THE ITO 5(1)(2), MUMBAI V. M/S. GAGAN TRADING CO. LTD, MUMBAI

ITA 2429/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9021 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SONDE
• Keywords: Period of limitation; Notional interest
• Section: 12; 154

Judgement Text

. ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. [ CORAM: PRAMOD KUMAR, AM AND V. DURGA RAO, JM ] I.T.A NO.2429/ MUM/2008 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER WARD 5(1)(2) .. APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS GAGAN TRADING CO. LTD. ,. RESPONDENT JINDAL MANSION, 5-A, G.D.MARG, PEDDAR ROAD, MUMBAI-20. PA NO.AAACG 1829 Q SHRI PAVAN VED, FOR THE APPELLANT SHRI ARVIND SONDE, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 18.2.2008, FOR THE ASSESSMENT YEAR 2005-06, ON THE FOLLOWING GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE AO NOT TO TAK E THE NOTIONAL INTEREST OF RS. 14,04,00,000 ON INTEREST FREE DEPOS ITS RECEIVED BY THE ASSESSEE WHILE COMPUTING THE ANNUAL LETTING VALUE O F THE PROPERTY. 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN EQUITY SHARES AND INVEST MENT AND FINANCING. IN THE COURSE . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 2 OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE, THE OWNER OF COMMERCIAL PREMISES KNOWN AS JINDAL MANSIO N SITUATED AT WELL KNOWN PEDDAR ROAD IN MUMBAI. THE ASSESSEE HAS LET OUT 87 00 SQ.FT TO M/S. JINDAL IRON & STEEL CO. LTD., 7500 SQ.FT TO M/S JINDAL VIJAYNAGAR STEEL LTD AND 5000 SQ. FT TO JINDAL THERMAL POWER CO. LTD AS PER THE LEASE AGREEMENTS A ND COLLECTED SECURITY DEPOSITS OF `` ` .34,00,00,000, ` . 30,00,00,000 AND ` . 14,00,00,000, RESPECTIVELY. THESE DEPOSITS ARE INTEREST FREE DEPOSITS. THE AO ALSO F URTHER NOTICED THAT AS PER THE TERMS OF THE LEASE AGREEMENT, THE LESSEE SHALL PAY ALL TH E RATES, CESS AND TAXES, ETC. THE LESSEE WILL PAY RS. 1 PER SQ. FT PER MONTH TO THE A SSESSEE COMPANY WHICH COMES TO RS. 21,200 PER MONTH. THE AO ALSO NOTICED THAT THE ASSESSEE COMPANY HAS INVESTED THE INTEREST FREE DEPOSIT OF ` ` . 78,00,00,000 IN EQUITY SHARES OF GROUP COMPANY. THE ASSESSEE COMPANY, WAS, THEREFORE, ASKED TO EXPLAIN AS TO WHY INTEREST ON SUCH SECURITY DEPOSIT SHOULD NOT BE TAKEN AS INDIRECT RE NT FOR THE PURPOSES OF INCOME FROM HOUSE PROPERTY. IN RESPONSE TO THE AOS QUERY , THE ASSESSEE HAS FILED EXPLANATION VIDE LETTER DATED 29.11.2007. THE ASSE SSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE AND WORKED OUT NOTIONAL INTEREST OF RS. 14,04,00,000 COMPUTED @ 18% PER ANNUM ON THE DEPOSITS OF RS. 78, 00,00,000 AND DETERMINED THE ANNUAL LETTING VALUE OF THE PROPERTY AT RS. 9,8 4,58,080. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). T HE CIT (A) DELETED THE NOTIONAL INTEREST ON DEPOSIT OF RS. 14,04,00,000 FOLLOWING THE DECISION OF THE ITAT ON THIS ISSUE, OBSERVING AS UNDER:- I HAVE GONE THROUGH THE ARGUMENTS AND SUBMISSIONS OF THE LD A.R. AS WELL AS THE CONTENTS OF THE IMPUGNED ASSESSMENT ORD ER. I FIND THE LD A.O HAS ESTIMATED INTEREST AT THE RATE OF 18% ON ` ` . 78 CRORES FOR THE PURPOSE OF COMPUTING THE ALV NOTIONALLY IN ORDER TO KEEP THE MATTER ALIVE, ALTHOUGH THIS ISSUE HAS BEEN SETTLED IN FAVO UR OF THE APPELLANT BY THE HONBLE ITAT MUMBAI. THUS RESPECTFULLY FOLLOWI NG THE DECISION OF THE HONBLE ITAT, MUMBAI ON THIS ISSUE, THE LD A.O. IS DIRECTED TO DELETE THE NOTIONAL INTEREST ON DEPOSIT TO THE TUNE OF RS. 14,04,00,000 WHILE COMPUTING THE ALV OF THE PROPERTY UNDER CONSI DERATION AND ACCEPT THE HOUSE PROPERTY INCOME AS RETURNED. THE APPEAL IS ALLOWED ON THESE GROUNDS. . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 3 3. AGGRIEVED BY THE STAND SO TAKEN BY THE CIT (A), THE ASSESSING OFFICER IS IN APPEAL BEFORE THE TRIBUNAL. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE IS COVERED BY THE DE CISION DATED 15.12.2003 OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 1999-2000 IN ITA NO.3799/M/1999, WHEREIN, IT WAS, INTER ALIA, HELD T HAT THE REVENUE AUTHORITIES CANNOT TAKE INTO CONSIDERATION THE NOTIONAL INTERES T ON THE INTEREST-FREE ADVANCES RECEIVED BY THE ASSESSEE WHILE DETERMINING THE ANNU AL LETTING VALUE OF THE RENTED PROPERTY. IN THE CASE OF DCIT V. RECLAMATION REA LTY INDIA PVT.LTD., (ITA NOS.1411 TO 1413, 1733 & 1744/MUM/2007, ORDER DATED 26.11.2010, TO WHICH ONE OF US WAS A PARTY, THE TRIBUNAL HAS OBSERVED AS FOLLOWS:- 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. O RIGINALLY 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 PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ACTUAL RECEIPT OF RENT WAS IRRELEVANT. BY THE TAXATION LAWS (AMENDME NT) 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 FR OM YEAR TO YEAR, ANNUAL VALUE WILL BE THE RENT RECEIVED. WHILE EXPLA INING 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 CIR CULAR GIVES AN INDICATION AS TO HOW THE EXPRESSION THE SUM FOR WH ICH, THE PROPERTY . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 4 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 EXPRE SSION 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 CONTROL LEGISLATATION, STANDARD RENT WOULD BE A PRO PER MEASURE AND IN ANY EVENT, ANNUAL VALUE CANNOT EXCEED SUCH STANDARD RENT. IN THE CASE OF MRS. SHEILA KAUSHISH VS. CIT, 131 ITR 435 (SC), THE QUESTION AROSE IN THE CONTEXT OF PROVISIONS OF SECTION 23 OF THE I.T. ACT . THE HON'BLE SUPREME COURT APPLYING THE DECISION OF HON'BLE SUPREME COUR T 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 DELH I 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 UNDE R SECTION 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY SEC TION 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 UNDER THE PROVISIONS OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LA NDLORD FROM THE TENANT. THIS INTERPRETATION WHICH WE ARE PLACING ON THE LAN GUAGE OF SUB-SECTION (1) OF SEC.23 OF THE IT ACT,1961, MAY BE REGARDED A S HAVING RECEIVED LEGISLATIVE APPROVAL, FOR, WE FIND THAT SEC.6 OF TH E 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 RECEI VED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SU M FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR, THE AMOUNT SO . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 5 RECEIVED OR RECEIVABLE SHALL BE DEEMED TO THE ANNUA L VALUE OF THE PROPERTY. THE NEWLY ADDED CL.(B) CLEARLY POSTULATE S 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 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 COURT AFT ER MAKING REFERENCE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DE WAN DAULAT RAI KAPOOR (SUPRA) AND MRS. SHEILA KAUSHISH (SUPRA) HEL D 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 LAW AND IN VIEW OF THE DECISION OF THE SUPREME COUR T, IT APPEARS TO US THAT THE INCOME FROM HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE EXPECTED TO LET FROM 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. THUS, 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 . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 6 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. CWT 323 ITR 104 (BOM) IN THE CONTEXT OF RULE 1 BB TO THE WEALTH TAX RULES, WHICH USES THE SAME EXPRESSION THE SUM FOR WHICH THE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YE AR 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 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 DOW N BY THE HON'BLE APEX COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHARGE 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, MUNICIPA L VALUE WOULD BE A PROPER YARDSTICK FOR DETERMINING THE ANNUAL VALUE. IF THE PROPERTY IS SUBJECT TO RENT CONTROL LAWS AND THE FAIR RENT DETE RMINED IN ACCORDANCE WITH SUCH LAW IS LESS THAN THE MUNICIPAL VALUATION THEN ONLY THAT CAN BE SUBSTITUTED BY THE MUNICIPAL VALUE. THE DECISION I N 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 DECISI ON OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRABHABATI BANSALI ( SUPRA) THAT STANDARD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE OF MUNICIPAL VALUATION. 23. AS FAR AS DECISIONS RELIED UPON BY THE LEARNE D D.R. IN THE CASE OF BAKER TECHNICAL SERVICES (P) LTD. (SUPRA), WE FIND THAT THE SAME IS BASED ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CAS E OF ITO VS. MAKRUPA CHEMICALS (P) LTD. 108 ITD 95 (MUMBAI). IN THE CAS E OF MAKRUPA CHEMICALS, IN PARA-14 OF THE DECISION IT HAS BEEN C LEARLY HELD THAT RATEABLE VALUE, IF CORRECTLY DETERMINED UNDER THE M UNICIPAL LAWS CAN BE TAKEN AS ALV U/S.23(1)(A) OF THE ACT AND IN THIS RE GARD THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SHEILA KAUSHIS H(SUPRA) HAS BEEN FOLLOWED. IT HAS FURTHER BEEN OBSERVED THAT THE RA TEABLE VALUE IS NOT BINDING ON THE AO, IF THE AO CAN SHOW THAT RATEABLE VALUE UNDER THE . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 7 MUNICIPAL LAW DOES NOT REPRESENT THE CORRECT FAIR R ENT. IN COMING TO THE ABOVE CONCLUSION, THE BENCH HAS FOLLOWED THE DECISI ON OF THE PATNA HIGH COURT IN THE CASE OF KASHI PRASAD KATARVKA VS. CIT 101 ITR 810 (PATNA). WE FIND THAT THE BOMBAY HIGH COURT WHICH IS THE JUR ISDICTIONAL HIGH COURT HAS HELD THAT THE RATEABLE VALUE UNDER THE MU NICIPAL LAW HAS TO BE ADOPTED AS ANNUAL VALUE U/S.23(1)(A) OF THE ACT AND THEREFORE THE DECISION IN THE CASE F MAKRUPA CHEMICALS (SUPRA) TO THE CONTRARY CANNOT BE FOLLOWED. FURTHER IN PARA-13 OF ITS DECISION IN THE CASE OF MAKRUPA CHEMICALS, THE TRIBUNAL HAS VERY CATEGORICALLY HELD THAT IF RATABLE VALUE IS LESS THAN THE STANDARD RENT (WHERE THE PROPERTY IS SUBJECT TO RENT CONTROL LAWS) THEN ONLY STANDARD RENT HAS TO BE TAKEN. IN C OMING TO THE ABOVE CONCLUSION THE TRIBUNAL HAS FOLLOWED THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA ). THUS THE DECISION IN THE CASE OF BAKER TECHNICAL SERVICES (P) LTD. (S UPRA) BEING CONTRARY TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN OU R VIEW CANNOT BE FOLLOWED. 24. THE DECISION RELIED UPON BY THE LEARNED D.R. IN THE CASE OF FIZZ DRINKS LTD.(SUPRA), ARE DISTINGUISHABLE ON FACTS. THE FACTS IN THAT CASE WERE THAT THE AGREED RENT WAS RE.1/- PER MONTH AND INTEREST FREE SECURITY DEPOSIT OF RS.1,62,36,000/- WAS TAKEN BY THE OWNER. IT WAS THIS FACTOR WHICH WEIGHED IN THE MIND OF THE TRIBUNAL AS IS EVI DENT FROM THE OBSERVATIONS IN PARA-8 OF ITS ORDER WHERE THEY HAVE HELD THAT ANY FAIR JUDICIAL ADMINISTRATION WOULD NOT ALLOW SUCH THINGS TO HAPPEN. THE DECISION IN THE CASE OF TIVOLI INVESTMENT & TRADING CO. (P) LTD. (SUPRA) IS AGAIN DISTINGUISHABLE BECAUSE IT WAS A CASE WHERE T HERE WAS NO RENT AND ONLY A HUGE INTEREST FREE SECURITY DEPOSIT WAS TAKE N BY THE OWNER. 25. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ANNUAL VALUE (ALSO REFERRED TO AS MUNICIPAL VALUATION/ RATEABLE VALUE) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROPERTY AT RS.27,50,835 SHOULD BE THE DETERMINING FACTOR FOR APPLYING THE PROVISIONS OF SEC.23(1)(A) OF THE ACT. SINCE THE RENT RECEIVED BY THE ASSESSEE WAS M ORE THAN THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE ACTUAL RENT RECEIVED SHOULD BE THE ANNUAL VALUE OF THE PROPERTY U/S.23(1)(B) OF THE ACT. NOTIONAL INTEREST ON INT EREST FREE SECURITY DEPOSIT/RENT RECEIVED IN ADVANCE SHOULD NOT BE ADDE D TO THE SAME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J.K.INVESTORS (BOMBAY) LTD. (SUPRA). WE HOLD ACCORD INGLY. THE APPEAL OF THE REVENUE IS DISMISSED. WE SEE NO REASON TO TAKE ANY OTHER VIEW OF THE MATT ER THAN THE VIEW TAKEN BY THE TRIBUNAL IN THE ABOVE CASE, AS ALSO IN ASSESSEES O WN CASE FOR ASSESSMENT YEAR 1999- . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 8 2000.. SINCE THE CIT (A) HAS FOLLOWED THE AFORESAID DECISION OF THE TRIBUNAL, WE APPROVE THE ORDER OF THE CIT (A) AND DECLINE TO INT ERFERE IN THE MATTER. 5. IN THE RESULT, THE APPEAL STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2011 SD/- (V. DURGA RAO ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 7 TH JANUARY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),V, MUMBAI 4. COMMISSIONER OF INCOME TAX, MC-V , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 9 . ITA NO.2429/ MUM/2008 GAGAN TRADING CO. LTD. 10