Appeal details
Counselvise Citation
19919914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-05-2011
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
09-05-2011
Assessment Year
2005-2006
Appeal Filed On
08-01-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A NOS.199 & 200/ MUM/2010 ASSESSMENT YEARS: 2005-06 & 2006-07 SHAILAJA S HEMDEV .. APPELLANT 12/13 TH FLOOR, BELAIR APARTMENT, DR. AMBEDKAR ROAD, BANDRA (W), MUMBAI-50 PA NO.ABBPH 2668D VS DY. COMMISSIONER OF INCOME TAX-19(3) ,. RESPON DENT MUMBAI. I.T.A NOS.108 & 107/ MUM/2010 ASSESSMENT YEARS: 2005-06 & 2006-07 DY. COMMISSIONER OF INCOME TAX-19(3) ,. APPELL ANT MUMBAI VS SHAILAJA S HEMDEV .. RESPONDENT 12/13 TH FLOOR, BELAIR APARTMENT, DR. AMBEDKAR ROAD, BANDRA (W), MUMBAI-50 APPEARANCES: YOGESH THAR, FOR THE ASSESSEE S.P.PRASAD, FOR THE REVENUE O R D E R PER PRAMOD KUMAR: 1. THE CROSS APPEALS ARE DIRECTED AGAINST THE SEPAR ATE ORDERS OF CIT(A)S DATED 23 RD OCTOBER, 2009, IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2005-06 & 2006-07, RESPECTIVELY. 2 ASSESSMENT YEAR: 2005-06 2. IN GROUND NOS.1,2 & 3, THE ASSESSEE IS AGGRIEVED BY THE CIT(A)S ACTION IN HOLDING THAT THE LICENCE FEES IN RESPECT OF COMPOSI TE LETTING ACTIVITY CARRIED ON BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS A GAINST INCOME FROM BUSINESS. 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT AS PER CLAUSE 8(A) OF TAX AUDIT REPORT IN FORM 3CD FILED ALONGWIT H THE RETURN OF INCOME, THE NATURE OF BUSINESS IS SPECIFIED AS LETTING OUT FL ATS WHICH ARE FURNISHED ACCORDING TO THE SPECIFICATIONS OF THE LICENSEE ALO NGWITH VARIOUS FACILITIES, AMENITIES, SERVICES, ETC, FOR A COMPOSITE LICENSE F EE. HE ALSO NOTICED THAT THE ASSESSEE HAS CREDITED LICENSE FEE RECEIVED FROM AVE NTIS CROPSCIENCE, SIGMA MARINE, LUCENT TECHNOLOGIES ETC AND CLAIMED IT AS B USINESS INCOME. SINCE ACCORDING TO THE AO, THE LICENSE FEE IS RENT RECEIV ED FOR LETTING OUT OF THE PROPERTY, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO W HY RENT RECEIVED SHOULD NOT BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY AS PER SECTION 22 OF THE INCOME TAX ACT AND AS PER HONBLE SUPREME COURT S JUDGMENT IN THE CASE OF SHAMBU INVESTMENT PRIVATE LIMITED V CIT(263 ITR 143 ). IN HER REPLY, IT WAS, INTER ALIA, SUBMITTED THAT FULLY FURNISHED RESIDEN TIAL PROPERTIES HAVE BEEN LET OUT ALONGWITH FURNITURE, FIXTURES, FACILITIES AND A MENITIES. IT WAS ALSO SUBMITTED THAT SUBSTANTIAL EXPENDITURE IS INCURRED ON FURNISH ING THE FLATS TO THE SPECIFICATIONS OF THE LICENSEE. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER AND THE LICENSE FEE WAS TREATED AS INCOME FROM HOUSE PROPERTY. THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE CIT (A) REJECT ED THE ASSESSEES APPEAL, OBSERVING AS FOLLOWS:- 4.4 THE ASSESSEE HAS NOT MADE OUT ANY CASE TO SHOW WHETHER ANY FACILITIES/SERVICES WERE PROVIDED/RENDERED APART FR OM LETTING THE PROPERTY. IT IS ALSO OBSERVED THAT THE NUMBER OF P ROPERTIES LET OUT DOES NOT INDICATE THE CONDUCT AS THAT OF A BUSINESSMAN. 4.5 SINCE THE FACTS IN THE ASSESSMENT YEAR UNDER CO NSIDERATION ARE IDENTICAL TO THOSE IN ASSESSMENT YEAR 2003-04 AND 2 004-05 AND THE ISSUE HAS BEEN EXAMINED IN DETAIL BY CIT(A)-XIX FOR A.Y. 2003-04 VIDE HIS ORDER DATED 17.11.2006 WHICH ORDER HAS BEEN FOLLOWED BY C IT(A)-XIX FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORDER DATED 9 TH JULY, 2008, FOR THE REASONS MENTIONED IN THESE ORDERS I AM INCLINED TO AGREE WITH THE VIEW 3 OF THE AO VIZ THAT THE RENTAL INCOME IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 4. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEF ORE US. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE SEE NO REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A). THE HONBLE CALCUTTA HIGH COURT, IN THE CASE OF SHAMBHU INVESTM ENTS PVT LTD VS CIT (249 ITR 47),OBSERVED THAT IF THE MAIN INTENTION IS FOR LE TTING OUT THE PROPERTY OR ANY PORTION THEREOF, THEN SAME MUST BE CONSIDERED AS R ENTAL INCOME OR INCOME FROM PROPERTY. THIS VIEW OF THE HONBLE HIGH COURT HAS BEEN AFFIRMED BY HONBLE SUPREME COURT REPORTED IN (263 ITR 143). IT IS CLEA R THAT CERTAIN FACILITIES HAVE BEEN PROVIDED, BUT THE MAIN INTENTION REMAINS LETTI NG OUT OF THE PROPERTY, THEREFORE, IT CANNOT BE SAID THAT THE INCOME FROM RENTING IS TO BE TREATED AS BUSINESS INCOME. WE, THEREFORE, CONFIRM THE FINDIN GS OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 6. GROUND NOS.1,2 & 3ARE THUS DISMISSED. 7. GROUND NO.4 OF THE ASSESSEE RELATES TO LEVY OF I NTEREST UNDER SECTION 234B AND 234C. THE LEVY OF INTEREST IS MANDATORY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. 9. NOW WE TAKE UP THE APPEAL OF THE REVENUE. 10. THE REVENUE HAS TAKEN THE FOLLOWING GROUND IN I TS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN RESTRICTING IN DELETING THE AD DITION MADE ON ACCOUNT OF NOTIONAL INTEREST @ 10% ON INTEREST FREE SECURITY DEPOSITS RECEIVED BY THE ASSESSEE WHILE COMPUTING T HE ANNUAL VALUE OF THE RESIDENTIAL PROPERTIES U/S.23 OF THE I .T.ACT IGNORING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF BHAGWANDAS JAIN VS UNION OF INDIA(1981) 128 ITR 315 . 11. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED INTEREST FREE DEPOSITS OF RS.75,00,000 FROM M/S. LUCENT TECHNOLOG IES HINDUSTAN LTD FOR 324 DAYS AND RS.6,00,000 FOR FULL YEAR. THE ASSESSEE W AS ASKED TO SHOW CAUSE AS TO 4 WHY NORMAL INTEREST ON DEPOSITS @ 10% PER ANNUM SHO ULD NOT BE INCLUDED IN ANNUAL VALUE OF THE PROPERTY TO DETERMINE THE CORRE CT ANNUAL LETTING VALUE OF LET OUT PROPERTIES. AFTER CONSIDERING THE ASSESSEES S UBMISSIONS, THE AO MADE AN ADDITION OF RS.7,25,753 FOLLOWING THE FINDINGS IN A SSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05. AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 12. THE CIT(A) OBSERVED THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 IN RESPECT OF THE VERY SAME PROPERTIES BEFORE THE CIT(A), WHO AFTER CONSIDERIN G THE VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS ISSUE DECIDED IN FAVOUR OF T HE ASSESSEE. FOLLOWING THE SAME, THE CIT (A) DELETED THE ADDITION. BEING AGGR IEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. 13. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE RECORD OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) TO INTERFERE. THE OBSERVATIONS OF THE CIT(A) ARE AS FOLLOWS:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO THE ORDERS OF CIT(A)-XIX FOR ASSESSMENT YEAR 2003-04 AND 2004-05 AND HAVE OBSERVED THAT THE FACTUAL POSITION IN THE ASSESSMENT YEAR UN DER CONSIDERATION IS THE SAME AS THE ONE IN THE EARLIER YEARS. THE AO H AS CONSIDERED NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSITS TO BE P ART OF ANNUAL VALUE U/S. 23(1) (B) OF THE ACT. THE JURISDICTIONAL HIGH COUR T HAS IN THE CASE OF J.K.INVESTORS 112 TAXMAN 180(BOM) AND THE CALCUTTA HIGH COURT IN THE CASE OF SATYA CO. LTD(75 TAXMAN 193) (CAL) HAVE CLE ARLY HELD THAT NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSITS CANNOT BE TAKEN TO BE PART OF ANNUAL VALUE U/S.23(1)(B) OF THE ACT. IN THE FACTS OF THIS CASE, THE QUESTION WHETHER NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSITS CAN BE TAKEN TO BE PART OF ANNUAL VALUE U/S.23(1)(A) DO ES NOT ARISE. HOWEVER, THIS CANNOT BE DONE EVEN U/S.23(1)(A). CBDT CIRCUL AR NO.204 DATED 24.7.1976(PARA 9) AND THE RATIO OF THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF SATYA CO.LTD AND SEVERAL DECISIONS O F THE JURISDICTIONAL BENCH OF ITAT INCLUDING THE DECISION IN THE CASE OF PARKPAPER INDUSTRIES LTD (25 SOT 406)(MUM)ARE CLEAR AUTHORITIES FOR THE PROPOSITION THAT MUNICIPAL RATABLE VALUE NEEDS TO BE CONSIDERED FOR THE PURPOSES OF S.23(1)(A). FURTHER, THE BOMBAY HIGH COURT HAS IN THE CASE OF OTTERS CONSTRUCTION CO.(SUPRA) AND ALSO IN THE CASE OF CYG US NEGRI INVESTMENTS PVT LTD (SUPRA) UPHELD THE ACTION OF ITAT IN DELETI NG THE ADDITION TO ANNUAL VALUE ON ACCOUNT OF NOTIONAL INTEREST. IN V IEW OF THIS AND ALSO FOR THE REASONS MENTIONED IN THE ORDER DATED 17.11.200 6 PASSED BY CIT(A)- XIX FOR ASSESSMENT YEAR 2003-04 AND ALSO IN ORDER D ATED 9.7.2008 PASSED BY THE CIT(A)-XIX FOR ASSESSMENT YEAR 2004-05,I HOL D THAT THE INCLUSION 5 OF RS 7,25,753 IN THE ANNUAL VALUE OF TWO LET OUT PROPERTIES BE DELETED. THIS GROUND IS ALLOWED.. 14. WE ALSO FIND THAT A CO-ORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF DCIT VS RECLAMATION REALTY INDIA PVT. LTD IN ITA NO. 141 14/M/07 FOR A.Y. 2004-05 AND OTHERS ORDER DATED 26.11.2010 HAD AN OCCASION T O DEAL WITH SIMILAR ISSUE AND AFTER ELABORATELY ANALYZING ALL THE LEGAL POSIT ION WITH REGARD TO THE ABOVE ISSUE 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 ONLY ON THE BASIS OF SUM FOR WHICH, THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ACTUAL RECEIPT OF RENT WAS IRRELEVANT. BY THE TAXATION LAWS (AMENDMEN T) ACT, 1975 W.E.F. 1.4.1976, SECTION 23(1)(B) WAS INTRODUCED, WHEREBY IT WAS PROVIDED THAT IF THE ACTUAL RENT RECEIVED BY AN ASSESSEE IS IN EX CESS OF THE SUM FOR WHICH, THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, ANNUAL VALUE WILL BE THE RENT RECEIVED. WHILE EXPLAINING THE AFORESAID AMENDMENT, CBDT IN CIRCULAR 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 DEEM ED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. IN MANY CASES, HOWEVER, THE ACTUAL RENT RECEI VED OR RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERT Y. SUB SECTION (1) OF SECTION 23 HAS BEEN AMENDED TO PROVIDE THAT THE WHE RE ANY PROPERTY IS IN OCCUPATION OF A TENANT AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM FOR WHICH THE PROPERT Y MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE ANNUAL RENT RECEIVED OR RECEIVABLE SHALL BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY . 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 DETERMI NING THE ANNUAL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TAX. THE EXPRES SION ANNUAL VALUE AS DEFINED IN THE DELHI MUNICIPAL CORPORATION ACT, 195 7 AND PUNJAB MUNICIPAL ACT, 1911 WAS GROSS ANNUAL RENT AT WHICH SUCH HOUSE OF BUILDING MAY REASONABLY BE EXPECTED TO LET FROM YEA R TO YEAR. THE HON'BLE SUPREME COURT HELD THAT THE ANNUAL VALUE IS ALWAYS RENT REALIZABLE BY LANDLORD AND THAT ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LANDLORD MIGHT REASONABLY EXPECT TO GET FROM A HYPO THETICAL TENANT. THE HONOURABLE COURT FURTHER HELD THAT WHERE TENANCY IS SUBJECT TO RENT 6 CONTROL LEGISLATATION, STANDARD RENT WOULD BE A PRO PER MEASURE AND IN ANY EVENT, ANNUAL VALUE CANNOT EXCEED SUCH STANDARD REN T. IN THE CASE OF MRS. SHEILA KAUSHISH VS. CIT, - (2002-TIOL-526-SC-IT) = 131 ITR 435 (SC), THE QUESTION AROSE IN THE CONTEXT OF PROVISIONS OF SECT ION 23 OF THE I.T. ACT. THE HON'BLE SUPREME COURT APPLYING THE DECISION OF HON'BLE SUPREME COURT IN THE 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 CORPORATION A CT, 1957, AND THE PUNJAB MUNICIPAL ACT, 1911, FOR THE PURPOSE OF LEVY OF HOUSE TAX, BUT IT WOULD BE EQULLY APPLICABLE IN INTERPRETING THE DEFI NITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT, 1 961, BECAUSE THESE DEFINITIONS ARE IN IDENTICAL TERMS AND IT WAS IMPOS SIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT, 1961, FROM THE DEFINITION OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT, 1957 AND THE PUNJAB MUNICIPAL ACT, 1911. WE MU ST, THEREFORE, HOLD ON AN IDENTICAL LINE OF REASONING, THAT EVEN IF THE STANDARD RENT OF A BUILDING HAS NOT BEEN FIXED BY THE CONTROLLER UNDER SECTION 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY SECT ION 12 OF THE RENT ACT FOR MAKING AN APPLICATION FOR FIXATION OF THE STAND ARD RENT HAVING EXPIRED, IT IS NO LONGER COMPETENT TO THE TENANT TO HAVE THE STANDARD RENT OF THE BUILDING FIXED, THE ANNUAL VALUE OF THE BUIL DING ACCORDING TO THE DEFINITION GIVEN IN SUB-SECTION (1) OF SECTION 23 O F THE I.T. ACT, 1961, MUST BE HELD TO BE THE STANDARD RENT DETERMINABLE U NDER THE PROVISIONS OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY TH E LANDLORD FROM THE TENANT. THIS INTERPRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB- SECTION (1) OF SEC.23 OF THE IT ACT,1961, MAY BE RE GARDED AS HAVING RECEIVED LEGISLATIVE APPROVAL, FOR, WE FIND THAT SE C.6 OF THE TAXATION LAWS (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 ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR TO YEAR, THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY. THE NEWLY ADDED CL.(B) CLEARLY POSTUL ATES THAT THE SUM FOR WHICH A BUILDING MIGHT REASONABLY BE EXPECTED TO LE T FROM YEAR TO YEAR MAY BE LESS THAN THE ACTUAL AMOUNT RECEIVED OR RECE IVABLE 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 PROPERTY I N MUMBAI, WHERE THE DISPUTE WAS WITH REGARD TO DETERMINATION OF ITS ANN UAL VALUE U/S. 23 OF THE ACT. HON'BLE CALCUTTA HIGH COURT AFTER MAKING R EFERENCE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DEWAN DAULA T 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 NOT CONCERN ED WITH SUCH SITUATION IN THE INSTANT CASE. THEREFORE, IN VIEW OF THAT POS ITION AND THE MUNICIPAL 7 LAW AND IN VIEW OF THE DECISION OF THE SUPREME COUR T, IT APPEARS TO US THAT THE INCOME FROM HOUSE PROPERTY MUST BE COMPUTE D ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE EXPECTED TO LET F ROM YEAR TO YEAR AND WITH THE ANNUAL MUNICIPAL VALUE PROVIDED SUCH A VAL UE IS NOT ABOVE THE STANDARD RENT RECEIVABLE AND THAT WOULD BE THE SAFE ST GUIDE FOR THIS PURPOSE AND THE RENT ACTUALLY 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 WHICH, TH E PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. T HUS, THE COURT CONCLUDED THAT THE MUNICIPAL VALUATION AND THE ANNU AL VALUE U/S. 23(1)(A) ARE ONE OF THE SAME. THE DECISION OF HON'B LE CALCUTTA HIGH COURT HAS BEEN FOLLOWED BY HON'BLE BOMBAY HIGH COURT IN T HE CASE OF M.V. SONAVALA VS. CIT, 177 ITR 246 (BOM); WHEREIN HON'BL E 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) SH OULD BE TAKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STA NDARD 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 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 WHET HER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE INCOME TAX OFFICER TO RE -DETERMINE THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1) AFRESH WI TH REFERENCE TO ITS RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPO RATION. THE QUESTION WAS ANSWERED IN THE AFFIRMATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON THE BASIS OF T HE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR TO YEAR AND THE ANNUAL MUNICIPAL VALUE. FOLLOWING THE CALCUTTA HIGH COURT DECISION (1983) 1 41 ITR 419, WHICH WE THINK, HAS TAKEN THE RIGHT VIEW, WE ANSWER THE QUES TIONS IN THE NEGATIVE AND AGAINST THE DEPARTMENT WITH A DIRECTION THAT TH E ANNUAL VALUE OF DIFFERENT PROPERTIES WILL NOW BE DETERMINED BY THE TRIBUNAL IN ACCORDANCE WITH THE DIRECTIONS SET OUT ABOVE. NO OR DER AS TO COSTS. 22. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SM ITABEN 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 T HE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN SEC.23(1)(A) OF THE ACT, HELD THAT RATEABLE VALUE A S DETERMINED BY THE MUNICIPAL AUTHORITIES SHALL BE THE YARDSTICK. THE L EARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVERAL OTHER JUDICIAL PRONOUNCE MENTS IN SUPPORT OF HIS CONTENTION THAT THE MUNICIPAL VALUE SHOULD BE T HE BASIS OF DETERMINING THE ANNUAL VALUE. WE ARE NOT MAKING REF ERENCE TO THOSE 8 DECISIONS, SINCE, IN OUR OPINION THE AFORESAID PRON OUNCEMENT OF HON'BLE BOMBAY HIGH COURT CONSIDERS THE DECISIONS OF HONBL E CALCUTTA HIGH COURT WHICH IN TURN HAS CONSIDERED THE LAW LAID DOWN BY T HE HON'BLE APEX COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSI TION OF LAW THAT CHARGE U/S. 22 IS NOT ON THE MARKET RENT; BUT IS ON THE AN NUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNICIPAL VA LUE WOULD BE A PROPER YARDSTICK FOR DETERMINING THE ANNUAL VALUE. IF THE PROPERTY IS SUBJECT TO RENT CONTROL LAWS AND THE FAIR RENT DETERMINED IN A CCORDANCE 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 RENT CONTR OL 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 STANDARD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN B E ADOPTED IN PLACE OF MUNICIPAL VALUATION. 15. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEW SO TAKEN BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL AS THE VERY FOUNDAT ION OF THE IMPUGNED ADDITION IS DEVOID OF LEGALLY SUSTAINABLE MERITS. WE, ACC ORDINGLY, RESPECTFULLY FOLLOWING THE SAME, UPHOLD THE ORDER OF THE CIT(A). 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ASSESSMENT YEARS: 2006-07. 17. GROUND NOS.1, 2 & 3 RAISED BY THE ASSESSEE IN H ER APPEAL ARE SIMILAR TO GROUND NOS.1,2 & 3 FOR THE ASSESSMENT YEARS 2005-06 . IN LINE WITH OUR DECISION IN PARA NO.5 ABOVE, THE ISSUE TAKEN IN THESE GROUND S IS DISMISSED. 18. GROUND NO.4 OF ASSESSEES APPEAL READS AS UNDE R:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT THE APPELLANTS CLAIM FOR DED UCTION OF MAINTENANCE CHARGES WHILE COMPUTING INCOME UNDER THE HEAD, INCO ME FROM HOUSE PROPERTY, WHICH CLAIM WAS BASED ON THE RATIO OF THE DECISIONS OF THE JURISDICTIONAL BENCH OF ITAT, IS NOT ALLOWABLE SINC E THIS CLAIM WAS NOT MADE BEFORE THE AO. THE APPELLANT PRAYS THAT THE MAINTENANCE CHARGES OF `.1,80,240 IN RESPECT OF HER FLATS IN SAMSHIBA APARTMENTS AND `.2 ,22,694 IN RESPECT OF HER FLATS IN BHOJWANI ENCLAVE BE DEDUCTED WHILE COM PUTING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 19. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND AT THE TIME OF HEARING, THEREFORE, THE SAME IS DISMISSED AS NOT PR ESSED. 9 20. GROUND NOS.5 & 6 OF ASSESSEES APPEAL RELATE T O LEVY OF INTEREST UNDER SECTIONS 234B, 234D. LEVY OF INTEREST IS MANDATORY . WE ORDER ACCORDINGLY. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 22. THE ONLY GROUND RAISED BY THE REVENUE IS AGAINS T DELETION OF ADDITION MADE ON ACCOUNT OF NOTIONAL INTEREST @ 10% ON INTER EST FREE SECURITY DEPOSITS RECEIVED BY THE ASSESSEE. 23. THIS ISSUE IS SIMILAR TO THE ISSUE TAKEN BY THE REVENUE IN A.Y. 2005-06. IN LINE WITH OUR DECISION IN PARA NOS.12 & 13, THIS IS SUE IS DECIDED AGAINST THE REVENUE. 24. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING I.E. ON 9TH MAY 2011. SD/- (V. DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 9 TH MAY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),30, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY 19 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI
