNUAL VALUE RECEIVED OR RECEIVAB LE BY THE OWNER FROM THE TENANT IRRESPECTIVE OF THE FACT THAT WHERE THE TENANT ON S UCH LETTING RECEIVED HIGHER RENT FROM THE SUB-TENANT. HE ALSO RELIED ON THE DECISION F THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. J.K. INVESTORS (BOMBAY) LTD. (248 ITR 723). ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 5 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE MAINLY ARGUED THAT THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE BECAUSE EITHER THEY WERE RENDERED F OR THE PURPOSE OF DETERMINING RATEABLE VALUE FOR LEVY OF MUNICIPAL TAX OR BECAUSE OF DIFFERENT FACTS. WHILE REFERRING TO PAGES 13 AND 14 OF THE ASSESSMENT ORDER, HE SUBM ITTED THAT COMBINED READING OF SECTION23(1)(A) AND 23(1)(B) MAKES IT CLEAR THAT WH AT HAS TO BE SEEN THAT ANNUAL VALUE IS REQUIRED TO BE FIXED ON THE BASIS OF EITHE R THE ACTUAL RENT RECEIVED BY THE ASSESSEE OR THE FAIR MARKET RENT WHICH MAY BE EXPEC TED FROM HYPOTHETICAL TENANT. SINCE THE ASSESSING OFFICER HAS ALREADY BROUGHT ON RECORD THE COMPARABLE EXAMPLES AND, THEREFORE, ANNUAL VALUE OR RENT IS TO BE DETER MINED AS PER THE RENT BEING PAID IN THE COMPARABLE EXAMPLES. IN ANY CASE NO EVIDENCE RE GARDING RATEABLE VALUE FIXED BY THE MUNICIPAL AUTHORITIES WAS PRODUCED BEFORE THE A SSESSING OFFICER, THEREFORE, THE SAME COULD NOT BE ADOPTED. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS THE JUDGMENTS CITED B Y THE PARTIES. SECTION 23 READS AS UNDER: 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE ( A ) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY B E EXPECTED TO LET FROM YEAR TO YEAR; OR ( B ) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE 20 BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR ( C ) . PROVIDED THAT THE TAXES LEVIED 21 BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PRE VIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWN ER ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHIC H SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION. FOR THE PURPOSES OF CLAUSE ( B ) OR CLAUSE ( C ) OF THIS SUB- SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECE IVABLE BY THE OWNER SHALL ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 6 NOT INCLUDE, SUBJECT TO SUCH RULES 22 AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. 12. THE LEGISLATIVE HISTORY SHOWS THAT UPTO 31 ST MARCH, 1976 THERE WAS ONLY ONE CLAUSE FOR DETERMINATION OF ANNUAL VALUE. WHEN THE GOVERNMENT REALIZED THAT IN SOME CASES THE ACTUAL RENT RECEIVED WAS MORE THAN T HE MUNICIPAL VALUE, THEN SUCH RENT NEEDS TO BE CHARGED AND THAT IS WHY CLAUSE (1) (B) WAS BROUGHT ON THE STATUTE WITH EFFECT FROM THE ASSESSMENT YEAR 1976-77. THER EFORE, IT IS CLEAR THAT ANNUAL VALUE WHICH IS HIGHER OF THE TWO THAT IS VALUE UNDE R CLAUSE (1)(A) OR (1)(B) HAS TO BE ADOPTED AS THE ANNUAL VALUE AS PER SECTION 23 OF TH E ACT. NOW THE QUESTION IS WHAT IS THE MEANING OF CLAUSE (A) I.E. THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLE BE EXPECTED TO LET FROM YEAR TO YEAR. THIS ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF PARKPAPER INDUSTRIES LTD. V. ITO (SUPRA). IN T HIS CASE, THE PROPERTY WAS NOT LET OUT AND THEREFORE, ONLY SECTION 23(1)(A) WAS RELEV ANT. THE RELEVANT PARAS OF THAT DECISION ARE REPRODUCED BELOW: 7 . IN THE PRESENT CASE, THE PROPERTY IN QUESTION HAS NOT BEEN LET OUT; AND THEREFORE, WHAT WOULD BE RELEVANT IS ONLY PROVISION S OF S. 23(1)(A) OF THE ACT. READING OF THE PROVISIONS OF S. 23(1)(A) WOULD SHOW THAT ONE HAS TO IMAGINE A SITUATION WHERE THE PROPERTY IN QUESTION IS LET OUT, THOUGH IT IS SELF-OCCUPIED. ORIGINALLY PROVISIONS OF S. 23 OF TH E ACT PROVIDED FOR DETERMINATION OF ANNUAL VALUE OF HOUSE PROPERTY ONL Y ON THE BASIS OF SUM FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTE D TO BE LET FROM YEAR TO YEAR. THE ACTUAL RECEIPT OF RENT WAS IRRELEVANT. BY THE TAXATION LAWS (AMENDMENT) ACT, 1975 W.E.F. 1ST APRIL, 1976. SEC. 23(1)(B) WAS INTRODUCED, WHEREBY IT WAS PROVIDED THAT IF THE ACT UAL RENT RECEIVED BY AN ASSESSEE IS IN EXCESS OF THE SUM FOR WHICH, THE PRO PERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR, AN NUAL VALUE WILL BE THE RENT RECEIVED. WHILE EXPLAINING THE AFORESAID AMEND MENT, CBDT IN CIRCULAR NO. 204, DT. 24TH JULY, 1976 IN PARA 9 HAS STATED AS FOLLOWS : 'HITHERTO, THE ANNUAL VALUE OF HOUSE PROPERTY, CHAR GEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS DEE MED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO- YEAR. IN MANY CASES, HOWEVER, THE ACTUAL RENT RECEI VED OR RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERT Y. SUB-S. (1) OF S. 23 HAS BEEN AMENDED TO PROVIDE THAT WHERE ANY PROPERTY IS IN OCCUPATION OF A TENANT AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REAS ONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE ANNUAL RENT RECEIVED OR RECEIVABLE SHALL BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY.' (EMPHAS IS, ITALICIZED IN PRINT, SUPPLIED) ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 7 8. FROM THE AFORESAID CIRCULAR, IT IS CLEAR THAT TH E LAW PRIOR TO INTRODUCTION OF S. 23(1)(B) WAS THAT ANNUAL VALUE WAS EQUAL TO M UNICIPAL VALUATION OF THE PROPERTY. THE ABOVE CIRCULAR GIVES AN INDICATIO N AS TO HOW THE EXPRESSION 'THE SUM FOR WHICH, THE PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR' USED IN S. 23(1) (A) HAS TO BE INTERPRETED. 9. IN THE CASE OF DEWAN DAULAT RAI KAPOOR VS. NEW D ELHI MUNICIPAL COMMITTEE (1980) 122 ITR 700 (SC), THE QUESTION BEF ORE THE HONBLE SUPREME COURT WAS AS TO WHAT SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TA X. THE EXPRESSION 'ANNUAL VALUE' AS DEFINED IN THE DELHI MUNICIPAL CO RPORATION ACT, 1957 AND PUNJAB MUNICIPAL ACT, 1911 WAS 'GROSS ANNUAL RE NT AT WHICH SUCH HOUSE OF BUILDING MAY REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR'. THE HONBLE SUPREME COURT HELD THAT THE ANNUAL VALU E IS ALWAYS RENT REALIZABLE BY LANDLORD AND THAT ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LANDLORD MIGHT REASONABLY EXPECT TO GET FROM A HYPO THETICAL TENANT. THE HONBLE COURT FURTHER HELD THAT WHERE TENANCY IS SU BJECT TO RENT CONTROL LEGALIZATION, STANDARD RENT WOULD BE A PROPER MEASU RE AND IN ANY EVENT, ANNUAL VALUE CANNOT EXCEED SUCH STANDARD RENT. IN T HE CASE OF SHIELA KAUSHISH VS. CIT (1981) 24 CTR (SC) 351 : (1981) 13 1 ITR 435 (SC), THE QUESTION AROSE IN THE CONTEXT OF PROVISIONS OF S. 2 3 OF THE IT ACT. THE HONBLE SUPREME COURT APPLYING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) OBSE RVED AS FOLLOWS : 'NOW THIS WAS A DEFINITION GIVEN ON THE INTERPRETAT ION OF THE DEFINITION OF ANNUAL VALUE IN THE DELHI MUNICIPAL CORPORATION ACT, 1957 , AND THE PUNJAB MUNICIPAL ACT, 1911, FOR THE PURPOSE OF LEVY OF HOUSE TAX, BUT IT WOULD BE EQUALLY APPLICABLE IN INTERPRETING THE DEFINITION OF ANNUAL VALUE IN SU B-S. (1) OF S. 23 OF THE IT ACT, 1961, BECAUSE THESE DEFINITIONS ARE IN IDENTICAL TE RMS AND IT WAS IMPOSSIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE IN SUB -S. (1) OF S. 23 OF THE IT ACT, 1961, FROM THE DEFINITION OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT, 1957 AND THE PUNJAB MUNICIPAL ACT, 1911. WE MUST, T HEREFORE, HOLD ON AN IDENTICAL LINE OF REASONING, THAT EVEN IF THE STAND ARD RENT OF A BUILDING HAS NOT BEEN FIXED BY THE CONTROLLER UNDER S. 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY S. 12 OF THE RENT ACT FOR MAKING AN A PPLICATION FOR FIXATION OF THE STANDARD RENT HAVING EXPIRED, IT IS NO LONGER COMPE TENT TO THE TENANT TO HAVE THE STANDARD RENT OF THE BUILDING FIXED, THE ANNUAL VAL UE OF THE BUILDING ACCORDING TO THE DEFINITION GIVEN IN SUB-S. (1) OF S. 23 OF THE IT ACT, 1961, MUST BE HELD TO BE THE STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE TENAN T. THIS INTERPRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB-S. (1) OF S. 23 OF THE IT ACT, 1961, MAY BE REGARDED AS HAVING RECEIVED LEGISLATIVE APPROVAL, F OR, WE FIND THAT S. 6 OF THE TAXATION LAWS (AMENDMENT) ACT, 1975 SUB-S. (1) HAS BEEN AMENDED AND IT HAS NOW BEEN MADE CLEAR BY THE INTRODUCTION OF CL. (B) IN THAT SUB-SECTION THAT WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM FOR WHICH T HE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY. THE NEWLY ADDED CL. (B) CLEARLY POSTULATES THAT THE SUM FOR WHICH A BUILDING MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR MAY BE LESS THAN THE ACTUAL AMOUN T RECEIVED OR RECEIVABLE BY THE LANDLORD FROM THE TENANT.' 10. HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SMT. PRABHABATI BANSALI (1982) 29 CTR (CAL) 15 : (1983) 141 ITR 419 (CAL) HAD TO DEAL WITH A CASE OF A PROPERTY IN MUMBAI, WHERE THE DISP UTE WAS WITH REGARD TO DETERMINATION OF ITS ANNUAL VALUE UNDER S. 23 OF THE ACT. HONBLE CALCUTTA HIGH COURT AFTER MAKING REFERENCE THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAI KAPOO R (SUPRA) AND SHIELA KAUSHISH (SUPRA) HELD AS FOLLOWS : ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 8 'THEREFORE, IN CASE WHERE THE ACTUAL RENT RECEIVED IS HIGHER THAN THAT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO- YEAR IN RESPECT OF AN INCOME ACCRUING SUBSEQUENT TO THE AMENDMENT DIFFERENT CONSIDERATIONS MIGHT ARISE. BUT, WE ARE N OT CONCERNED WITH SUCH SITUATION IN THE INSTANT CASE. THEREFORE, IN VIEW O F THAT POSITION AND THE MUNICIPAL LAW AND IN VIEW OF THE DECISION OF THE SU PREME COURT, IT APPEARS TO US THAT THE INCOME FROM HOUSE PROPERTY M UST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE E XPECTED TO LET FROM YEAR-TO-YEAR AND WITH THE ANNUAL MUNICIPAL VALUE PR OVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVABLE AND THAT WOULD BE THE SAFEST GUIDE FOR THIS PURPOSE AND THE RENT ACTUALLY RECEIV ED WOULD NOT BE OF ANY RELEVANCE.' 11. THE COURT IN THE AFORESAID DECISION ALSO RELIED ON THE PROVISIONS OF S. 154 OF THE BOMBAY MUNICIPAL CORPORATION ACT, WHEREI N THE MANNER OF DETERMINATION OF RATEABLE VALUE HAS BEEN LAID DOWN. THE SAID PROVISIONS ALSO SPEAK OF 'ANNUAL RENT FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR'. THUS, THE COURT CONCLUDED THAT THE MUNICIPAL VALUATION AND THE ANNUAL VALUE UNDER S. 2 3(1)(A) ARE ONE OF THE SAME. THE DECISION OF HONBLE CALCUTTA HIGH COURT H AS BEEN FOLLOWED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF M.V. SONAV ALA VS. CIT (1989) 75 CTR (BOM) 74 : (1989) 177 ITR 246 (BOM), WHEREIN HONBLE BOMBAY HIGH COURT HAS OBSERVED AS FOLLOWS : 'HOWEVER, THE QUESTIONS POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF S. 23(1)(A) SHOULD BE T AKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STANDARD R ENT. THE QUESTION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKEN AT THE AMOUNT WHIC H IS ACTUAL COMPENSATION RECEIVED OR AT THE AMOUNT FIXED AS MUNICIPAL RATEAB LE VALUE. OBVIOUSLY, MUNICIPAL RATEABLE VALUE CANNOT BE EQUATED TO STANDARD RENT. IN THIS CONTEXT, IT MAY BE DESIRABLE TO REFER TO THE CALCUTTA HIGH COURTS DEC ISION IN THE CASE OF CIT VS. SMT. PRABHABATI BANSALI (1982) 29 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 REDETERMINE THE ANNUAL VALUE O F THE PROPERTY UNDER S. 23(1) AFRESH WITH REFERENCE TO ITS RATEABLE VALUE AS DETE RMINED BY THE MUNICIPAL CORPORATION. THE QUESTION WAS ANSWERED IN THE AFFIR MATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPU TED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR-TO-YEAR AND THE ANNUAL MUNICIPAL VALUE. FOLLOWING THE CALCUTTA HIGH COURT DECISION (1982) 2 9 CTR (CAL) 15 : (1983) 141 ITR 419 (CAL), WHICH WE THINK, HAS TAKEN THE RIGHT VIEW, WE ANSWER THE QUESTIONS IN THE NEGATIVE AND AGAINST THE DEPARTMENT WITH A D IRECTION THAT THE ANNUAL VALUE OF DIFFERENT PROPERTIES WILL NOW BE DETERMINED BY T HE TRIBUNAL IN ACCORDANCE WITH THE DIRECTIONS SET OUT ABOVE. NO ORDER AS TO COSTS. ' 12. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVE RAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT TH E MUNICIPAL VALUE SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE . WE ARE NOT MAKING REFERENCE TO THOSE DECISIONS, SINCE, IN OUR OPINION THE AFORESAID PRONOUNCEMENT OF HONBLE BOMBAY HIGH COURT CONSIDER S THE DECISIONS OF HONBLE CALCUTTA HIGH COURT WHICH IN TURN HAS CONSI DERED THE LAW LAID DOWN BY THE HONBLE APEX COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHARGE UNDER S. 22 IS NOT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNICIPAL VALUE WOULD BE A PROPER YARDSTIC K FOR DETERMINING THE ANNUAL VALUE. DECISION IN THE CASE OF SHIELA KAUSHI SH (SUPRA) MENTIONS STANDARD RENT UNDER THE RENT CONTROL ACT AS ONE OF THE YARDSTICKS. THIS DOES NOT MEAN THAT STANDARD RENT ALONE IS TO BE CON SIDERED. IN THE PRESENT CASE, WE ALSO NOTICE THAT THE AO HAS NOT CH OSEN TO ADOPT THE ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 9 STANDARD RENT AS PER THE RENT CONTROL ACT AS YARDST ICK FOR DETERMINING THE ANNUAL VALUE. WE ALSO FIND FROM THE DECISION OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRABHABATI BANSALI (SUPRA ) THAT STANDARD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CA N BE ADOPTED IN PLACE OF MUNICIPAL VALUATION. FOR ALL THE ABOVE REASONS, WE HOLD THAT THE MUNICIPAL VALUATION SHOULD BE THE BASIS OF DETERMIN ING ANNUAL VALUE IN THE PRESENT CASE. ACTION OF THE REVENUE AUTHORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS OF INQUIRIES CONDUCTED REGARDING MARKET RENT IN THE VICINITY OF THE PROPERTY IS NOT IN ACCORDANCE WITH LAW. THE AO IS DIRECTED TO ACCEPT THE INCOME FROM HOUSE PROPERTY ON THE BAS IS OF MUNICIPAL VALUATION. 13. THE ABOVE PARAS CLEARLY SHOW THAT THE WHOLE LAW ON THE RELEVANT ISSUE WAS CONSIDERED AND ULTIMATELY IT WAS CONCLUDED THAT MU NICIPAL VALUATION IS TO BE TAKEN AS THE BASIS FOR DETERMINATION OF ANNUAL VALUE. WE FURTHER FIND THAT THE HONBLE BOMBAY HIGH COURT HAS AGAIN CONSIDERED SIMILAR QUES TION IN THE CASE OF SMT. SMITABEN N. AMBANI VS. CWT (SUPRA) UNDER WEALTH TAX ACT AND ULTIMATELY IT WAS OBSERVED AS UNDER: IN OUR VIEW, THE BASIS ON WHICH A SELF-OCCUPIED PR OPERTY IS VALUED UNDER RULE 1BB OF THE WEALTH-TAX ACT AND MUNICIPAL RATABL E VALUE IS ARRIVED AT UNDER MUNICIPAL LAW IS THE SAME I.E. A REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FROM A HYPOTHETICAL TE NANT. THAT WHILE ARRIVING AT SUCH REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FROM A HYPOTHETICAL TENANT, THE AMOUNT OF STA TUTORY DEDUCTION, IF ANY, PERMISSIBLE UNDER THE LOCAL MUNICIPAL LAW MUST BE ADDED TO THE RATABLE VALUE. WE THUS ANSWER QUESTION NO. 3 AS FO LLOWS: THAT WHILE APPLYING PROVISIONS OF RULE 1BB FOR VAL UING THE SELF-OCCUPIED PROPERTY , MUNICIPAL RATABLE VALUE WITH ADDITION OF STATUTORY DEDUCTIONS IF ANY, MAY BE ADOPTED INSTEAD OF STANDARD RENT, FOR A RRIVING AT THE GROSS MAINTAINABLE RENT. THOUGH THE DECISION WAS RENDERED UNDER THE WEALTH-T AX ACT BUT THE DEFINITION OF GROSS MUNICIPAL RENT GIVEN UNDER RULE 1BB(2)(A) REA DS AS UNDER: THE SUM FOR WHICH THE HOUSE MIGHT REASONABLE BE EXPECTED TO LET FROM YEAR TO YEAR 14. THUS, IT IS CLEAR THAT THE DEFINITION IS ALMOST IDENTICAL WITH THE DEFINITION OF ANNUAL VALUE GIVEN IN SECTION 23(1)(A) OF THE INCOM E-TAX ACT. THEREFORE, IN OUR OPINION THE VIEW THE AO HAS REFERRED TO SECTION 23( 1)(A) AND WAS RIGHT TO EXPLORE THE POSSIBILITY OF ASSESSING INCOME AT A HIGHER FI GURE BUT THE ANNUAL VALUE UNDER SECTION 23(1)(A) CANNOT GO BEYOND THE MUNICIPAL VAL UATION. ITA. NO.1280/M/2009 M/S. TIP TOP TYPOGRAPHY 10 15. IN THE CASE BEFORE US IT WAS CLAIMED BEFORE THE ASSESSING OFFICER THAT THE RATABLE VALUE FIXED BY THE MUNICIPAL AUTHORITIES WA S RS. 39,573/- PER ANNUM WHEREAS THE ACTUAL RENT RECEIVED UNDER SECTION 23(1)(B) WA S RS. 30,000 PER MONTH I.E. RS.3,60,000/- PER ANNUM WHICH IS MUCH HIGHER. THE REFORE, ONLY ACTUAL RENT RECEIVED AMOUNTING TO RS.36,00,000/- UNDER SECTION 23(1)(B) SHOULD HAVE BEEN ASSESSED AS INCOME FROM HOUSE PROPERTY. 16. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADM ITTED BEFORE US THAT NO EVIDENCE WAS FILED BEFORE THE ASSESSING OFFICER REG ARDING RATEABLE VALUE FIXED BY THE MUNICIPAL AUTHORITIES. THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE RATEABLE VALUE FIXED BY THE MUNICIPAL AUTHORITIES A ND IF THE SAME IS LESS THAN RS. 3,60,000/- THEN THE ACTUAL RENT RECEIVED SHOULD BE TAXED OTHERWISE THE MATTER MAY BE DECIDED IN ACCORDANCE WITH LAW. 16. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2010. SD. SD. (N.V. VASUDEVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 31 ST MARCH, 2010. COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-XII, MUMBAI 4. THE CIT(A)-XII, MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI