Madras Application Software Development Export Company Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 142/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9488 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.139, 140, 141 & 142/MDS/2016 ( )( / ASSESSMENT YEARS : 2002-03, 2004-05, 2005-06 & 20 06-07 M/S MADRAS APPLICATION SOFTWARE DEVELOPMENT EXPORT COMPANY PRIVATE LIMITED, NO.6, SMITH ROAD, CHENNAI - 600 034. PAN : AACCM 8764 E V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE -.+, / 0 / RESPONDENT BY : SH. A.B. KOLI, JCIT 1 / 2% / DATE OF HEARING : 30.03.2016 3') / 2% / DATE OF PRONOUNCEMENT : 22.04.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) 8, CHENNAI, DATED 30.10.2015, PERTAINING TO ASSESSM ENT YEARS 2002-03, 2004-05, 2005-06 AND 2006-07. SINCE COMMO N ISSUE 2 I.T.A. NOS.139 TO 142/MDS/16 ARISES FOR CONSIDERATION IN ALL THESE APPEALS, WE H EARD THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. SH. R. VIJAYARAGHAVAN, THE LD.COUNSEL FOR THE AS SESSEE, SUBMITTED THAT THE ASSESSEE LET OUT A HOUSE TO M/S DATA SOFTWARE RESEARCH COMPANY PVT. LTD. FOR A MONTHLY RENT OF ` 7500/-. THE ASSESSING OFFICER ESTIMATED THE RENTAL VALUE AT ` 1,90,240/- AS AGAINST THE RENTAL INCOME DECLARED BY THE ASSESSEE AT ` 90,000/-. THE ASSESSING OFFICER ESTIMATED THE RENTAL VALUE AT ` 12,00,000/- PER ANNUM AFTER INCREASING THE SAME AT THE RATE OF 25% PER ANNUM. ACCORDING TO THE LD. COUNSEL, INCREASING THE RENTAL VALUE AT 25% IS ABNORMAL. IT CANNOT BE ANYBODYS IMAGINATION THAT THE RENTAL VALUE IS INCREASED AT THE RATE OF 25% PER ANNUM. THE CIT (APPEALS) ESTIMATED THE RENTAL INCOME AT ` 3,00,000/- PER ANNUM. ACCORDING TO THE LD. COUNSEL, AT THE BEST, THE RENTAL VALUE CAN BE INCREASED 15% AT AN INTERVAL OF THREE YEARS. THEREFORE, THE ASSE SSEE MAY NOT HAVE ANY GRIEVANCE IF THE RENTAL VALUE IS FIXED AT THE I NCREASED RATE OF 15% IN EVERY THREE YEARS. 3. ON THE CONTRARY, SH. A.B. KOLI, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT FOR THE ASSESSMENT Y EAR 2002-03, THE ASSESSEE ACCEPTED BEFORE THE COMMISSIONER THE R EVISION OF 3 I.T.A. NOS.139 TO 142/MDS/16 RENTAL INCOME BY 25%. BY TAKING INTO CONSIDERATION OF THIS ACCEPTANCE MADE BY THE ASSESSEE BEFORE THE COMMISSI ONER, THE APPELLATE COMMISSIONER ESTIMATED THE RENTAL INCOME AT ` 3,00,000/- PER ANNUM. SIMILARLY, FOR ASSESSMENT YEAR 2004-05, THE APPELLATE COMMISSIONER ESTIMATED THE RENTAL INCOME AT ` 4,68,750/-. FOR THE ASSESSMENT YEAR 2005-06, BY ADOPTING 25% INCREASE P ER ANNUM, THE RENTAL INCOME WAS WORKED OUT TO ` 5,85,938/- PER ANNUM. SIMILARLY FOR THE ASSESSMENT YEAR 2006-07, THE RENT AL INCOME WAS ESTIMATED BY APPELLATE COMMISSIONER AT ` 7,32,422/- PER ANNUM. SINCE THE HOUSE PROPERTY WAS LET OUT TO HOLDING COM PANY OF THE ASSESSEE, ACCORDING TO THE LD. D.R., THE INCOME HAS TO BE ESTIMATED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 23 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') CLEARLY S AYS THAT THE ANNUAL VALUE SHALL BE THE SUM FOR WHICH THE PROPERTY MAY R EASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR OR WHERE THE PROPERTY IS LET OUT AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE O WNER IN RESPECT THEREOF. IN THE CASE BEFORE US, A PROPERTY WAS LET OUT TO A HOLDING COMPANY, NAMELY, M/S DATA SOFTWARE RESEARCH COMPANY PVT. LTD. 4 I.T.A. NOS.139 TO 142/MDS/16 SINCE THE PROPERTY WAS LET OUT TO A HOLDING COMPANY , THE AUTHORITIES BELOW INCREASED THE RENT RECEIVED BY 25% PER ANNUM. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT INCREASI NG THE VALUE AT THE RATE OF 25% PER ANNUM IS HIGHLY ARBITRARY. THE REN TAL VALUE CANNOT INCREASE AT THE RATE OF 25% YEAR TO YEAR. 5. THE RENTAL VALUE WOULD DEPEND UPON THE DEMAND FO R THE PROPERTY IN THE MARKET. NORMALLY, WHEN THE PROPERT Y WAS LET OUT FOR AGREED RENT BETWEEN THE LESSER AND THE LESSEE, THE AGREED RENT SHALL BE TAKEN AS RENT RECEIVABLE. IN THIS CASE, T HE ASSESSEE LET OUT THE PROPERTY TO A HOLDING COMPANY. THEREFORE, WE H AVE TO ASCERTAIN WHETHER THE BUILDING WAS LET OUT AT THE MARKET RATE . COPY OF THE RENTAL AGREEMENT IS NOT AVAILABLE ON RECORD. THE P ROPERTY APPEARS TO BE SITUATED AT CRESCENT STREET, ARCH BISHOP MATH IAS AVENUE, RAJA ANNAMALAIPURAM, CHENNAI. THE BUILT-UP AREA AP PEARS TO BE 2584 SQ.FT. IT IS NOT KNOWN WHETHER ANY LAND APPUR TENANT TO THE BUILDING IS AVAILABLE OR NOT. THE ASSESSING OFFICE R APPARENTLY COMPUTED THE RENTAL VALUE ON THE BASIS OF INSPECTOR S REPORT AND THE MUNICIPAL VALUE. THE BUILDING IS ADMITTEDLY IN THE CITY OF CHENNAI AND IT IS GOVERNED BY TAMIL NADU RENT CONTROL ACT. TAMIL NADU RENT CONTROL ACT PROVIDES FOR METHOD OF CALCULATION OF RENTAL VALUE. 5 I.T.A. NOS.139 TO 142/MDS/16 THEREFORE, THE ASSESSING OFFICER IS EXPECTED TO COM PUTE THE ANNUAL RENTAL VALUE OF THE PROPERTY ON THE BASIS OF THE ME THOD PROVIDED IN THE TAMIL NADU BUILDINGS (LEASE & RENT CONTROL) ACT , 1960. SINCE THE PROVISIONS OF TAMIL NADU BUILDINGS (LEASE & REN T CONTROL) ACT, 1960 WAS NOT TAKEN INTO CONSIDERATION AND THE COMMI SSIONER ENHANCED THE RENT AT THE RATE OF 25% PER ANNUM, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER H AS TO COMPUTE THE RENTAL VALUE OF THE PROPERTY BY TAKING INTO CON SIDERATION OF THE PROVISIONS OF TAMIL NADU BUILDINGS (LEASE & RENT CO NTROL) ACT, 1960. ONCE IT IS DETERMINED UNDER THE PROVISIONS O F TAMIL NADU BUILDINGS (LEASE & RENT CONTROL) ACT, 1960 FOR THE ASSESSMENT YEAR 2002-03, IT WOULD BE REASONABLE TO INCREASE THE REN T AT THE RATE OF 15% FOR EVERY THREE YEARS AS SUGGESTED BY THE LD.CO UNSEL FOR THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LOWER AUT HORITIES ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXA MINE THE ISSUE IN THE LIGHT OF THE PROVISIONS OF TAMIL NADU BUILDINGS (LEASE & RENT CONTROL) ACT, 1960 AND ESTIMATE ANNUAL RENTAL INCOM E FOR ASSESSMENT YEAR 2002-03 AND THEREAFTER THE RENT OF THE BUILDING SO DETERMINED FOR ASSESSMENT YEAR 2002-03 MAY BE INCRE ASED BY 15% FOR EVERY THREE YEARS. IF THERE IS ANY DIFFICULTY, IT IS OPEN TO THE 6 I.T.A. NOS.139 TO 142/MDS/16 ASSESSING OFFICER TO REFER THE MATTER TO THE VALUAT ION OFFICER TO ASCERTAIN THE RENT OF THE BUILDING AFTER APPLYING T HE PROVISIONS OF TAMIL NADU BUILDINGS (LEASE & RENT CONTROL) ACT, 19 60. 6. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22 ND APRIL, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 22 ND APRIL, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT, CHENNAI-4, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.