A.C.I.T. CIRCLE 7(2)(3), MUMBAI V. SHUBHMANGAL PORTFOLIO PVT. LTD., MUMBAI

ITA 2264/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92538 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Notional interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI VIJAY PAL RAO ( JM ) AND D. KARUNAKAR A RAO, (AM) , . , ./ I.T.A.NO . 2 2 64 / MUM/20 1 2 ( / ASSESSMENT YE A R : 20 0 5 - 06 ) INCOME TAX OFFICER 7(2)(3), ROOM NO. 618 , 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 4000 20 / VS. M/S SHUBHMANGAL PORTFOLIO P.LTD., B - 1, TULSI VIHAR, DR.A B ROAD, WORLI N AKA, MUMBAI - 400018 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACS7156A / REVENUE BY SHRI NEIL PHILIP / ASSESSEE BY S HRI NISHIT GANDHI / DATE OF HEARING : 7 .5.2015 / DATE OF PRONOUNCEMENT : 22 .5. 2015 / O R D E R PER VIJAY PAL RAO ( JM ) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.12.2011 OF LD. CI T(A) FOR THE ASSESSMENT YEAR 2005 - 06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING AN ADDITION MADE ON ACCOUNT OF NOTIONAL INCREASE IN FRV IN VIEW OF INTEREST FREE DEPOSITS RECEIVED FROM THE TENANT, NOT APPRECIATING T HE FACT THAT SUCH INTEREST FREE DEPOSIT IS THE DETERMINATE FACTOR IN WORKING OUT THE ANNUAL RENT VALUE. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS B E SET ASIDE A ND THAT OF THE AO RESTORED. THE APPELLANT CRAVE LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY 22 64 /MUM/201 2 2 3. THE ASSESSEE LET OUT PART OF ITS OFFICE PREMISES FOR THE USE BY THE SISTER CONCERN AND RECEIVED INTEREST FREE DEPOSIT S . THE AO ADDED RS.12,48,980/ - BEING NOTIONAL INTEREST ON THE DEPOSITS IN THE ANNUAL LETTING VALUE WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD.CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO IN THE ANNUAL LETTING VALUE ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE DEPOSITS. 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE RAISED IN THIS APPEAL IS NOW STANDS COVERED BY THE DECISION O F THE HONBLE J URISD ICTIONAL HIGH COURT IN THE CASE OF C IT V/S TIP TOP TYPOGRAPHY [2014] 368 ITR 330 (BOM) WHEREIN, THE HONBLE JURISDICTIONAL HAS HELD AS UNDER : 47. WE ARE OF THE VIEW THAT WHERE THE RENT CONTROL LEGISLATION IS APPLICABLE AND AS IS NO W URGED THE TREND IN THE REAL ESTATE MARKET SO ALSO IN THE COMMERCIAL FIELD IS THAT CONSIDERING THE DIFFICULTIES FACED IN EITHER RETRIEVING BACK IMMOVABLE PROPERTIES IN METRO CITIES AND TOWNS, SO ALSO THE TIME SPENT IN LITIGATION, IT IS EXPEDIENT TO EXECUT E A LEAVE AND LICENCE AGREEMENTS. THESE ARE USUALLY FOR FIXED PERIODS AND RENEWABLE. IN SUCH CASES AS WELL, THE CONCEDED POSITION IS THAT THE ANNUAL LETTING VALUE WILL HAVE TO BE DETERMINED ON THE SAME BASIS AS NOTED ABOVE. IN THE EVENT AND AS URGED BEFORE US, THE SECURITY DEPOSIT COLLECTED AND REFUNDABLE INTEREST - FREE AND THE MONTHLY COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REFLECT THE PREVAILING RATE OR THE ATTEMPT IS TO DEFLATE OR INFLATE THE RENT BY SUCH METHODS, THEN, AS HELD BY THE DELHI HIGH C OURT, THE ASSESSING OFFICER IS NOT PREVENTED FROM CARRYING OUT THE NECESSARY INVESTIGATION AND ENQUIRY. HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION. HE MUST NOT M AKE A GUESS WORK OR ACT ON CONJECTURES AND SURMISES. THERE MUST BE DEFINITE AND POSITIVE MATERIAL TO INDICATE THAT THE PARTIES HAVE SUPPRESSED THE PREVAILING RATE. THEN, THE ENQUIRIES THAT THE ASSESSING OFFICER CAN MAKE, WOULD BE FOR ASCERTAINING THE GOING RATE. HE CAN MAKE A COMPARATIVE STUDY AND MAKE A ANALYSIS. IN THAT REGARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN BE ASCERTAINED BY OBTAINING THE REQUISITE DETAILS. HOWEVER, THERE ALSO THE ASSESSING OFFICER MUST SAFEGUARD AGAINST ADOPTING THE RAT E STATED THEREIN STRAIGHTWAY. HE MUST FIND OUT AS TO WHETHER THE PROPERTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE AND LICENCE BASIS IS OF A SIMILAR NATURE, NAMELY, COMMERCIAL OR RESIDENTIAL. HE SHOULD ALSO SATISFY HIMSELF AS TO WHETHER THE RATE OBTAINED B Y HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS IN RELATION THERETO CAN BE APPLIED OR WHETHER A DEPARTURE THEREFROM CAN BE MADE, FOR EXAMPLE, BECAUSE OF THE AREA, THE MEASUREMENT, THE LOCATION, THE USE TO WHICH THE PROPERTY HAS BEEN PUT, THE ACCESS THE RETO AND THE SPECIAL 22 64 /MUM/201 2 3 ADVANTAGES OR BENEFITS. IT IS POSSIBLE THAT IN A HIGH RISE BUILDING BECAUSE OF SPECIAL ADVANTAGES AND BENEFITS AN OFFICE OR A BLOCK ON THE UPPER FLOOR MAY FETCH HIGHER RETURNS OR VICE VERSA. THEREFORE, THERE IS NO MAGIC FORMULA AND EVE RYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE. HOWEVER, WE EMPHASISE THAT BEFORE THE ASSESSING OFFICER DETERMINES THE RATE BY THE ABOVE EXERCISE OR SIMILAR PERMISSIBLE PROCESS HE IS BOUND TO DISCLOSE THE MATERIAL IN HIS POSSESSION TO THE PA RTIES. HE MUST NOT PROCEED TO RELY UPON THE MATERIAL IN HIS POSSESSION AND DISBELIEVE THE PARTIES. THE SATISFACTION OF THE ASSESSING OFFICER THAT THE BARGAIN REVEALS AN INFLATED OR DEFLATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER CONSIDERATI ONS MAKES IT UNREASONABLE MUST PRECEDE THE UNDERTAKING OF THE ABOVE EXERCISE. AFTER THE ABOVE ASCERTAINMENT IS DONE BY THE OFFICER HE MUST, THEN, COMPLY WITH THE PRINCIPLES OF FAIRNESS AND JUSTICE AND MAKE THE DISCLOSURE TO THE ASSESSEE SO AS TO OBTAIN HIS VIEW. 48. WE ARE NOT IN AGREEMENT WITH SHRI CHHOTARAY THAT THE MUNICIPAL RATEABLE VALUE CANNOT BE ACCEPTED AS A BONA FIDE RENTAL VALUE OF THE PROPERTY AND IT MUST BE DISCARDED STRAIGHTWAY IN ALL CASES. THERE CANNOT BE A BLANKET REJECTION OF THE SAME. IF THAT IS TAKEN TO BE A SAFE GUIDE, THEN TO DISCARD IT THERE MUST BE COGENT AND RELIABLE MATERIAL. 49. WE ARE OF THE OPINION THAT MARKET RATE IN THE LOCALITY IS AN APPROVED METHOD FOR DETERMINING THE FAIR RENTAL VALUE BUT IT IS ONLY WHEN THE ASSESSING OFFIC ER IS CONVINCED THAT THE CASE BEFORE HIM IS SUSPICIOUS, DETERMINATION BY THE PARTIES IS DOUBTFUL THAT HE CAN RESORT TO ENQUIRE ABOUT THE PREVAILING RATE IN THE LOCALITY. WE ARE OF THE VIEW THAT MUNICIPAL RATEABLE VALUE MAY NOT BE BINDING ON THE ASSESSING O FFICER BUT THAT IS ONLY IN CASES OF AFORE - REFERRED NATURE. IT IS DEFINITELY A SAFE GUIDE. 50. WE HAVE BROADLY AGREED WITH THE VIEW TAKEN BY THE FULL BENCH OF THE DELHI HIGH COURT. HENCE, THE ISSUE OF DETERMINATION OF THE 'FAIR RENTAL VALUE' IN RESPECT OF PROPERTIES NOT COVERED BY OR COVERED BY THE RENT CONTROL ACT IS TO BE UNDERTAKEN IN TERMS OF THE LAW LAID DOWN IN THE FULL BENCH DECISION OF THE DELHI HIGH COURT. 5. IN THE CASE IN HAND, THE AO HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD OR CONDUCTED ANY INQUIRY TO SHOW THAT DUE TO RECEIPT OF INTEREST FREE DEPOSITS, THE ASSESSEE HAS DEFLATED TO RENT OF THE PROPERTY IN QUESTION AND FURTHER HOW THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS LESS THAN THE RENT EXPECTED TO BE FETCHED BY THE PROPERTY. IN VI EW OF THE ABOVE FACTS AND CIRCUMSTANCES AND FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT (SUPRA), WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) QUA THIS ISSUE . 22 64 /MUM/201 2 4 6 . IN THE RESULT, THE APPEAL S FILED BY THE REVENUE IS DIS MISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22ND MAY , 201 5 . 22ND MAY , 2015 SD SD ( . / D. KARUNAKAR A RAO) ( / VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: 22 ND MAY , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI