ACIT Non Corporate Circle 11 , CHENNAI V. Kamini Sundaram , CHENNAI

ITA 1636/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5630 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: A NARAYANAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , ! ' [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMB ER ] ./I.T.A. NO. 1636/MDS/2017 / ASSESSMENT YEAR : 2008-2009 THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 11, CHENNAI 600 006. VS. SMT. KAMINI SUNDARARAM, C/O. M/S. INTERNATIONAL SERVICES, NEW NO.45, OLD NO.22, 6 TH MAIN ROAD, R.A. PURAM, CHENNAI 600 028. ./I.T.A. NO.2377/MDS/2017 / ASSESSMENT YEAR : 2008-2009 SMT. KAMINI SUNDARARAM, C/O. M/S. INTERNATIONAL SERVICES, NEW NO.45, OLD NO.22, 6 TH MAIN ROAD, R.A. PURAM, CHENNAI 600 028. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 11, CHENNAI 600 006. [PAN AADPS5136J ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) DEPARTMENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. ASSESSEE BY : SHRI. A. NARAYANAN, C.A. /DATE OF HEARING : 14-12-2017 /DATE OF PRONOUNCEMENT : 20-12-2017 ' / O R D E R THESE ARE APPEALS FILED BY THE REVENUE AND ASSESSE E RESPECTIVELY DIRECTED AGAINST AN ORDER DATED 24.03 .2017 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI. ITA NOS.1637 & 2377/2017 :- 2 -: 2. APPEAL OF THE ASSESSEE IS FILED WITH A DELAY OF THI RTY THREE DAYS, AND APPEAL OF THE REVENUE IS DELAYED BY SIX D AYS. CONDONATION PETITIONS HAVE BEEN FILED BY THE RESPECTIVE PARTIES . BOTH THE PARTIES DID NOT RAISE ANY SERIOUS OBJECTION TO THE RESPECTI VE PLEAS. ACCORDINGLY, DELAYS IN BOTH CASES ARE CONDONED AND APPEALS ARE ADMITTED. 3. BOTH THE APPEALS RELATE TO AN ISSUE REGARDING ASSE SSMENT OF ANNUAL RENT OF A PROPERTY BELONGING TO THE ASSESSEE LOCATED AT NORTH BEACH ROAD, CHENNAI. ASSESSEE HAD ORIGINALLY FILED HER RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF RS.31,74,020/-. IN THE STATEMENT OF INCOME FILED ALONGWITH RETURN, ASSESSEE HAD SHOWN RENTALS FROM TWO PROPERTIES ON E AT CATHEDRAL ROAD AND ANOTHER AT NORTH BEACH ROAD, BOTH IN CHENN AI. ANNUAL RENT FROM THE CATHEDRAL ROAD BUILDING WAS SHOWN AS RS.3 3,15,006/- AGAINST WHICH MUNICIPAL TAX OF RS.1,51,522/- WAS DEDUCTED. ANNUAL RENT FOR THE PROPERTY AT NORTH BEACH ROAD, RAJAJI SALAI WAS SHOWN AS RS.1,05,894/- AGAINST WHICH MUNICIPAL TAX OF RS.1, 09,590/- WAS DEDUCTED. THUS, THE RENTAL INCOME FROM THE LATTER BUILDING REFLECTED A LOSS OF RS.3,696/-. LD. ASSESSING OFFICER WAS OF T HE OPINION THAT FOR THE CATHEDRAL ROAD BUILDING MUNICIPAL TAX PAID CA ME TO 4.57% OF THE ANNUAL RENT. IN OTHER WORDS, AS PER THE LD. ASSESS ING OFFICER RENTAL SHOWN BY THE ASSESSEE FOR THE CATHEDRAL ROAD BUILD ING WAS 21.88 ITA NOS.1637 & 2377/2017 :- 3 -: TIMES OF THE MUNICIPAL TAX. BY APPLYING THIS RATIO , LD. ASSESSING OFFICER CAME TO A CONCLUSION THAT FOR THE RAJAJI SALAI BUI LDING, RENTALS OUGHT HAVE BEEN RS.23,97,830/- VIZ 21.88 TIMES OF MUNICI PAL TAX RS.1,09,590/-. AS PER LD. ASSESSING OFFICER, ASSES SEE HAD AGAINST THE RECEIVABLE ANNUAL RENT OF RS.23,97,830/-, DECLARED ONLY RS.1,05,894/-. AFTER ALLOWING DEDUCTION U/S.24 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), AN ADDITION OF RS.16,01,768/- WAS MADE . 4. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION OF THE ASSESSEE WAS THAT SHE HAD ONLY 1/3 RD SHARE IN THE BUILDING AT NORTH BEACH ROAD. ACCORDING TO THE ASSESSEE, MUNICIPAL TAX, WA TER TAX AND THE TOTAL TAXES IN RESPECT OF THIS BUILDING WERE AS UND ER:- PARTICULARS MUNICIPAL VALUATION P.A. MUNICIPAL TAX P.A WATER TAX P.A TOTAL TAXES PAID PORTION 1 PORTION 2 PORTION 3 212176 476440 231067 38682 78036 41120 14852 33350 15120 53534 111386 56240 TOTAL 919683 157838 63322 221160 1/3 RD SHARE OF THE ABOVE 306561 52613 21107 73720 CONTENTION OF THE ASSESSEE WAS THAT INCOME FROM HOU SE PROPERTY HAD TO BE WORKED OUT IN ACCORDANCE WITH SECTIONS 23 & 24 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). AS PER THE A SSESSEE THE DATA RELEVANT FOR SUCH COMPUTATION WAS AS UNDER:- ITA NOS.1637 & 2377/2017 :- 4 -: PARTICULARS MUNICIPAL VALUATION P.A. RENT RECEIVABLE HIGHER OF THE ABOVE ACTUAL RENT VACANCY ALLOWANCE GROSS ANNUAL VALUE PORTION 1 PORTION 2 PORTION 3 212176 476440 231067 210000 280920 152676 212176 476440 231067 192489 23409 101784 17511 257511 50892 194665 218929 180175 TOT AL 919683 643596 919683 317682 325914 593769 1/3 RD SHARE OF THE ABOVE 306561 214532 306561 105894 108638 197923 CONTENTION OF THE ASSESSEE WAS THAT TAX OF RS.1,0 9,589/- CLAIMED BY HER COMPRISED OF MUNICIPAL TAX RS.52,613/-, METRO WATER TAX RS.21,107/- AND ARREARS OF MUNICIPAL TAX RS.35,869 /-. AS PER THE ASSESSEE PERCENTAGE OF MUNICIPAL TAX ON ANNUAL VAL UE IN A PARTICULAR LOCALITY COULD NOT BE APPLIED UNIVERSALLY FOR FINDI NG THE ANNUAL VALUE OF A PROPERTY SITUATED IN A ENTIRELY DIFFERENT LOCALIT Y. 5. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE WAS OF THE OPINION THAT LD. ASSESSING OFFICER WAS JUSTIFIED IN APPLYING THE RATIO OF ANN UAL RENTAL TO MUNICIPAL TAX RETURNED BY THE ASSESSEE FOR ITS PROPERTY IN CA THEDRAL ROAD, FOR FINDING THE ANNUAL VALUE OF THE PROPERTY AT NORTH B EACH ROAD. HOWEVER, ACCORDING TO HIM, FOR APPLYING MULTIPLICAT ION FACTOR OF 21.88, WHAT OUGHT HAVE BEEN CONSIDERED WAS MUNICIPAL TAX COMPONENT ALONE. SUCH MUNICIPAL TAX COMPONENT WAS RS.52,613/- ONLY AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THUS, ACC ORDING TO HIM, ITA NOS.1637 & 2377/2017 :- 5 -: RENTALS FROM NORTH BEACH ROAD PROPERTY COULD BE C ONSIDERED ONLY AS RS.11,51,172/- AFTER DEDUCTING STANDARD DEDUCTION U /S.24 OF THE ACT. HE DIRECTED THE LD ASSESSING OFFICER TO CONSIDER TH E ANNUAL RENT OF THE NORTH BEACH ROAD PROPERTY AT RS.11,51,172/- AGAINST RS.23,97,830/- CONSIDERED IN THE ASSESSMENT. 6. NOW BEFORE ME, ASSESSEE IS AGGRIEVED ON THE METHOD OLOGY ADOPTED FOR FIXING THE ANNUAL VALUE OF HER PROPERTY AT NORTH BEACH ROAD. ACCORDING TO HER ANNUAL VALUE SHOWN IN THE RETURN OF INCOME WAS CORRECT. AS AGAINST THIS, REVENUE IS AGGRIEVED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED APPLI CATION ON MULTIPLICATION FACTOR 21.88 TIMES ON MUNICIPAL TA X COMPONENT OF RS.52,613/- ALONE IGNORING THE METRO WATER TAX RS. 21,107/- AND ARREARS OF I35,869/-. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MET HODOLOGY ADOPTED BY THE LOWER AUTHORITIES FOR FIXING THE AN NUAL VALUE OF THE NORTH BEACH ROAD WAS UNKNOWN TO THE LAW. ACCORDING TO HIM, JUST BECAUSE ONE PROPERTY FETCHED HIGHER RENT, IT WOULD NOT MEAN THAT ANOTHER PROPERTY WHICH WAS AT AN ENTIRELY DIFFEREN T LOCALITY WOULD EARN SIMILAR INCOME. ACCORDING TO HIM, ASSESSEE HAD COR RECTLY RETURNED THE RENTAL INCOME BASED ON THE ACTUAL RENT RECEIVED FRO M THE PROPERTY. ITA NOS.1637 & 2377/2017 :- 6 -: 8. PER CONTRA, AND IN SUPPORT OF ITS OWN APPEAL, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT LD. ASSE SSING OFFICER HAD CORRECTLY APPLIED RATIO OF 21.88 TIMES ON THE MUNI CIPAL TAX CLAIMED BY THE ASSESSEE FOR ASCERTAINING THE ANNUAL RENTALS O F THE NORTH BEACH ROAD PROPERTY. AS PER THE LD. DEPARTMENTAL REPRESE NTATIVE, LD. COMMISSIONER OF INCOME TAX (APPEALS) FELL IN ERROR IN DIRECTING EXCLUSION OF METRO WATER TAX AND ARREARS OF MUNICI PAL TAX WHILE APPLYING SUCH RATIO. 9. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT A SSESSEE HAD RETURNED RENTAL INCOME FROM ITS PROPERTY AT CATHEDRAL ROAD AT RS.33,15,006/- AGAINST WHICH MUNICIPAL TAX CLAIMED WAS RS.1,51,522 /-. IT IS ALSO TRUE THAT MUNICIPAL TAX AS A PERCENTAGE OF THE RENTAL IN COME CAME TO 4.57% AND THIS GAVE A MULTIPLICATION FACTOR 21.88. BUT THE QUESTION BEFORE ME IS WHETHER THE SAME MULTIPLICATION FACTOR CAN BE ADOPTED WHEREVER A PROPERTY IS LOCATED. LD. ASSESSING OFFI CER HAD ADOPTED THE MULTIPLICATION FACTOR OF 21.88 ON THE MUNICIPAL TA X, FOR THE PROPERTY SITUATED IN NORTH BEACH ROAD. AT THIS JUNCTURE, IT IS APPOSITE TO REPRODUCE SECTION 23 OF THE ACT. 1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VAL UE OF ANY PROPERTY SHALL BE DEEMED TO BE. ITA NOS.1637 & 2377/2017 :- 7 -: (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR ; O R (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE B Y THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SU M REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED O R RECEIVABLE ; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORI TY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS 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 WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION FOR THE PURPOSES OF CLAUSE (B) OR CLAUS E (C) OF THIS SUB-SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH? (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSES OF HIS OWN RESIDENCE ; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSION CARRIED ON AT ANY OTHER PLAC E, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT APP LY IF? ITA NOS.1637 & 2377/2017 :- 8 -: (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR ; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE OWNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION (2) CONSISTS OF MORE THAN ONE HOUSE? (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT HIS OPTION, SPECIFY IN THIS BEHALF ; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN OPTION UNDER CLAUSE (A), SHALL BE DETERMINED UNDER SUB-SECTION (1) AS IF SUCH HOUSE OR HOUSES BAD BEEN LET. THE METHOD IN WHICH ANNUAL VALUE IS TO BE DETERMINE D IS CLEARLY SET OUT ON THE ABOVE SECTION. NO DOUBT, MULTIPLICATIO N VALUATION CAN BE A POINTER AS TO THE REASONABLE RENTAL THAT CAN BE FET CHED FOR A GIVEN PROPERTY. HOWEVER, IN MY OPINION, A MULTIPLICATION FACTOR DERIVED FROM ONE SET OF DATA FOR A GIVEN PROPERTY, CANNOT BE APP LIED BLINDLY TO ANOTHER PROPERTY LOCATED AT A DIFFERENT PLACE, EVEN THOUGH, BOTH ARE IN THE SAME CITY. THE METHODOLOGY FOLLOWED BY THE LOW ER AUTHORITIES WAS IN MY OPINION ENTIRELY UNSCIENTIFIC. LD. COMMISSIO NER OF INCOME TAX (APPEALS) THOUGH HE GAVE PARTIAL RELIEF TO THE ASSE SSEE DID NOT CHANGE OR APPLY THE CORRECT METHOD FOR ASCERTAINING THE R ENTAL VALUE OF THE NORTH BEACH ROAD PROPERTY. IN MY OPINION, ASCERTAI NMENT OF ANNUAL VALUE OF THE NORTH BEACH ITA NOS.1637 & 2377/2017 :- 9 -: ROAD PROPERTY REQUIRES A FRESH LOOK BY THE LD. ASSE SSING OFFICER. I THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 10. IN THE RESULT, APPEALS OF BOTH ASSESSEE AND REVENUE ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 20TH DAY O F DECEMBER, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER / CHENNAI / DATED:20TH DECEMBER, 2017 KV ! ' #$ %$ / COPY TO: 1 . &' / APPELLANT 3. ( () / CIT(A) 5. $+, ' - / DR 2. '.&' / RESPONDENT 4. ( / CIT 6. ,/ 0 / GF