TUPUR CHATTERJI, MUMBAI V. ACIT-11(1), MUMBAI

ITA 1440/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83672 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 06-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Deemed owner of house property

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.1440 /MUM/2012 (A.Y. 2008-09) SMT. TUPUR CHATTERJI, 101, MARBLE ARCH PREMISES, 94, NARGIS DUTT ROAD, PALI HILL, BANDRA (W), MUMBAI 400 050 PAN:ACXPC 3361M THE ACIT 11(1), AAYKAR BHAVAN, MK MARG, MUMBAI 400 020 ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI MANDAR VAIDYA ()$% * + * + * + * + /RESPONDENT BY : SHRI. NEIL PHILIP ' * ,-' / / / / DATE OF HEARING : 16.09.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 16.09.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIR ECTED AGAINST ORDER PASSED BY LD. CIT(A)-3, MUMBAI DATED 23/12/2011 FOR ASSESSMENT YEAR 2008- 09. GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -3, MUMBAI ERRED IN NOT GIV ING DIRECTIONS TO THE AO TO ADOPT MUNICIPAL RATEABLE VALUE FOR COMPUTING. INCOM E OF SECOND PROPERTY, ACQUIRED DURING THE YEAR, WHICH REMAINED IDLE, ON T HE GROUND THAT THE DETAILS OF ALV WERE NOT FURNISHED BY THE APPELLANT. THE AO MAY BE DIRECTED TO ADOPT MUNICIPAL RATEABLE VALUE FOR SECOND PROPERTY AS PER THE DECISION OF THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF M. V. SONAVALA V CIT (177 ITR 246) 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A)-3 MUMBAI ERRED IN NOT ALLOWING THE FULL INTEREST OF R S.3,50,641/- PAID FOR THE SECOND PROPERTY, AS THE SAME WAS TREATED AS DEEMED LET OUT BY THE AO. 2. LD. AR OF THE ASSESSEE DID NOT PRESS GROUND NO.1 , THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 3. APROPOS GROUND NO.2, THE FACTS ARE THAT THE ASS ESSEE IS OWNER OF TWO PROPERTIES, ONE OF WHICH IS FLAT NO.101, MARBLE ARC H, PALI HILL, BANDRA AND THE ITA NO.1440 /MUM/2012 (A.Y. 2008-09) 2 OTHER IS 203, NESTLE-1, A-WING, P.B.MARG, MUMBAI. FLAT AT BANDRA HAS BEEN CONSIDERED TO BE SELF OCCUPIED PROPERTY AND PROPERT Y IN NESTLE IS VACANT PROPERTY UPON WHICH AO HAS APPLIED ALV AT 7% OF BOO K VALUE OF THE PROPERTY AND COMPUTED DEEMED HOUSE PROPERTY INCOME OF RS.1,4 0,185/- AS PER FOLLOWING CALCULATION: BOOK VALUE OF THE PROPERTY 57,22,000/- 7% OF THE BOOK VALUE OF THE PROPERTY 4,00,540/- LESS: 30% STANDARD DEDCUTION 1,20,162/- LESS : INTEREST PAID 1,40,193/- DEEMED HOUSE PROPERTY INCOME 1,40,185/- 3.1 FOR BUYING AFOREMENTIONED PROPERTY THE ASSESSE E HAD OBTAINED LOAN FROM THE BANK FOR WHICH INTEREST OF RS.3,50,641/- WAS PAID, WHICH WAS RESTRICTED BY THE AO TO A SUM OF RS.1,40,193/- ON T HE GROUND THAT ASSESSEE COULD NOT BE ALLOWED A CUMULATIVE DEDUCTION MORE T HAN RS.1,50,000/- AS PER SECOND PROVISO TO SECTION 24 OF THE INCOME TAX ACT, 1961 (THE ACT). THE LD. CIT(A) HAS UPHELD THE ACTION OF A.O. THE ASSESSEE IS AGGRIEVED, HENCE HAS FILED AFOREMENTIONED GROUND NO.2. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE IN ITS ENTIRETY IN ACCORDANCE WITH CLAUSE (B) OF SECTION 24 OF THE ACT. HE SUBMITTED THAT THE RESTRICTION OF R S.1,50,000/- IS WITH REGARD TO PROPERTY ON WHICH SUB-SECTION (2) OF SECTION 23 IS APPLICABLE. LD. AR REFERRED TO THE PROVISIONS OF SECTION 24 AS WELL AS SECTION 23(2) OF THE ACT AND IT WAS HIS CASE THAT ONLY PROPERTY IN THE SHAPE OF FLAT AT BAN DRA WILL FALL WITHIN THE AMBIT OF SECTION 23(2) AND THE RESTRICTION OF INTEREST WO ULD BE APPLICABLE TO THAT PROPERTY AND IN RESPECT OF NESTLE PROPERTY NO INTER EST LIMIT IS FIXED BY THE STATUTE. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY A.O AND LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. TO UNDERSTAND THE CONTROVERSY IT WILL BE RELEVANT TO REPRODUCE SECTION 24 AND 23 OF THE ACT. SECTION 24. DEDUCTIONS FROM INCOME FROM HOUSE PROPE RTY.-- ( 1) INCOME CHARGEABLE UNDER THE HEAD ' INCOME FROM HOUSE PROPE RTY ' SHALL, SUBJECT TO THE ITA NO.1440 /MUM/2012 (A.Y. 2008-09) 3 PROVISIONS OF SUB-SECTION (2), BE COMPUTED AFTER MA KING THE FOLLOWING DEDUCTIONS, NAMELY:-- (I) IN RESPECT OF REPAIRS,-- (A) WHERE THE PROPERTY IS IN THE OCCUPATION OF TH E OWNER, OR WHERE THE PROPERTY IS LET TO A TENANT AND THE OWNER HAS UNDERTAKEN TO BEAR THE COST OF REPAIRS, A SUM EQUAL TO ONE-SIXTH OF THE ANNUAL VALUE; (B) WHERE THE PROPERTY IS IN THE OCCUPATION OF A TENANT WHO HAS UNDERTAKEN TO BEAR THE COST OF REPAIRS,-- (I) THE EXCESS OF THE ANNUAL VALUE OVER THE AMOU NT OF RENT PAYABLE FOR A YEAR BY THE TENANT; OR (II) A SUM EQUAL TO ONE-SIXTH OF THE ANNUAL VALU E, WHICHEVER IS LESS; (II) THE AMOUNT OF ANY PREMIUM PAID TO INSURE THE PROPERTY AGAINST RISK OF DAMAGE OR DESTRUCTION; (III) WHERE THE PROPERTY IS SUBJECT TO A MORTGAGE OR OTHER CAPITAL CHARGE, THE AMOUNT OF ANY INTEREST ON SUCH MORTGAGE OR CHARGE; (IV) WHERE THE PROPERTY IS SUBJECT TO AN ANNUAL C HARGE, NOT BEING A CAPITAL CHARGE, THE AMOUNT OF SUCH CHARGE; (V) WHERE THE PROPERTY IS SUBJECT TO A GROUND REN T, THE AMOUNT OF SUCH GROUND RENT; (VI) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTR UCTED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL; (VII) ANY SUMS PAID ON ACCOUNT OF LAND REVENUE IN RESPECT OF THE PROPERTY; (VIII) ANY SUMS SPENT TO COLLECT THE RENT FROM TH E PROPERTY, NOT EXCEEDING SIX PER CENT. OF THE ANNUAL VALUE OF THE PROPERTY; (IX) WHERE THE PROPERTY IS LET AND WAS VACANT DUR ING A PART OF THE YEAR, THAT PART OF THE ANNUAL VALUE WHICH IS PROPORTIONATE TO THE PERIOD DURING WHICH THE PROPERTY IS WHOLLY UNOCCUPIED OR, WHERE THE PROPERT Y IS LET OUT IN PARTS, THAT PORTION OF THE ANNUAL VALUE APPROPRIATE TO ANY VACA NT PART, WHICH IS PROPORTIONATE TO THE PERIOD DURING WHICH SUCH PART IS WHOLLY UNOCCUPIED; AND (X) SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT IN RESPECT OF RENT FROM PROPERTY LET TO A TENANT WHICH THE ASS ESSEE CANNOT REALISE. (2) THE TOTAL AMOUNT DEDUCTIBLE UNDER SUB-SECTION (I) IN RESPECT OF PROPERTY OF THE NATURE REFERRED TO IN SUB-SECTION (3) OF SECTIO N 23 SHALL NOT EXCEED THE ANNUAL VALUE OF THE PROPERTY AS DETERMINED UNDER SECTION 2 3. SECTION 23. ANNUAL VALUE HOW DETERMINED .--(1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEME D TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FR OM YEAR TO YEAR: PROVIDED THAT WHERE THE PROPERTY IS IN THE OCCUPATI ON OF A TENANT AND THE TAXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PRO PERTY ARE, UNDER THE LAW ITA NO.1440 /MUM/2012 (A.Y. 2008-09) 4 AUTHORISING SUCH LEVY, PAYABLE WHOLLY BY THE OWNER, OR PARTLY BY THE OWNER AND PARTLY BY THE TENANT, A DEDUCTION SHALL BE MADE EQU AL TO THE PART, IF ANY, OF THE TENANT'S LIABILITY BORNE BY THE OWNER. EXPLANATION.--FOR THE PURPOSES OF THIS SUB-SECTION IN THE CASE OF A PROPERTY THE CONSTRUCTION OF WHICH WAS COMPLETED BEFORE THE 1ST DAY OF APRIL, 1950, THE TOTAL AMOUNT OF SUCH TAXES, AND IN THE CASE OF ANY OTHER PROPERTY, ONE-HALF OF THE TOTAL AMOUNT OF SUCH TAXES SHALL BE DEEMED TO BE THE TENA NT'S LIABILITY: PROVIDED FURTHER THAT IN THE CASE OF A BUILDING COM PRISING ONE OR MORE RESIDENTIAL UNITS THE ERECTION OF WHICH IS BEGUN AND COMPLETED AFTER THE 1ST DAY OF APRIL, 1961, THE ANNUAL VALUE AS DETERMINED UNDER THIS SUB -SECTION SHALL, FOR A PERIOD OF THREE YEARS FROM THE DATE OF COMPLETION OF THE B UILDING, BE REDUCED BY A SUM EQUAL TO THE AGGREGATE OF-- (I) IN RESPECT OF ANY RESIDENTIAL UNIT WHOSE ANN UAL VALUE AS SO DETERMINED, DOES NOT EXCEED SIX HUNDRED RUPEES, BY THE AMOUNT O F SUCH ANNUAL VALUE; (II) IN RESPECT OF ANY RESIDENTIAL UNIT WHOSE AN NUAL VALUE AS SO DETERMINED EXCEEDS SIX HUNDRED RUPEES, BY AN AMOUNT OF SIX HUN DRED RUPEES; SO, HOWEVER, THAT THE INCOME IN RESPECT OF ANY R ESIDENTIAL UNIT IS IN NO CASE A LOSS. (2) WHERE THE PROPERTY IS IN THE OCCUPATION OF TH E OWNER FOR THE PURPOSES OF HIS OWN RESIDENCE, THE ANNUAL VALUE SHALL FIRST BE DETE RMINED AS IN SUB-SECTION (I) AND FURTHER BE REDUCED BY ONE-HALF OF THE AMOUNT SO DETERMINED OR ONE THOUSAND EIGHT HUNDRED RUPEES, WHICHEVER IS LESS: PROVIDED THAT WHERE THE SUM SO ARRIVED AT EXCEEDS TEN PER CENT. OF THE TOTAL INCOME OF THE OWNER, THE EXCESS SHALL BE DISREGARDE D. EXPLANATION.--WHERE ANY SUCH RESIDENTIAL UNIT AS IS REFERRED TO IN THE SECOND PROVISO TO SUB-SECTION (I) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSES OF HIS OWN RESIDENCE, NOTHING CONTAINED IN THAT PROVISO SH ALL APPLY IN COMPUTING THE ANNUAL VALUE OF THAT RESIDENTIAL UNIT. (3) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION (2) CONSISTS OF ONE RESIDENTIAL HOUSE ONLY AND IT CANNOT ACTUALLY BE OCCUPIED BY TH E OWNER BY REASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSIO N CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BU ILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE SHALL-- (A) IF THE HOUSE WAS NOT ACTUALLY OCCUPIED BY TH E OWNER DURING THE WHOLE OF THE PREVIOUS YEAR, BE TAKEN TO BE NIL, OR (B) IF THE HOUSE WAS ACTUALLY OCCUPIED BY THE OW NER FOR A FRACTION OF THE PREVIOUS YEAR, BE TAKEN TO BE THAT FRACTION OF THE ANNUAL VALUE DETERMINED UNDER SUB-SECTION (2): PROVIDED THAT THE FOLLOWING CONDITIONS ARE IN EIT HER CASE FULFILLED:-- (I) THE HOUSE IS NOT ACTUALLY LET, AND (II) NO OTHER BENEFIT THEREFROM IS DERIVED BY TH E OWNER. ITA NO.1440 /MUM/2012 (A.Y. 2008-09) 5 6.1 ACCORDING TO SECTION 24(B), WHERE THE PROPERTY IS ACQUIRED, CONSTRUCTED, REPAIRED OR RENEWED OR CONSTRUCTED WITH THE BORROWE D CAPITAL THEN ANY INTEREST PAYABLE ON SUCH BORROWED CAPITAL WOULD BE AN ALLOWABLE DEDUCTION. THE RESTRICTION OF RS.1,50,000/- DESCRIBED IN SECON D PROVISO IS WITH REFERENCE TO THE PROPERTY WHICH IS REFERRED IN SUB-SECTION (2 ) OF SECTION 23. SECTION 23(2) WOULD BE APPLICABLE TO A HOUSE OR PART OF THE HOUS E WHICH EITHER IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSE OF HIS RESI DENCE OR THE SAME IS NOT ACTUALLY OCCUPIED BY THE OWNER FOR THE REASON THAT OWNING TO HIS EMPLOYMENT, BUSINESS OR PROVISION CARRIED ON AT ANY OTHER PLACE AND HE IS TO RESIDE AT THAT OTHER PLACE IN BUILDING NOT BELONGING TO HIM AND ALV OF SUCH PROPERTY WOULD BE TAKEN AS NIL. UNDISPUTEDLY, THE FLAT AT BANDR A FALLS UNDER THE CATEGORY OF PROPERTY MENTIONED IN SECTION 23(2) OF THE ACT AS A O DID NOT ASSESS THE ALV OF THE SAID PROPERTY AS INCOME OF THE ASSESSEE. THERE FORE, PROVISIONS OF SECOND PROVISO TO SECTION 24 WOULD NOT BE APPLICABLE AND T HE CASE OF THE ASSESSEE WOULD FALL WITHIN CLAUSE (B) OF SECTION 24 IN WHIC H THERE IS NO LIMIT FOR ALLOWABILITY OF THE INTEREST AND THE CONDITION IS THAT THE SAID PROPERTY SHOULD INTER-ALIA BE ACQUIRED OUT OF BORROWED CAPITAL. I N THE PRESENT CASE AS PER SUBMISSIONS OF THE ASSESSEE BEFORE AO VIDE LETTER D ATED 13/09/2010 WHICH ARE REPRODUCED IN PARA-4.4 OF THE ASSESSMENT ORDER THE ASSESSEE HAS PAID INTEREST OF RS.3,50,641/- AS INTEREST FOR NESTLE PR OPERTY. THEREFORE, INTEREST DEDUCTIBLE OUT OF ALV OF NESTLE PROPERTY COULD NOT BE RESTRICTED TO ANY AMOUNT LESS THAN THE INTEREST PAID BY THE ASSESSEE. THEREFORE, GROUND NO.2 OF THE ASSESSEE IS ALLOWED AND AO IS DIRECTED TO GIVE FULL DEDUCTION OF INTEREST PAID BY THE ASSESSEE WHICH IS CLAIMED TO BE A SUM O F RS.3,50,641/-. GROUND NO.2 IS ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16.09. 2 014. 1 * ./0 2'3 16.09.2014 / * : SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 16.SEPT. 2014. VM. ITA NO.1440 /MUM/2012 (A.Y. 2008-09) 6 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0, 1 * (,; < ;0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. =() / THE CIT, MUMBAI. 4. = / CIT(A)-13, MUMBAI 5. ;@: (,' , , / DR, ITAT, MUMBAI 6. :A B / GUARD FILE. 1' 1' 1' 1' / BY ORDER, );, (, //TRUE COPY// C CC C/ // /D D D D (DY./ASSTT. REGISTRAR) , ,, , / ITAT, MUMBAI