M/s Rajeevan Hospitals (P) Ltd., Visakhapatnam V. The ITO, Ward-4(1)/Range-4, Visakhapatnam

ITA 286/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2694 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: C KAMESWARA RAO
• Keywords: Business income; Notional interest

Judgement Text

ITA 286/VIZ/2010 RAJEEVAN HOSPITAL P LTD, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 286 /VIZAG/ 20 10 ASSESSMENT YEAR : 2007 - 08 RAJEEVAN HOSPITAL S (P) LTD VISAKHAPATNAM ITO WARD - 4(1) /RANGE - 4 VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AABCR 4026R APPELLANT BY: SHRI C. KAMESWARA RAO, CA RESPONDENT BY: SHRI D.S. SUNDER SINGH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS IS AN APPEAL OF THE ASSESSEE PREFERRED AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER: - 1. THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CI T(A) ORDER IN SO FAR AGAINST THE ASSESSEE IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE EVIDENCE ON RECORD IN TREATING THE BUSINESS INCOME AS INCOME FROM HOUSE PROPERTY. 4. THE ESTIMATION OF NOTIONAL INTEREST @ 1 5% ON THE LEASE ADVANCE OF RS.5,00,000/ - AND TREATING IT NOTIONAL RENT IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IN VIEW OF THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, THE APPELL ANT HUMBLY PRAYS FOR DELETING OF THE ADDITION AND/OR SUCH OTHER RELIEF AS IT DEEMS FIT AND ACCORD JUSTICE. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING THE APPEAL. 2. DURING THE COURSE OF HE ARING, THE LD. COUNSEL FOR THE ASSESSEE OPTED NOT TO PRESS THE GROUND NO.3. THEREFORE, GROUND NO.3 IS DISMISSED BEING NOT PRESSED. GROUND NOS.1, 2, 5 & 6 ARE GENERAL IN NATURE AND AS SUCH NO INDEPENDENT ADJUDICATIONS ARE CALLED FOR. THEREFORE, WE ARE L EFT WITH ONLY GROUND NO.4 WHICH RELATE TO THE ESTIMATION OF NOTIONAL INTEREST @ 15% ON THE LEASE ADVANCE OF RS.5 LAKHS. IN THIS REGARD, WE HAVE NOTED FROM THE ORDERS OF THE LOWER AUTHORITIES THAT ASSESSEE HAS RECEIVED LEASE ADVANCE OF RS.5 LAKHS FROM THE TENANTS. THE A.O. HAS ESTIMATED THE NOTIONAL INTEREST ON THE ITA 286/VIZ/2010 RAJEEVAN HOSPITAL P LTD, VSKP 2 SAID RECEIPT AT 15% AND MADE THE ADDITION OF THE SAME TO THE TOTAL INCOME OF THE ASSESSEES. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. NOW THE ASSESSE E IS BEFORE US WITH THE SUBMISSIONS THAT THE NOTIONAL INTEREST CANNOT BE CHARGED ON THE LEASE ADVANCES RECEIVED BY THE ASSESSEES ON THE BASIS OF THE REAL INCOME THEORY. 3. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THAT THE ASSESSEE HAS LET OUT THE PR OPERTY AT A LESSER RENT AFTER CHARGING THE SUBSTANTIAL AMOUNT AS A LEASE ADVANCE. THEREFORE, THE NOTIONAL INTEREST SHOULD BE CHARGED. 4 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD, WE ARE OF THE VIEW THAT WITHOUT EARNING AN INCOME THE ASSESSEE CANNOT BE CHARGEABLE TO TAX. THOUGH THE ASSESSEE HAS RECEIVED A LEASE ADVANCE, THIS LEASE ADVANCE WAS NOT INVESTED ANYWHERE. IF THE ASSESSEE KEEPS THIS ADVANCE AMOUNT AT HIS HOME, HE CANNOT BE CHARGED WITH A NOTIONAL INTEREST TO BE ACCRUED ON THE SAID RECEIPT. IT IS A SWEET WILL OF THE ASSESSEE TO INVEST THE SAID RECEIPT O R DEPOSIT THE SAID RECEIPT IN SOME BANK OR KEEP IT AT HIS HOME. BUT WITHOUT EARNING ANY INCOME, THE ASSESSEE CANNOT BE CHARGEABLE TO TAX ON THE BASIS OF NOTIONAL INTEREST. IT IS NOT A CASE WHERE THE A.L.V. OF THE PROPERTY IS TO BE WORKED OUT FOR THE PURPOSE OF INCOME FROM HOUSE PROPERTY. IT IS A STRAIGHT CASE OF NOTIONAL INTEREST ON THE ADVANCE RECEIVED BY THE ASSESSEES. WE THEREFORE DO NOT FIND ANY JUSTIFICATI ON IN ESTIMATING THE NOTIONAL INTEREST ON THE LEASE ADVANCE RECEIVED BY THE ASSESSEES AND TO MAKE THE ADDITION ON THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITIONS. 5 . IN THE RESULT, TH E APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19.11 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 19 TH NOVEMBER , 20 10 ITA 286/VIZ/2010 RAJEEVAN HOSPITAL P LTD, VSKP 3 COPY TO 1 RAJEEVAN HOSPIT ALS (P) LTD, NRI PLOT NO.1, NORTH EXTENSION, SEETHAMMADHARA, VISAKHAPATNAM 2 ITO WARD - 4(1)/RANGE - 4, VISAKHAPATNAM 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM