VEENA D. MUNGANAHALLI, MUMBAI V. I.T.O. 21(3)(2), MUMBAI

ITA 2516/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9170 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KU MAR SR
• Keywords: Notional interest

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F : MUMBAI .. , ! / H.L. KARWA, PRESIDENT #$% &'(), $.. / NARENDRA KUMAR BILLAIYA, AM $ ! BEFORE SHRI H.L.KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.2516/MUM/2012 *# + *# + *# + *# + / / / / ASSESSMENT YEAR :2009-2010 VEENA D.MUNGANAHALLI ODYSEY-II, HIRANANDANI GARDENS, POWAI, MUMBAI 400 076 # # # # / VS. I.T.O. 21(3)(2) MUMBAI ,- $. ./ /0 ./ PAN PAN AGHPM-6384-N ( -1 / // / APPELLANT ) .. ( 23-1 / RESPONDENT ) -1 4 $ / APPELLANT BY : SHRI MANDAR VAIDYA 23-1 5 4 $ / RESPONDENT BY : SHRI MANOJ KUMAR (SR.A.R.) # 5 6. / / / / DATE OF HEARING : 05.12.2012 78+ 5 6. / DATE OF PRONOUNCEMENT : 07.12.2012 2 9$: / O R D E R PER H.L.KARWA, PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A)-32, MUMBAI DATED 23.2.2012 RELATING TO THE A SSESSMENT YEAR 2009- 2010. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FO LLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED IN FOLLOWING HIS OWN ORDE R FOR THE EARLIER YEAR AND FELL IN ERROR OF LAW IN NOT APPREC IATING THAT THE ANNUAL VALUE OF A PROPERTY NOT ACTUALLY LET OUT C ANNOT, FOR THE PURPOSE OF SECTION 23(1)(A) EXCEED THE MUNICIPAL VA LUATION OF THE PROPERTY AS ADOPTED BY THE MUNICIPAL AUTHORITIE S. 2. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN IGNORING TH E BINDING AUTHORITIES OF THE HONBLE JURISDICTIONAL HIGH COUR T AND THE HONBLE TRIBUNAL WHICH WERE BROUGHT TO HIS NOTICE, WHICH LAY DOWN THAT THE ANNUAL VALUE OF A PROPERTY FOR THE PURPOSES OF SECTION 23(1)(A) CANNOT EXCEED THE MUNICIPAL VALUAT ION OF THE PROPERTY. 3. THE LEARNED CIT(A) ERRED IN IGNORING THE SETTLED PO SITION THAT THE ANNUAL VALUE OF A PROPERTY FOR THE PURPOSES OF SECTION 23(1)(A) CANNOT EXCEED THE STANDARD RENT AS COMPUTE D UNDER THE RENT CONTROL ACT. 2. THE ONLY ISSUE BEFORE US IS DETERMINATION OF ANN UAL LETTING VALUE (ALV) OF THE PROPERTY IN QUESTION IN TERMS OF SECTION 23(1), WHETHER IT CAN BE DETERMINED AS PER MUNICIPAL VALUATION OR NOT ? 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISS UE RAISED BY THE ASSESSEE IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE BY THE DECISION OF THIS BENCH OF THE TRIBUN AL DATED 11 TH JULY, 2012 PASSED IN ASSESSEES OWN CASE RELATING TO ASSESSMEN T YEAR 2008-2009. THE 3 TRIBUNAL HAS HELD THAT THE ALV OF THE PROPERTY IN Q UESTION SHOULD BE DETERMINED AS PER MUNICIPAL VALUATION / RATABLE VAL UE ADOPTED BY THE MUNICIPAL AUTHORITIES. RELEVANT FINDINGS GIVEN BY T HE TRIBUNAL ON A SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2008-2009, ARE AS UND ER : 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL PLACED ON RECORD. IT HAS NOT B EEN DISPUTED BEFORE US THAT BOTH THE PROPERTIES HAVE NO T BEEN LET OUT AT ALL AND, THEREFORE, ANNUAL VALUE HAS TO BE D ETERMINED AS PER SECTION 23(1)(A). FOR THE SAKE OF THE READY REFERENCE SECTION 23(1) (A) (B) & (C) ARE REPRODUCED HEREUNDE R :- 23. (1) FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPER TY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOU S YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR R ECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM R EFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE : THERE HAS BEEN NO CHANGE IN THE LANGUAGE SO FAR AS SECTION 23(1)(A) IS CONCERNED. FURTHER FROM THE PLAIN READI NG OF THE SECTION, IT WOULD BE SEEN THAT NOWHERE IT HAS BEEN PROVIDED THAT FOR THE PURPOSE OF DETERMINING THE ANNUAL VALUE OF ANY PROPERTY, MARKET RENT IS TO BE APPLIED. ON THE OTHER HAND, IT ENVISAGES THAT PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THERE ARE CATENA OF CASE LAWS NOW AVAILABLE, NOT ONLY OF THE JURISDICTIONAL HIGH COURT BUT ALSO ITAT MUMBAI BENCH, 4 WHEREIN IT HAS BEEN HELD THAT MUNICIPAL VALUATION SHOULD BE TAKEN AS FAIR BASIS FOR DETERMINING THE ANNUAL LETT ING VALUE. THE GIST OF SUCH CASE LAWS ARE GIVEN AS UNDER :- I) M.V.SONAVALA VS. CIT, 177 ITR 246 (BOM). IN TH IS CASE, THE HONBLE HIGH COURT AFTER RELYING UPON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI BANSAL I, [1983] 141 ITR 419, HELD AS UNDER :- HOWEVER, THE QUESTION POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF SEC TION 23(1)(A) SHOULD BE TAKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STANDARD RENT. THE QUES TION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKEN AT THE AMO UNT WHICH IS THE ACTUAL COMPENSATION RECEIVED OR AT THE AMOUNT FIXED AS MUNICIPAL RATEABLE VALUE. OBVIOUSLY, MUNI CIPAL RATEABLE 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 V S. PRABHABATI BANSALI [1983] 141 ITR 419. ONE OF THE Q UESTIONS INVOLVED IN THAT CASE WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE INCOME TAX OFFICER TO REDETERMINE THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1) AFRESH WI TH REFERENCE TO ITS RATEABLE VALUE AS DETERMINED BY TH E MUNICIPAL CORPORATION. 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 THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEA R TO YEAR AND THE ANNUAL MUNICIPAL VALUE. 5 II) PARKPAPER INDUSTRIES P. LTD. 25 SOT 406(MUM) : IN THIS CASE, THE HONBLE TRIBUNAL AFTER RELYING UPON THE DECISION O F BOMBAY HIGH COURT IN THE CASE OF M.V.SONAVALA VS. CIT, 177 ITR 246 (BOM) AND THE DECISION OF THE HONBLE SUPREME COURT IN TH E CASE OF DEWAN DAULAT RAI KAPOOR VS. NEW DELHI MUNICIPAL COM MITTEE [1980] 122 ITR 700 (SC) AND IN THE CASE OF MRS. SHE ILA KAUSHISH VS. CIT [1981] 131 ITR 435(SC), HAS OBSERVED AND HE LD AS UNDER:- 12. LEARNED COUSEL FOR THE ASSESSEE RELIED ON SEVERAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT TH E MUNICIPAL VALUE SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE. WE ARE NOT MAKING REFERENCE TO THOSE DECISIONS, SINCE IN OUR OPINION, THE AFORESAID PRON OUNCEMENT OF HONBLE BOMBAY HIGH COURT CONSIDERS THE DECISION S OF HONBLE CALCUTTA HIGH COURT WHICH IN TURN HAS CONSI DERED THE LAW LAID DOWN BY THE HONBLE APEX COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHARGE UNDER SECTION 22 IS NOT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS N OT LET OUT, MUNICIPAL VALUE WOULD BE A PROPER YARDSTICK FOR DET ERMINING THE ANNUAL VALUE. DECISION IN THE CASE OF MRS. SHEI LA KAUSHISH (SUPRA) MENTIONS STANDARD RENT UNDER THE RENT CONTR OL ACT AS ONE OF THE YARDSTICKS. THIS DOES NOT MEAN THAT STAN DARD RENT ALONE IS TO BE CONSIDERED. IN THE PRESENT CASE, WE ALSO NOTICE THAT THE ASSESSING OFFICER HAS NOT CHOSEN TO ADOPT THE ANNUAL VALUE. WE ALSO FIND FRO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRA BHABATI BANSALI (SUPRA) THAT STANDARD RENT, IF IT DOES NOT EXCEED THE 6 MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE O F MUNICIPAL VALUATION. FOR ALL THE ABOVE REASONS, WE HOLD THAT THE MUNICIPAL VALUATION SHOULD BE THE BASIS OF DETE RMINING ANNUAL VALUE IN THE PRESENT CASE. ACTION OF THE REV ENUE AUTHORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS O F INQUIRIES CONDUCTED REGARDING MARKET RENT IN THE VICINITY OF THE PROPERTY IS NOT IN ACCORDANCE WITH LAW. THE ASSESSI NG OFFICER IS DIRECTED TO ACCEPT THE INCOME FROM HOUSE PROPERT Y ON THE BASIS OF MUNICIPAL VALUATION. III) SMITABEN AMABANI, 323 ITR 104(BOM) : IN THI S CASE, THE HONBLE HIGH COURT HAS HELD AS UNDER :- IN THE CASE OF SELF-OCCUPIED PROPERTY, THE VALUATI ON OF A HOUSE FOR THE PURPOSE OF WEALTH-TAX IS TO BE CALCUL ATED ON THE BASIS OF GROSS MAINTAINABLE RENT WHICH IS THE S UM FOR WHICH THE HOUSE MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. AS FAR AS RATEABLE VALUE IS CONC ERNED, UNDER THE VARIOUS ACTS THAT GOVERN MUNICIPALITIES/ MUNICIPAL CORPORATIONS RATEABLE VALUE IS ALSO CALCULATED ON T HE BASIS OF REASONABLE RENT THAT THE PROPERTY MAY FETCH. IV) DCIT VS. RECLAMATION REALTY INDIA PVT. LTD. ITA.NO.1411/M/2007 : WHEREIN THE ITAT MUMBAI BENCH AFTER REFERRING TO CA TENA OF CASE LAWS HAS COME TO THE FOLLOWING CONCLUSION :- 25. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ANNUA L VALUE (ALSO REFERRED TO AS MUNICIPAL VALUATION/RATEABLE V ALUE) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROPERTY AT RS.27,50,835/- SHOULD BE THE DETERMININ G FACTOR FOR APPLYING THE PROVISIONS OF SEC.23(1)(A) OF THE ACT. SINCE 7 THE RENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE SUM FOR WHICH 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 A CT. NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT /RENT RECEIVED IN ADVANCE SHOULD NOT BE ADDED TO THE SAME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF J.K.INVESTORS (BOMBAY) LTD.(SUPRA). WE HOLD ACCORDINGLY. THE APPEAL OF THE REVENUE IS DISMISSED . 7. THUS, RESPECTFULLY FOLLOWING THE AFORESAID DECI SIONS, WE HOLD THAT THE ANNUAL LETTING VALUE OF THE PROPERTY IN QU ESTION SHOULD BE DETERMINED AS PER THE MUNICIPAL VALUATION/RATEAB LE VALUE ADOPTED BY THE MUNICIPAL AUTHORITIES. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ADOPT THE MUNICIPA L VALUATION/RATEABLE VALUE ADOPTED BY THE MUNICIPAL A UTHORITIES. SINCE GROUND NO.1 HAS NOT BEEN PRESSED, HENCE, THE ASSESSEES APPEAL IS TREATED AS PARTLY ALLOWED. 4. THE FACTS OF THE CASE RELATING TO THIS YEAR ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2008-2009 AND THE ISSUE INVOLVED IS ALSO IDENTICAL. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL PA SSED IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2008-2009 WE HOLD THAT THE ALV OF THE PROPERTY IN QUESTION SHOULD BE DETERMINED AS PER MUNICIPAL VALU ATION. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ADOPT THE MUNICIPAL VALUE/RATABLE VALUE ADOPTED BY THE MUNICIPAL AUTHORITIES. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ; 6< *# ;6 / /, 5 = , > 6 5 /6 ?( 8 ITA.NO.2516/M/2012 D.MUNGANAHALLI PRONOUNCED IN THE OPEN COURT ON 07.12.2012. 9$: 5 8+ . $ = @9#< 07TH DECEMBER, 2012 8 5 A SD/- SD/- (N.K.BILLAIYA) (H L KARWA) $. 9, $. 9, $. 9, $. 9, / ACCOUNTANT MEMBER ! ! ! ! / // / PRESIDENT MUMBAI; @9# DATED 07.12.2012 .*#../ VBP, SR. PS 9$: 5 2*6BC D$C+6 9$: 5 2*6BC D$C+6 9$: 5 2*6BC D$C+6 9$: 5 2*6BC D$C+6/ COPY OF THE ORDER FORWARDED TO : 1. -1 / THE APPELLANT 2. 23-1 / THE RESPONDENT. 3. CIT(A) - 32, MITTAL COURT, B WING, ROOM NO. 13 & 1305, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021. 4. E / CIT, CITY-21, MUMBAI 5. CFA 2*6*# , , / DR F BENCH 6. AG / GUARD FILE 9$:# 9$:# 9$:# 9$:# / BY ORDER, 3C6 2*6 //TRUE COPY// H HH H/ // /? / ? / ? / ? / ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI