Boltzen Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1396/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69627 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH KUMAR SEHGAL
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 1396/DEL/2012 ASSESSMENT YEAR: 2008- 2009 BOLTZEN PVT. LTD., VS. ITO, D-105, WARD-3(1) VIVEK VIHAR, NEW DELHI. NEW DELHI. (PAN NO. AACCB2575N) (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI RAKESH KUM AR SEHGAL, CA RESPONDENT BY : SMT. ABHA RANI SI NGH, SR. DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLA TE ORDER SOLELY ON THE GROUND THAT THE ADDITION OF RS. 7,74,720/- UNDER TH E HEAD INCOME FROM HOUSE PROPERTY AND CONFIRMATION OF THE SAME BY THE LD. CIT(A) IS CONTRARY TO FACTS AND LAW AND THEREFORE THE ADDITION IS LIAB LE TO BE DELETED. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW AND MATERIAL AVA ILABLE ON RECORD. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS OWNER OF A PLOT ADMEASURING 1614 SQ. FT AT A-25, SECTOR 16, NOIDA, THE COST OF WHICH IS BEING SHOWN BY THE ASSESEE AT RS. 22,53,291/- UNDER THE HEAD INVE STMENT IN ITS BALANCE ITA NO. 1396/DEL/2012 2 SHEET. THE SAID PLOT WAS ALLOTTED TO THE ASSESEE BY THE NOIDA AUTHORITIES. ON FIELD ENQUIRIES DIRECTED BY THE AO, THE INSPECTO R REPORTED THAT THE AREA OF THE PLOT IS ABOVE 1000 SQ. YARDS AND THE ASSESSE E HAS CONSTRUCTED A BUILT-UP SHED OF APPROXIMATELY 40 FT. X 60 FT. ON T HE SAME ALONGWITH ANOTHER KUCHCHA SHED AND BOUNDARY WALL ON ALL FOUR SIDES OF THE PLOT OF APPROXIMATELY 6-7 FT. HIGH WITH BIG STEEL GATE. THE SAID PROPERTY WAS LYING VACANT AND A GUARD WAS APPOINTED BY THE DIRECTOR OF THE ASSESSEE COMPANY FOR WATCH AND WARD OF THE PROPERTY. THE AO PROPOSED AS TO WHY THE NOTIONAL RENTAL INCOME FROM THE ABOVE PROPERTY SHOU LD NOT BE BROUGHT TO TAX. THE ASSESSEE TOOK THE PLEA THAT THE PROPERTY W AS UNDER ILLEGAL OCCUPATION. IT WAS ALSO STATED THAT THE ACCESS TO T HE PROPERTY WAS OCCUPIED BY STAMP PAPER VENDORS AND DEED WRITERS ETC. ON FUR THER ENQUIRY BY THE INSPECTOR IT WAS FOUND THAT ALTHOUGH EARLIER THERE WERE SOME UNAUTHORIZED OCCUPATION ON THE ROAD BY STAMP VENDORS DEED WRITER S BUT NOW THERE WAS NO RESTRICTION ON ACCESS TO ANY OF THE OFFICE / IND USTRIES LOCATED ON THE ROAD. THE ASSESSEE ALSO PLEADED BEFORE THE AO THAT SINCE PROPERTY WAS SITUATED ON AN INDUSTRIAL PLOT WHICH WAS ALLOTTED TO THE ASS ESSEE FOR MANUFACTURING OF COLOUR TELEVISION, RECEIVER SETS OF BOXES VIDEOC ON, THE SAME CANNOT BE TREATED AS A HOUSE PROPERTY U/S 22 OF THE ACT. IT WAS ALSO ARGUED BY THE ASSESEE THAT THE PROPERTY WAS NOT IN A LETTABLE CON DITION AS THERE WAS NO WATER AND ELECTRICITY CONNECTIONS AND NO DOOR OR WI NDOW AND WILD PLANTS HAD GROWN INSIDE THE PLOT. ON THE BASIS OF LOCAL EN QUIRY CONDUCTED, THE AO ITA NO. 1396/DEL/2012 3 HELD THAT THE ABOVE DIFFICULTIES WERE ON ACCOUNT OF FACT THAT THE PROPERTY HAD BEEN KEPT VACANT BY THE ASSESSEE FOR LONG TIME AND HE ACCORDINGLY CALCULATED THE ANNUAL LETTING VALUE OF THE PROPERTY (ALV) AT RS. 7,74,720/- BY ADOPTING THE RATE OF RS. 40 PER SQ. FT. PER MONT H. THE ASSESSEE PREFERRED FIRST APPEAL AGAINST THIS ACTION OF THE AO BUT COUL D NOT SUCCEED. HENCE THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. IN SUPPORT OF THE APPEAL THE LD. AR SUBMI TTED THAT SECTION 22 OF THE ACT IS NOT APPLICABLE IN THE PRESENT CASE, HENCE TH ERE IS NO QUESTION OF APPLICATION OF SECTION 23 OF THE ACT IN THE PRESENT CASE. HE SUBMITTED THAT SECTION 22 IS APPLICABLE TO THE OWNER AND THE ASSES SEE IS NOT AN ABSOLUTE BENEFICIAL OWNER BUT IS ONLY A LIMITED OWNER OF THE PLOT OF LAND ALLOTTED BY NOIDA. HE SUBMITTED THAT ASSESSEE HAS ENTERED WITH A LEASE DEED WITH NOIDA AUTHORITY FOR THE SAID PLOT OF LAND. IN THIS REGARD, HE REFERRED PAGE NOS. 11 TO 15 OF THE PAPER BOOK I.E. COPY OF THE LE ASE DEED. HE DREW OUR ATTENTION TO THE CONTENTS OF PAGE NO. 13 TO 14 OF T HE PAPER BOOK WHERE DIFFERENT RELEVANT CLAUSES TO THE LEASE DEED HAVE B EEN MENTIONED WHEREBY RESTRICTIONS HAS BEEN IMPOSED ON SALE, TRANSFER , S UB LETTING ETC. LD. AR WITH THE ASSISTANCE OF THESE CLAUSES SUBMITTED THAT THE ASSESSEE CANNOT BE SAID TO HAVE POWER OF ABSOLUTE ENJOYMENT OF THE PROPER TY IN QUESTION. IN SUCH CIRCUMSTANCES ASSESSEE CANNOT BE SAID TO BE EVEN A BENEFICIAL OWNER AND THEREFORE PROVISIONS OF SECTION 22 ARE NOT APPLICAB LE TO THE ASSESSEE. ITA NO. 1396/DEL/2012 4 5. WITHOUT PREJUDICE TO THE ABOVE ARGUMENT, THE LD. AR SUBMITTED FURTHER THAT IF AT ALL ASSESSEE IS TREATED AS A OWNER THEN THE ASSESSEE IS COVERED WITHIN THE EXCEPTION PROVIDED TO SECTION 22 AND THE REFORE SECTION 22 IS NOT APPLICABLE TO IT FOR THE SAID PROPERTY. HE THEN RE FERRED PROVISIONS OF SECTION 22 OF THE ACT AND STATED THAT ASSESSEE HAS OCCUPIED PROPERTY FOR THE PURPOSE OF BUSINESS. HE REFERRED PAGE NO. 30 OF THE PAPER BOOK I.E. COPY OF THE INSPECTORS REPORT WHEREBY IT HAS BEEN INFORMED THAT THE PROPERTY IS OCCUPIED BY THE ASSESSEE. AS PER PARA III (1) OF TH E LEASE DEED PROPERTY HAS TO BE USED ONLY FOR SPECIFIED BUSINESS OF MANUFACTU RING OF TELEVISION RECEIVER SETS SIGNIFYING THAT THE OCCUPATION OF THE PROPERTY IS FOR BUSINESS CARRIED ON BY THE ASSESSEE. HE ALSO REFERRED PAGE N O. 10 AND 10A OF THE PAPER BOOK I.E INCOME TAX RETURN FORM AND COMPUTATI ON OF TOTAL INCOME WHEREIN INCOME DISCLOSED HAS BEEN SHOWN AS BUSINESS INCOME CLARIFYING THAT PROFITS OF BUSINESS ARE CHARGEABLE TO TAX. LD. AR SUBMITTED THAT THE ASSESSEE THUS FULFILLS ALL THE CONDITIONS OF THE EX CEPTION TO SECTION 22 OF THE ACT THAT THE ASSESSEE HAS OCCUPIED THE SAID PROPERT Y FOR THE PURPOSE OF BUSINESS CARRIED ON BY HIM, PROFITS OF WHICH ARE CH ARGEABLE TO TAX. 6. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION THE LD. AR SUBMITTED FURTHER THAT IF AT ALL THE PROVISIONS OF SECTION 22 ARE MAD E APPLICABLE TO THE ASSESSEE, THE ASSESSEE CLAIMS THAT THE RENT DETERMI NED BY AO IS ON THE BASIS OF INSPECTORS REPORT WHICH IS ARBITRARY AND UNCALLED FOR. HE SUBMITTED THAT ALV IN THE CASE OF THE ASSESSEE CAN BE DETERMI NED AS PER PROVISIONS OF ITA NO. 1396/DEL/2012 5 SECTION 23 (1)(A) AS PER WHICH THE SUM FOR WHICH TH E PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. HE SUBMITTED THAT AS PER THE RESTRICTION IMPOSED IN THE LEASE DEED THE ASSES SEE CANNOT SUB LET THE PROPERTY HENCE ALV OF THE PROPERTY IS NIL. HE SUBMI TTED THAT EVEN AFTER THE PERMISSION FROM NOIDA AUTHORITY IS OBTAINED FOR SU B LETTING THE PROPERTY, THE ALV DEPENDS UPON ACTUAL CONDITION OF THE PROPE RTY VIZ. ITS QUALITY OF CONSTRUCTION, ABSENCE OF ELECTRICITY AND WATER CONN ECTION ETC. HE SUBMITTED THAT NEIGHBORING PROPERTIES VIZ. HCL ETC. REFERRED BY INSPECTOR IN HIS REPORT CANNOT BE CONSIDERED COMPARABLE BECAUSE THEIR CONST RUCTION QUALITY DIFFERS FROM THE PROPERTY OF THE ASSESSEE. NEIGHBORING PROP ERTIES CAN BE AN IDEA BUT SIMILAR PROPERTIES IN THE NEIGHBORING AREA ARE TO BE CONSIDERED. HE SUBMITTED THAT PROPERTY ENCIRCLED BY VENDORS IN THE VICINITY MAKING THE ACCESS TO THE PROPERTY DIFFICULT DURING THE YEAR OF ASSESSMENT WHICH SHOULD HAVE BEEN ALSO CONSIDERED. LD. AR REFERRED PAGE 31 OF THE PAPER BOOK I.E. COPY OF THE INSPECTORS REPORT DATED 29.11.2010, WH EREIN IN LAST PARA THE INSPECTOR HAS ENQUIRED THE RENTAL RATES IN AREA WI THOUT REFERRING TO THE PARTICULARS OF CONSTRUCTION ON THE PLOT OF THE ASSE SSEE AND CONSTRUCTION QUALITY AS WELL AS ABSENCE OF ELECTRICITY AND WATER CONNECTIONS THERETO. THUS THE RENTAL RATES CAN BE SAID TO BE ON HEARSAY BASIS WITH NO MATERIAL ON RECORD EXCEPT THE STATEMENT OF THE INSPECTOR WITHOU T REFERRING TO EVEN THE NAMES AND ADDRESSES OF THE PERSONS FROM WHOM ENQUIR Y WAS MADE. LD. AR CONCLUDED HIS ARGUMENT WITH THE SUBMISSION THAT IN ACCORDANCE WITH ITA NO. 1396/DEL/2012 6 PROVISION OF SECTION 23(1)(A) ALV OF THE PROPERTY O F THE ASSESSEE HAS TO BE AN AMOUNT EQUIVALENT TO RENTAL OF SIMILAR PROPERTIE S AS THAT OF ASSESSEE IN THE VICINITY AND TAKING INTO ACCOUNT THE RESTRICTIO N IMPOSED ON THE ASSESSEE IN THE LEASE DEED FOR SUB LETTING ETC. 7. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. 8. AS PER THE ABOVE SUBMISSIONS AND ORDERS OF TH E AUTHORITIES BELOW, THE FIRST ISSUE BEFORE US IS AS TO WHETHER THE PROPERTY OF THE ASSESSEE QUALIFY THE REQUIREMENT OF THE PROVISIONS LAID DOWN U/S 22 OF THE ACT UNDER THE CATEGORY OF INCOME FROM HOUSE PROPERTY? FOR A REA DY REFERENCE CONTENTS OF SECTION 22 OF THE ACT ARE BEING REPRODUCED HEREU NDER :- 22. THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSI ON CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEAB LE TO INCOME TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 9. IF WE FIND THAT THE PROPERTY OWNED BY THE ASSES SEE FALLS U/S 22 UNDER THE CATEGORY OF INCOME FROM HOUSE PROPERTY THEN O NLY PROVISION LAID DOWN U/S 23 OF THE ACT WILL COME IN OPERATION TO DETERMI NE ANNUAL VALUE OF THE SAID HOUSE PROPERTY. AS PER THE PROVISIONS LAID DOW N U/S 22 THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LA NDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ONLY EXC EPTION TO SECTION 22 OF ITA NO. 1396/DEL/2012 7 THE ACT IS OTHER THAN SUCH PORTION OF SUCH PROPER TY AS HE MAY OCCUPY FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED O N BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX. IN OTHER WORDS SUCH PORTION OF SUCH PROPERTY AS AN ASSESSEE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH A RE CHARGEABLE TO INCOME TAX SHALL NOT BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE FOR ADJUDICATION OF THE ISSUE WE FIND THAT THERE IS NO DISPUTE THAT THE LAND IN QUESTION ALLOTTED BY THE NOIDA AUTHORITIES TO THE ASSESSEE A ND OCCUPIED BY THE ASSESSEE WAS STRICTLY FOR THE PURPOSE OF MANUFACTUR E OF COLOUR TELEVISION, RECEIVER SETS OF BOXES VIDEOCON AS IT IS ALSO APPAR ENT FROM CLAUSES III(I) OF LEASE DEED, COPY OF WHICH HAS BEEN MADE AVAILABLE A T PAGE NO. 13 OF THE PAPER BOOK. FOR A READY REFERENCE THE SAME IS BEING REPRODUCED HEREUNDER :- CLAUSE III (I) OF LEASE DEED PLACED AT PAGE 13 OF P APER BOOKLET THAT THE LESSEE SHALL NOT AT ANY TIME CARRY ON OR PERMIT TO BE CARRIED ON UPON THE DEMISED PREMISES ANY TRADE OR BUSINESS WHATSOEVER OR TIME OR PERMIT THE SAME TO BE USED FOR ANY PURPOSE OTHE R THAN THE MANUFACTURE OF COLOR TELEVISION RECEIVER SET OF BOXES VIDEO CON WITHOUT THE CONSENT IN WRITING OF THE LESSOR FIRST HAD AND OBTAINED. 10. THUS IT IS AN ADMITTED FACT THAT THE PROPERT Y IN QUESTION OCCUPIED BY THE ASSESSEE WAS FOR THE PURPOSE OF BUSINESS CARRIE D ON BY HIM. THE COST OF THE LAND WAS BEING SHOWN BY THE ASSESSEE AT RS. 22, 53,291/- UNDER THE HEAD INVESTMENT IN ITS BALANCE SHEET. THE ONLY DI SQUALIFICATION FOR THE ITA NO. 1396/DEL/2012 8 ASSESSEE FOR APPLICATION OF THE EXCEPTION TO THE PR OVISION U/S 22 OF THE ACT REMAINED THAT THE ASSESSEE WAS NOT CARRYING OUT ANY BUSINESS, BUT HE WAS IN OCCUPATION OF THE PROPERTY. THE AO HAS ALSO ALLE GED THAT THE PROPERTY HAD BEEN KEPT VACANT BY THE ASSESSEE FOR LONG TIME DELIBERATELY THOUGH IT WAS A VALUABLE PROPERTY WHICH WAS USABLE. NOW THE Q UESTION BEFORE US IS THAT IN SUCH A SITUATION WHEN THE PROPERTY WAS OCCU PIED BY THE ASSESSEE FOR THE PURPOSE OF A BUSINESS BUT NO BUSINESS WAS CARRI ED ON BY HIM PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX AS TO WHETHER SU CH PROPERTY SHALL BE CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY? AS PER CLEAR WORDING OF SECTION 22 SINCE THE ASSESSEE DESP ITE OCCUPYING THE PROPERTY FOR THE PURPOSE OF BUSINESS DID NOT CARRY ON ANY BUSINESS, THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME TAX WILL NOT QUALIFY THE BENEFIT OF EXCEPTION PROVIDED U/S 22 OF THE ACT. THUS INCOME F ROM HOUSE PROPERTY OF THE SAID PROPERTY FALLING WITHIN THE PROVISION OF S ECTION 22 OF THE ACT WILL BE DETERMINED AS PER THE PROVISIONS OF SECTION 23(1)(A ) OF THE ACT, THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. WE THUS DO NOT FIND INFIRMITY IN THE ACTION O F THE AUTHORITIES BELOW COMING TO THE CONCLUSION THAT SECTION 23(1)(A) OF T HE ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE. NOW THE FURTHER QUESTION IS A S TO WHETHER THE RENTAL RATE ADOPTED AT RS. 40 PER SQ. FT. PER MONTH ON THE BASIS OF THE REPORT OF THE INSPECTOR IS REASONABLE OR NOT. ON GOING THROUG H THE REPORT OF THE INSPECTOR DATED 29.11.2010 WE FIND THAT IT WAS INFO RMED THAT THE PREVAILING ITA NO. 1396/DEL/2012 9 RENTAL RATE IN THE LOCALITY (A-25, SECTOR -16, NOID A ) WAS AROUND RS. 60/- PER SQ. FT. AND THE RATES DURING THE FINANCIAL YEAR 200 7-08 WERE APPROXIMATELY RS. 40/- PER SQ. FT. THE AO HAS NOT CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THE PROPERTY COULD NOT BE LET OUT WIT HOUT PRIOR PERMISSION OF NOIDA AUTHORITY THAT TOO FOR THE AGREED PURPOSE OF MANUFACTURING COLOR TELEVISION RECEIVER SET OF BOXES VIDEOCON AND THAT WATER AND ELECTRICITY CONNECTIONS WERE NOT AVAILABLE IN THE PROPERTY. WE THUS IN THE INTEREST OF JUSTICE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION OF THE ISSUE REGARDING LETTABLE VALUE OF THE PROPERTY DUE TO ABOVE STATED REASONS AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 11. CONSEQUENTLY APPEAL IS ALLOWED FOR STATISTI CAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2013. SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 22 ND NOVEMBER, 2013 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT