ACIT 12(3), V. HARESH R. MEHTA, MUMBAI

ITA 163/MUM/2009

• Counselvise Citation: 16319914 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 04-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Opportunity of being heard; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.163/MUM/2009 (ASSESSMENT YEAR: 2003-04) ACIT -12(3), ROOM NO.121, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ....... APPELLANT VS SHRI HARESH R. MEHTA, CHURCHGATE, MUMBAI -400 020 ..... RESPONDENT PAN: AAQPM 9349 A APPELLANT BY: SHRI T.T. JACOB RESPONDENT BY: SHRI SANJAY R. PARIKH O R D E R PER R.S. PADVEKAR, JM THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE I MPUGNED ORDER OF THE LD. CIT (A)-12, MUMBAI DATED 7.10.2008 FOR THE A.Y. 2003-04. THE ONLY ISSUE WHICH ARISES FROM THE GROU NDS TAKEN BY THE REVENUE IS WHETHER THE NOTIONAL INTEREST ON THE INT EREST-FREE DEPOSIT CAN BE CONSIDERED FOR DETERMINING ALV OF THE PROPER TY U/S.23(1)(A) OF THE ACT. 2. THE ASSESSEE HAS LET OUT HIS PROPERTY TO THE FOL LOWING TWO COMPANIES AND RECEIVING RENT / LICENSE, WHICH WAS D ECLARED BY THE ASSESSEE. THE ASSESSEE HAS ALSO TAKEN INTEREST FRE E DEPOSIT FROM ITS TENANT / LICENSEE AS UNDER:- (I) ISAGRO ASIA AGRO CHEMICAL P. LTD. ` 52,50,000 (II) UNISYS INDIA (P) LTD. ` 24,00,000 ------------------- ` 76,50,000 ========== ITA 163/MUM/2009 SHRI HARESH R. MEHTA 2 3. THE A.O. ASKED THE ASSESSEE WHY THE NOTIONAL INT EREST ON THE INTEREST-FREE DEPOSIT SHOULD NOT BE CONSIDERED FOR DETERMINING THE ANNUAL LETTING VALUE (ALV) OF THE PROPERTY? THE AS SESSEE PLACED HIS RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF B OMBAY IN THE CASE OF CIT VS. J.K. INVESTOR (BOM.) LTD. 248 ITR 723. THE A.O. WAS NOT IMPRESSED WITH THE CONTENTIONS OF THE ASSESSEE AND HE WORKED OUT THE GROSS ALV AS UNDER:- (I) RENT RECEIVED DURING THE F.Y. ` 50,33,871 (II) ADD: 15% OF ` 76,50,000 ` 11,47,500 GROSS A.L.V. ` 61,81,371 4. THE ASSESSEE CHALLENGED THE ALV DETERMINED BY TH E A.O. U/S.23(1)(A) OF THE ACT BEFORE THE FIRST APPELLATE AUTHORITY AND FIRST APPELLATE AUTHORITY DIRECTED THE A.O. NOT TO ADD TH E NOTIONAL INTEREST ON THE INTEREST-FREE SECURITY DEPOSIT TAKEN BY THE ASSESSEE FROM HIS TENANTS/LICENSEE. NOW, THE REVENUE IS IN APPEAL BE FORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. SO FAR AS RELIANCE PLACED BY THE ASSE SSEE ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF J.K. INVEST ORS (BOM) LTD. (SUPRA) IS CONCERNED, IN OUR HUMBLE OPINION THE SAM E IS NOT HELPFUL TO HIM AS IN THE SAID CASE, THEIR LORDSHIPS WERE CEASE D WITH CLAUSE (B) OF SECTION 23(1) AND IT IS EXPRESSLY MADE CLEAR THAT W HETHER THE NOTIONAL INTEREST CAN FORM PART OF THE FAIR RENT U/S.23(1)(A ) IS LEFT OPEN. NOW, IN THE RECENT DECISION, THE HONBLE HIGH COURT OF DELH I (FULL BENCH) IN THE CASE OF CIT VS. MONI KUMAR SUBBA 333 ITR 38 (DE L)(FB) HAS HELD THAT WHILE DETERMINING THE ANNUAL VALUE OF THE PROP ERTY UNDER CLAUSE (A) TO SECTION 23(1) NOTIONAL INTEREST ON THE INTER EST FREE DEPOSITS CANNOT BE ADDED OR CONSIDERED. AT THE SAME TIME, T HE HONBLE HIGH ITA 163/MUM/2009 SHRI HARESH R. MEHTA 3 COURT HAS LAID DOWN CERTAIN GUIDELINES FOR DETERMIN ING THE ANNUAL VALUE OF THE PROPERTY LET OUT U/S.23(1)(A), WHICH A RE AS UNDER:- 18. ..(I) ALV WOULD BE THE SUM AT WHICH THE PROPER TY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRA NEOUS CIRCUMSTANCE S. (II) AN INFLATED OR DEFLATED RENT BASED ON EXTRANEO US CONSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS. (III) ACTUAL RENT RECEIVED, IN NORMAL CIRCUMSTANCE S, WOULD BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED / DEFLATED BY REASON OF EXTRANEOUS CONSIDERATION. (IV) SUCH ALV, HOWEVER, CANNOT EXCEED THE STANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO T HE PROPERTY. (V) IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTROLLER, THEN IT IS THE DUTY OF THE ASSESSING OF FICER TO DETERMINE THE STANDARD RENT AS PER THE PROVISIONS O F RENT CONTROL ENACTMENT. (VI) THE STANDARD RENT IS THE UPPER LIMIT, IF TH E FAIR RENT IS LESS THAN THE STANDARD RENT, THEN IT IS THE FAIR RE NT WHICH SHALL BE TAKEN AS ALV AND NOT THE STANDARD RENT. 6. THERE SHOULD NOT BE DISPUTE ON WELL SETTLED LEGA L PROPOSITION THAT IF IN THE OPINION OF THE A.O. THE RENT DECLARE D BY THE ASSESSEE U/S.23(1)(B) IS LESSER THAN THE ANNUAL VALUE DETERM INED U/S.23(1)(A) THEN HE HAS TO ADOPT THE ANNUAL VALUE AS DETERMINED U/S.23(1)(A). WE, THEREFORE, CONSIDER IT FIT TO RESTORE THE ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION NOT TO ADD THE NOTIONAL INTEREST W HILE DETERMINING THE ITA 163/MUM/2009 SHRI HARESH R. MEHTA 4 ANNUAL VALUE OF THE LET OUT PROPERTY U/S.23(1)(A) O F THE ACT. WE FURTHER DIRECT THE A.O. THAT HE SHOULD WORK OUT THE ANNUAL VALUE OF THE LET OUT PROPERTY IN RESPECT OF WHICH THE ASSESSEE HAS DECLA RED THE RENT U/S.23(1)(A) OF THE ACT AS PER THE GUIDELINES LAID DOWN IN THE CASE OF MONI KUMAR SUBBA (SUPRA). NEEDLESS TO SAY THE A.O. SHOULD GIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR T HE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JULY 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 15TH JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)XII, MUMBAI. 4) THE CIT-XII, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 163/MUM/2009 SHRI HARESH R. MEHTA 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 05.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 06.07.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER