PHOTOGRAVURS (INDIA) PVT LTD, MUMBAI V. I.T.O. - 2(2)-4, NAVI MUMBAI

ITA 1813/MUM/2011

• Counselvise Citation: 181319914 RSA 2011
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARIGOVIND SINGH
• Keywords: Period of limitation
• Section: 143(3); 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.1813/ MUM/2011 ASSESSMENT YEAR: 2007-08 PHOTOGRAVURS (INDIA) PVT. LTD. .. APPELLANT SHETH CHAMBERS, DR. V.B.GANDHI MARG, FORT, MUMBAI-400 030 PA NO.AAACP 4088 L VS INCOME TAX OFFICER 2(2)-4 ,. RESPONDEN T MUMBAI. APPEARANCES: K. GOPAL, FOR THE APPELLANT HARI GOVIND SINGH, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO Q UESTION CORRECTNESS OF CIT(A)S ORDER DATED 3 RD JANUARY, 2011, IN THE MATTER OF ASSESSMENT UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS: 1. THE LD CIT (A) ERRED IN PASSING THE ORDER DATED 3.1.2011 CONFIRMING THE ASSESSMENT ORDER DATED 15.12.2009 PASSED U/S.143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF THE APPELLANT AT ` .1,55,77,080 AS AGAINST RETURNED TOTAL LOSS OF RS. 1,42,610 DECLARED BY THE APPELLANT WITHOUT AP PRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD CIT (A) ERRED IN UPHOLDING THE ACTION OF THE AO IN ESTIMATING THE HOUSE PROPERTY INCOME AT RS.1,57,50,000 BY INVOKING THE PROVISIONS OF SECTION 23(1)(A) AS AGAINST RS. 30,310 SHOWN BY THE APPE LLANT, WITHOUT I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 2 APPRECIATING THAT THE PROVISIONS OF SECTION 23(1)(A) I S NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE. THE APPELLANT, THEREFORE, PRA YS THAT THE ADDITION OF RS. 1,57,50,000 UNDER THE INCOME FROM HOUSE PROPERTY I S NOT AT ALL JUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 3. THE LD CIT (A) FAILED TO APPRECIATE THAT PROPERT Y IN DISPUTE IS GOVERNED BY THE PROVISIONS OF MAHARASHTRA RENT CONTROL ACT, 1999 A ND HENCE, THE STANDARD RENT IS THE ACTUAL RENT RECEIVED BY THE APPELLANT. THE APPELLANT, THEREFORE, PRAYS THAT THE ADDITION OF RS.1,57,50,000 UNDER THE INCOME FROM HOUSE PROPERTY IS NOT AT ALL JUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT (A) F AILED TO APPRECIATE THAT THE AO HAS NEITHER PROVIDED THE DETAILS AND INFORMATION O BTAINED BY HIM TO THE APPELLANT NOR HE HAS PROVIDED THE BASIS OR REASON TO CONCLUDE THAT THE ALV HAS DETERMINED AT RS. 125 PER SQ.FT. HENCE, THE ORDER PA SSED BY THE AO AS WELL AS THE CIT(A) IS BADE IN LAW AND MAY BE QUASHED. 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE SASSESSEE HAS RECEIVED THE COMPENSATION OF RS. 49,416 AND OFFERED THE SAME TO TAX AS PROPERTY INCOME. THIS AMOUNT CONSISTED OF RS. 43,728 RECEIVED FROM ROTOGRAVU RS AND RS. 5,688 RECEIVED FROM RELL FAB INDUSTRIES. IN RESPONSE TO ASSESSING OFFICE RS REQUISITION, COPIES OF THE AGREEMENTS WERE ALSO FURNISHED TO THE ASSESSING OFFICER B UT THE ASSESSING OFFICER WAS OF THE VIEW THAT UNDER SECTION 23(1), ANNUAL VALU E OF THE PROPERTY COULD BE TAKEN AS THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE ACCEPTED TO LET FROM YEAR TO YEAR AND THAT THE MARKET RENT OF THE PROPERTY IS MUC H HIGHER. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER PROCEEDED TO ASCERTAIN, ON TH E BASIS OF FIELD ENQUIRIES, AS TO WHAT WOULD BE THE MARKET RENT OF THE PROPERTY IS LET OUT. THE RESULT OF THE ENQUIRIES SO CONDUCTED WAS CONFRONTED TO THE ASSESSEE AND DISREGARDI NG THE RENT ACTUALLY RECEIVED BY THE ASSESSEE, THE AO PROCEEDED TO COMPUTER THE ANNUAL VALUE OF THE PROPERTY LET OUT ON THE BASIS, WHAT HE PERCEIVED AS T HE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE ACCEPTED TO LET FROM YEAR TO YEA R. ACCORDINGLY, INCOME FROM HOUSE PROPERTY WAS COMPUTED AT RS. 1,57,50,000 AS AGAIN ST RS. 49,416 RETURNED BY THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. THE CIT (A) REJECTED THE CON TENTION OF THE ASSESSEE AND OBSERVED AS FOLLOWS: 2.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMI SSIONS OF THE APPELLANT. AS I FIND, THE AO HAS DETERMINED THE ALV ON THE BASIS OF LOCAL ENQUIRIES AND AFTER TAKING INTO ACCOUNT VARIOUS OTHER FACTORS UNEARTHED ON I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 3 ACCOUNT OF INVESTIGATION REVEALING THAT THE MARKET R ENT OF THE PROPERTY WAS MUCH HIGHER THAN THE ACTUAL RENT RECEIVED. IT IS, THEREFORE, IN ORDER THAT HE HAS INVOKED THE PROVISIONS OF SECTION 23(1)(A) ON THE STREN GTH OF THESE FINDINGS. AS AGAINST THIS, THE APPELLANT HAS TAKEN THE STAND THAT THE PROPERTY BEING UNDER THE RENT CONTROL ACT, THE SUBSTITUTION OF THE A LV IS INCORRECT. LOOKING INTO THE FACTS BROUGHT ON RECORD, THE PROVISIONS OF TH E MAHARASTHRA RENT CONTROL AT, 1999, AND OTHER ATTENDING FACTS AND CIRC UMSTANCES , I DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER. TO THIS END, THE PRINCIPLES LAID DOWN BY THE HONBLE ITAT, MUMBAI IN THE CASE MA AKRUPA CHEMICALS PVT LTD., 108 ITD 95 ENGAGE MY ATTENTION. IN THIS DECISI ON, IT HAS BEEN CLEARLY ADJUDICATED THAT EXTRANEOUS FACTORS CAN ALWAYS BE TAK EN AS THE BASIS FOR DETERMINATION OF THE ALV WHEN A SHARP DIFFERENCE IS D ETECTED IN THE MARKET RENT AND THE RENT TAKEN. THIS DIFFERENCE STANDS FIRML Y ESTABLISHED IN THE APPELLANTS CASE IN THAT BY LOCAL INQUIRIES, SEARCH IN THE INTERNET AND ENQUIRIES WITH A LOCAL BROKER AND A LOCAL CONTRACTOR, THE AO HAS UNEARTHED THAT THE GOING RENT IN THE LOCALITY WAS IN THE RATE OF ` .50 TO ` .350 PER SQ.FT. INTERESTINGLY, THE DIFFERENCE IN THE APPELLANTS CASE IS SO SHARP THAT RATE SHOWN BY THE APPELLANT IS NOT ALSO REMOTELY CLOSE TO EVEN THE LOWEST END OF ` .50/-. THE AOS ACTION IS THUS RIGHT. THIS COURSE OF ACTION STANDS ENDORSED IN THE CASE OF M/S MOTICHAND HIRACHAND VS BOMBAY MUNCIPAL CORPORATION A IR 1968 SC 441, WHEREIN, IT WAS OBSERVED AS UNDER: IT IS WELL RECOGNIZED PRINCIPLE IN RATING THAT BOTH GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFERENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YE AR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HYPOTHETICAL RENT, FOR INSTANCE, BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHERE THERE ARE NO RENTS BY REFERENCE TO THE ASSESSMENT OR COMPARABLE PROPERTIE S OR TO THE PROFITS CARRIED FROM THE PROPERTY OR THE COST OF CONST RUCTION. 2.3.1 THE APPELLANTS DEFENSE THAT THE PROPERTIES ARE COVERED BY THE MAHARASHTRA RENT CONTROL ACT, 1999 IS ALSO SERIOUSLY FLA WED IN THE FACE OF THE SPECIFIC FACTS OF THE APPELLANTS CASE. IN THIS RESPECT , IN THE FIRST PLACE, I FIND THAT THERE IS NO STANDARD RENT CONTROL ACT,. 1999, T HE APPELLANT HAS ALSO NOT EXERCISED THE OPTION TO MOVE THE COURT TO GET THE ST ANDARD RENT FIXED. ACCORDINGLY, AFTER HAVING NOT EXERCISED AVAILABLE OP TION TO GET THE STANDARD RENT FIXED, THE APPELLANT IS INELIGIBLE TO TAKE PROT ECTION UNDER THIS ACT, MUCH LESS FOR THE PURPOSE OF INCOME TAX PROCEEDINGS, WHICH A RE GUIDED BY SEVERAL OTHER PARAMETER. WHY THE APPELLANT HAS NOT EXERCISE D THE OPTION AVAILABLE TO IT UNDER SECTION 8 OF THE MAHARASHTRA RENT CONTROL AC T, IS ALSO OBVIOUS IN THAT THE TENANTS ARE APPELLANTS SISTER CONCERNS. FURTHER, AS POINTED OUT BY THE AO THE APPELLANT DID NOT SHOW THE RENTAL INCOME RECEIV ED FROM C R JHAVERI & BROTHERS. SIGNIFICANTLY, THE RENT DECLARED HAS ALSO B EEN SHOWN ONLY AS DUE. IN FACE OF ALL THESE GLARING FEATURES IT IS CLEAR, THE AP PELLANT IS SEEKING COVER OF THE MAHARASHTRA RENT CONTROL ACT BY STRETCHING THE INTERP RETATION OF WHAT CONTRIBUTES STANDARD RENT TO AVOID PAYMENT OF LEGITI MATE TAX UNDER THE INCOME TAX ACT. IT IS OBVIOUS, IN THE CONTEST OF THE ABOVE GL ARING COMMISSIONS/OMISSIONS INDICATING COLLUSIVENESS, THE LEGISLATI VE INTENT OF I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 4 BOTH THE INCOME TAX ACT, AND THE MAHARASHTRA RENT C ONTROL ACT IS SOUGHT TO BE FRUSTRATED BY THE APPELLANT BY ADOPTING THE ARGUMENT IT HAS TAKEN. 2.3.2 THE MUNCIPAL RATABLE VALUE ALSO CANNOT BE TAK EN AS THE ALV IN THE APPELLANT CASE. IN THE FIRST PLACE, MUNCIPAL RATABL E VALUE OF THE RELEVANT PERIOD HAS NOT BEEN SUBMITTED. FURTHER, THE MUNCIPAL RATABL E VALUE IS ALSO NOT OTHERWISE BINDING ON THE AO IF HE IS ABLE TO SHOW THAT THE VALUE DOES NOT REPRESENT THE CORRECT FAIR RENT. THIS IS IN TERMS OF T HE DECISION IN THE CASE OF KESHIPRASAD KATTURAKAR V CIT, 101 ITR 816. THIS STANDS FURTHER ECHOED IN THE DECISION OF THE HONBLE ITAT, MUMBAI IN THE CASE ITO VS BAKER TECHNICAL SERVICES P LTD 126 TTJ 455. IN THIS DECISION ALSO, IT HAS BEEN HELD THAT VALUE DETERMINED BY THE MUNCIPAL AUTHORITIES IS NOT BINDING ON THE AO. FURTHER, EVEN IN THE CASE J.K. INVESTORS (BOMBAY) LTD V CIT, 24 0 ITR 723, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT U/S.23(1)9A), THE AO CAN TAKE VARIOUS FACTORS INTO ACCOUNT WHILE DECIDING THE FAIR RENT. AS ENUMERATED IN THESE DECISIONS, THE AO HAS RIGHTLY DETERMINED THE ALV BASED ON VARIOUS FACTORS AND AUTHENTIC COMPARISON OF PREVALENT RENT IN THE SAME A REA. 2.3.3 THE APPELLANTS RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE CIT V. AKSHAY TEXTILES TRADING & AGE NCIES LTD., IS ALSO MISPLACED IN THE CONTEXT OF THE PECULIAR FACTS OF THE APPELLANTS CASE AS DISCUSSED ABOVE. AS MAY BE NOTED, IN THE CASE BEFORE TH E HONBLE BOMBAY HIGH COURT, THE DECISION WAS IN THE LIGHT OF SUB-LETT ING OF PREMISES BY THE ORIGINAL TENANT. FURTHER, IN THE APPELLANTS CASE, T HE QUESTION ABLE FACTS LIKE THE TENANTS BEING SISTER CONCERNS, NON-DISCLOSURE OF THE RENT FROM ONE OF THE TENANTS, ACCOUNTING OF THE RENT AS DUE, THE SPECIFIC FINDINGS OF THE AO ON THE MARKET RENT MAKE IT NECESSARY TO LOOK AT THE APPELLAN TS CASE FROM THE POINT OF VIEW OF COLLUSIVENESS AND DISTORTION OF THE LEGISLATIVE INTENT BEHIND THE RELEVANT STATUES AND LAW. THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THUS DISTINGUISHABLE AS IT IS NOT IN THIS PERSPECTIVE. 2.3.4 THE APPELLANT HAS ARGUED THAT IT WAS NOT CONFRO NTED WITH THE INFORMATION AND ENQUIRY RELIED UPON BY THE AO. THI S IS AGAIN MISPLACED AS THE RESULTS OF THE ENQUIRY STANDS FULLY COMMUNICATED TO THE APPELLANT. AS I SEE, THE APPELLANT HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO CONTROVERT HOW THE MARKET RENT DETERMINED BY THE AO WAS NOT THE PREVALE NT MARKET RENT,. IT IS ALSO IMPORTANT TO NOTE THAT THE APPELLANT WAS ISSUED A DETAILED SHOW CAUSE DURING THE ASSESSMENT PROCEEDINGS AND ALL THE FACTS AND R ESULTS OF THE ENQUIRY STOOD COMMUNICATED IN THE SHOW CAUSE. FURTHER, SUMMONS WERE ALSO ISSUED TO THE PRINCIPAL OFFICER OF THE APPELLANT COMPANY W HICH WAS EVASIVELY RESPONDED TO. ACCORDINGLY, THE APPELLANT WAS GIVEN A LL THE OPPORTUNITY TO STATE ITS VIEWS IN THE MATTER. 2.3.5 IN LINE WITH THE FOREGOING, I FIND THE ACTIO N OF THE AO UNJUSTIFIED. IT IS CONFIRMED AND THE GROUNDS OF APPEAL ARE DISMISSED. 3. THE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 5 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 5. WE FIND THAT THE SHORT ISSUE WHICH IS TO BE DECIDED IN THE PRESENT CASE, WHETHER OR NOT, ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT WAS OPEN TO THE AO TO DISREGARD THE ACTUAL RENT RECEIVED BY THE ASSESSEE AND PROCEED TO COMPUTE THE ANNUAL VALUE OF THE PROPERTY LET OUT ON THE BASIS WHA T HE CONSIDERED TO BE MARKET RENT OF THE PROPERTY LET OUT. IT IS NOT THE ASSESSING O FFICERS CASE THAT THE MARKET VALUE ADOPTED BY HIM IS IN ACCORDANCE WITH MUNICIPAL VALUATION. A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS RECLAMATION REALTY INDIA PVT. LTD IN ITA NO. 14114/M/07 FOR A.Y. 2004-05 AND OTHERS ORDER DATED 26.11.2010 HAD AN OCCASION TO DEAL WITH SIMILAR ISSUE AND BOTH THE MEMBERS IN THE PRE SENT FORUM WERE ALSO IN THE FORUM OF THE SAID CO-ORDINATE BENCH AND AFTER ELABOR ATELY ANALYZING ALL THE LEGAL POSITION WITH REGARD TO THE ABOVE ISSUE, SPEAKING THROU GH ONE OF US (I.E. JUDICIAL MEMBER), OBSERVED AS FOLLOWS: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ORIG INALLY PROVISIONS OF SECTION 23 OF THE ACT PROVIDED FOR DETERMINATION OF ANNUAL VALUE OF HOUSE PROPERTY O NLY ON THE BASIS OF SUM FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ACTUAL RECEIPT OF RENT WAS IRRELEVANT. BY THE TAXATION LAW S (AMENDMENT) ACT, 1975 W.E.F. 1.4.1976, SECTION 23(1)(B) WAS INTRODUC ED, WHEREBY IT WAS PROVIDED THAT IF THE ACTUAL RENT RECEIVED BY AN ASS ESSEE IS IN EXCESS OF THE SUM FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, ANNUAL VALUE WILL BE THE RENT RE CEIVED. WHILE EXPLAINING THE AFORESAID AMENDMENT, CBDT IN CIRCULA R 204 DATED 24.7.1976 IN PARAGRAPH 9 HAS STATED AS FOLLOWS :- HITHERTO, THE ANNUAL VALUE OF HOUSE PROPERTY, CHAR GEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR. IN MANY CASES, HOWEVER, THE ACTUAL RE NT RECEIVED OR RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERTY . SUB SECTION (1) OF SECTION 23 HAS BEEN AMENDED TO PROVIDE THAT THE WHERE ANY PROPERTY IS IN OCCUPATION OF A T ENANT AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR, THE ANNUAL RENT RECEIVED OR RECEIVABL E SHALL BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY. I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 6 18. FROM THE AFORESAID CIRCULAR, IT IS CLEAR THAT T HE LAW PRIOR TO INTRODUCTION OF SECTION 23(1)(B) WAS THAT ANNUAL VA LUE WAS EQUAL TO MUNICIPAL VALUATION OF THE PROPERTY. THE ABOVE CIRC ULAR GIVES AN INDICATION AS TO HOW THE EXPRESSION THE SUM FOR WH ICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR USED IN SECTION 23(1)(A) HAST TO BE INTERPRETED. 19. IN THE CASE OF DIWAN DAULAT KAPPOR VS. NEW DELH I MUNICIPAL COMMITTEE, 122 ITR 700 (SC), THE QUESTION BEFORE TH E HONBLE SUPREME COURT WAS AS TO WHAT SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TA X. THE EXPRESSION ANNUAL VALUE AS DEFINED IN THE DELHI MUNICIPAL CO RPORATION ACT, 1957 AND PUNJAB MUNICIPAL ACT, 1911 WAS GROSS ANNU AL RENT AT WHICH SUCH HOUSE OF BUILDING MAY REASONABLY BE EXPECTED T O LET FROM YEAR TO YEAR. THE HON'BLE SUPREME COURT HELD THAT THE ANNU AL VALUE IS ALWAYS RENT REALIZABLE BY LANDLORD AND THAT ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LANDLORD MIGHT REASONABLY EXPECT TO GET FR OM A HYPOTHETICAL TENANT. THE HONOURABLE COURT FURTHER HELD THAT WHER E TENANCY IS SUBJECT TO RENT CONTROL LEGISLATATION, STANDARD REN T WOULD BE A PROPER MEASURE AND IN ANY EVENT, ANNUAL VALUE CANNOT EXCEE D SUCH STANDARD RENT. IN THE CASE OF MRS. SHEILA KAUSHISH VS. CIT, - ( 2002-TIOL-526- SC-IT ) = 131 ITR 435 (SC), THE QUESTION AROSE IN THE CON TEXT OF PROVISIONS OF SECTION 23 OF THE I.T. ACT. THE HON'B LE SUPREME COURT APPLYING THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) OBSERVED AS FOLLOWS :- NOW THIS WAS A DEFINITION GIVEN ON THE INTERPRETAT ION OF THE DEFINITION OF ANNUAL VALUE IN THE DELHI MUNICIPAL CORPORATIO N ACT, 1957, AND THE PUNJAB MUNICIPAL ACT, 1911, FOR THE PURPOSE OF LEVY OF HOUSE TAX, BUT IT WOULD BE EQULLY APPLICABLE IN INTERPRETING T HE DEFINITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT, 1961, BECAUSE THESE DEFINITIONS ARE IN IDENTICAL TERMS AN D IT WAS IMPOSSIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT, 1961, FROM THE DEFINITI ON OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT, 1957 AND THE PUNJA B MUNICIPAL ACT, 1911. WE MUST, THEREFORE, HOLD ON AN IDENTICAL LINE OF REASONING, THAT EVEN IF THE STANDARD RENT OF A BUILDING HAS NOT BEE N FIXED BY THE CONTROLLER UNDER SECTION 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY SECTION 12 OF THE RENT ACT FOR MAKING AN APPLICATION FOR FIXATION OF THE STANDARD RENT HAVING EXPIRED, IT IS NO LONGER COMPETENT TO THE TENANT TO HAVE THE STANDARD RENT OF THE BUIL DING FIXED, THE ANNUAL VALUE OF THE BUILDING ACCORDING TO THE DEFIN ITION GIVEN IN SUB- SECTION (1) OF SECTION 23 OF THE I.T. ACT, 1961, MU ST BE HELD TO BE THE STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM T HE TENANT. THIS INTERPRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB-SECTION (1) OF SEC.23 OF THE IT ACT,1961, MAY BE REGARDED AS HA VING RECEIVED LEGISLATIVE APPROVAL, FOR, WE FIND THAT SEC.6 OF TH E TAXATION LAWS I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 7 (AMENDMENT) ACT, 1975 SUB-SECTION (1) HAS BEEN AMEN DED AND IT HAS NOW BEEN MADE CLEAR BY THE INTRODUCTION OF CLAUSE(B ) IN THAT SUB- SECTION THAT WHERE THE PROPERTY IS LET AND THE ANNU AL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EX CESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY. THE NEWLY ADDED CL.(B ) CLEARLY POSTULATES THAT THE SUM FOR WHICH A BUILDING MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR MAY BE LESS THAN THE ACTUAL AMOUN T RECEIVED OR RECEIVABLE BY THE LANDLORD FROM THE TENANT. 20. HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI BANSALI, 141 ITR 419 HAD TO DEAL WITH A CASE OF A P ROPERTY IN MUMBAI, WHERE THE DISPUTE WAS WITH REGARD TO DETERMINATION OF ITS ANNUAL VALUE U/S. 23 OF THE ACT. HON'BLE CALCUTTA HIGH COU RT AFTER MAKING REFERENCE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) AND MRS. SHEILA KAUSHISH (SUPRA) HELD AS FOLLOWS :- THEREFORE, IN CASE WHERE THE ACTUAL RENT RECEIVED IS HIGHER THAN THAT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR IN RESPECT OF AN INCOME ACCRUING SUBSEQUENT TO THE AMENDMENT DIFFERENT CONSIDERATIONS MIGHT ARISE. BUT, WE ARE N OT CONCERNED WITH SUCH SITUATION IN THE INSTANT CASE. THEREFORE, IN V IEW OF THAT POSITION AND THE MUNICIPAL LAW AND IN VIEW OF THE DECISION O F THE SUPREME COURT, IT APPEARS TO US THAT THE INCOME FROM HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASON ABLY BE EXPECTED TO LET FROM YEAR TO YEAR AND WITH THE ANNUAL MUNICI PAL VALUE PROVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVA BLE AND THAT WOULD BE THE SAFEST GUIDE FOR THIS PURPOSE AND THE RENT A CTUALLY RECEIVED WOULD NOT BE OF ANY RELEVANCE. 21. THE COURT IN THE AFORESAID DECISION ALSO RELIED ON THE PROVISIONS OF SECTION 154 OF THE BOMBAY MUNICIPAL CORPORATION ACT , WHEREIN THE MANNER OF DETERMINATION OF RATEABLE VALUE HAS BEEN LAID DOWN. THE SAID PROVISIONS ALSO SPEAK OF ANNUAL RENT FOR WHIC H, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR. THUS, THE COURT CONCLUDED THAT THE MUNICIPAL VALUATION AND TH E ANNUAL VALUE U/S. 23(1)(A) ARE ONE OF THE SAME. THE DECISION OF HON'BLE CALCUTTA HIGH COURT HAS BEEN FOLLOWED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M.V. SONAVALA VS. CIT, 177 ITR 246 (BOM); W HEREIN HON'BLE BOMBAY HIGH COURT HAS OBSERVED AS FOLLOWS :- HOWEVER, THE QUESTIONS POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF SECTION 23(1)(A) SHOULD BE TAKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STANDARD RENT. THE QUESTION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKE N AT THE AMOUNT WHICH IS ACTUAL COMPENSATION RECEIVED OR AT THE AMO UNT FIXED AS I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 8 MUNICIPAL RATEABLE VALUE. OBVIOUSLY, MUNICIPAL RATE ABLE VALUE CANNOT BE EQUATED TO STANDARD RENT. IN THIS CONTEXT, IT MAY BE DESIRABLE TO REFER TO TH E CALCUTTA HIGH COURTS DECISION IN THE CASE OF CIT VS. PRABHABATI BANSALI, (1983) 141 ITR 419. ONE OF THE QUESTIONS INVOLVED IN THAT CASE WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE INCOME TAX OFFICER TO RE- DETERMINE THE ANNUAL VALUE OF THE PROPERTY UNDER SE CTION 23(1) AFRESH WITH REFERENCE TO ITS RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. THE QUESTION WAS ANSWERED IN THE AFFIR MATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGH T REASONABLY BE LET FROM YEAR TO YEAR AND THE ANNUAL MUNICIPAL VALUE. FOLLOWING THE CALCUTTA HIGH COURT DECISION (1983) 1 41 ITR 41 9 , WHICH WE THINK, HAS TAKEN THE RIGHT VIEW, WE ANSWER THE Q UESTIONS IN THE NEGATIVE AND AGAINST THE DEPARTMENT WITH A DIRECTIO N THAT THE ANNUAL VALUE OF DIFFERENT PROPERTIES WILL NOW BE DETERMINE D BY THE TRIBUNAL IN ACCORDANCE WITH THE DIRECTIONS SET OUT ABOVE. NO ORDER AS TO COSTS. 22. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMITABEN N. AMBANI VS. 323 ITR 104 (BOM) IN THE CONTEXT OF RULE 1BB TO THE WEALTH TAX RULES , WHICH USES THE SAME EXPRESSION THE SUM FOR WHICH THE PRO PERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN S EC.23(1)(A) OF THE ACT, HELD THAT RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL AUTHO RITIES SHALL BE THE YARDSTICK. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVE RAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT TH E MUNICIPAL VALUE SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE. WE ARE N OT MAKING REFERENCE TO THOSE DECISIONS, SINCE, IN OUR OPINION THE AFORESAID PRON OUNCEMENT OF HON'BLE BOMBAY HIGH COURT CONSIDERS THE DECISIONS OF HONBLE CALCU TTA HIGH COURT WHICH IN TURN HAS CONSIDERED THE LAW LAID DOWN BY THE HON'BLE APE X COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHA RGE U/S. 22 IS NOT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNICIPAL VALUE WOULD BE A PROPER YARDSTICK FOR DET ERMINING THE ANNUAL VALUE. IF THE PROPERTY IS SUBJECT TO RENT CONTROL LAWS AND TH E FAIR RENT DETERMINED IN ACCORDANCE WITH SUCH LAW IS LESS THAN THE MUNICIPAL VALUATION THEN ONLY THAT CAN BE SUBSTITUTED BY THE MUNICIPAL VALUE. THE DECISION IN THE CASE OF MRS. SHEILA KAUSHISH (SUPRA) MENTIONS STANDARD RENT UNDER THE R ENT CONTROL ACT AS ONE OF THE YARDSTICKS. WE ALSO FIND FROM THE DECISION OF HON'B LE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRABHABATI BANSALI (SUPRA) THAT STANDA RD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE O F MUNICIPAL VALUATION. 6. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEW SO TA KEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL. WE HAVE ALSO NOTED THAT MUNIC IPAL VALUATION, A COPY OF WHICH IS PLACED AT PAGE 30 OF THE PAPER BOOK, IS LESS THAN RENT RECEIVED BY THE ASSESSEE. ACCORDINGLY, WE FIND THAT THE VERY FOUNDATION OF TH E IMPUGNED ADDITION MADE TO THE PROPERTY INCOME RETURNED BY THE ASSESSEE ARE DEVOID OF LEGALLY SUSTAINABLE I.T.A NO.1813/ MUM/2011 PHOTOGRAVURS (INDIA) PVT. LTD 9 MERITS. WE, ACCORDINGLY, RESPECTFULLY FOLLOWING TH E SAME, UPHOLD THE GRIEVANCE OF THE ASSESSEE. 7. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 27 TH APRIL, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),5, MUMBAI 4. COMMISSIONER OF INCOME TAX, 2 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI