RAJESH R. DAGA, MUMBAI V. ITO 14(1)(1), MUMBAI

ITA 3127/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1075 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 13-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Notional interest
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3127/MUM/2009 (ASSESSMENT YEAR: 2004-05) SHRI RAJESH R. DAGA INCOME TAX OFFICER - 14(1)(1) 5TH FLOOR, 18/22, SHEIKH MEMON AAYAKAR BHAVAN. M.K. ROAD STREET, MUMBAI 400002 VS. MUMBAI 400020 PAN - AEWPD 7914 A APPELLANT RESPONDENT ITA NO. 3010/MUM/2009 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER - 14(1)(1) SHRI RAJESH R. DAGA AAYAKAR BHAVAN. M.K. ROAD 5TH FLOOR, 18/22, SHEIKH MEMON MUMBAI 400020 VS. STREET, MUMBAI 400002 PAN - AEWPD 7914 A APPELLANT RESPONDENT ASSESSEE BY: SHRI VIJAY MEHTA REVENUE BY: SHRI JITENDRA YADAV O R D E R PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE RE VENUE AGAINST THE ORDER OF THE CIT(A)-XIV, MUMBAI DATED 19.02.2009 FO R THE ASST YEAR 2004- 05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN IT A NO. 3127/MUM/2009: - 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDI TION ON ACCOUNT OF NOTIONAL INTEREST ON SECURITY DEPOSIT, BY CONSIDERI NG THE SAME FOR DETERMINING ANNUAL VALUE OF THE PROPERTY IN ADDITIO N TO THE ACTUAL RENT RECEIVED. WITHOUT PREJUDICE TO THE ABOVE: (I) THE LEARNED CIT(A) ERRED IN DIRECTING THE LEARN ED INCOME TAX OFFICER TO ADOPT RATE OF 7% INSTEAD OF 6% (SUGGESTED BY THE APPELLANT) TO ARRIVE AT NOTIONAL INTEREST FOR DETERMINING ANNUAL LETTING VALUE. (II) THE LEARNED CIT(A) ERRED IN DISMISSING THE ARG UMENT OF THE APPELLANT FOR NOT CONSIDERING NOTIONAL INTEREST ON SECURITY DEPOSIT FOR DETERMINING ANNUAL LETTING VALUE (AS THE APPELL ANT HAD UTILISED ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 2 PART OF THE SECURITY DEPOSIT FOR REPAYMENT OF BANK LOAN AND / OR FOR EARNING INCOME OFFERED IN THE RETURNS. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO. 3010/MUM/ 2009:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ADOPT T HE NOTIONAL INTEREST ON SECURITY DEPOSIT @ 7% INSTEAD OF 12% AD OPTED BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) HAS FAILED TO CONSIDER THE FACT THAT THE REN T CHARGED (LICENSE FEES) WAS VERY LOW AND THE HUGE INTEREST FREE SECUR ITY DEPOSIT TAKEN OF RS.1.50 CRORES WOULD DIRECTLY FAVOUR TO TH E ASSESSEE AND CONVENIENTLY COMPENSATE THE LOW LEASE RENT. THEREFO RE, THE ACTION OF THE AO OF WORKING OUT NOTIONAL INTEREST @12% P.A . ON THE INTEREST FREE DEPOSIT OF RS.1.50 CRORES TO DETERMIN E THE FAIR RENTAL VALUE OF THE PROPERTY U/S. 23(1)(A) OF THE I.T. ACT , 1961 IS RIGHT. 3. WITHOUT PREJUDICE TO THE ABOVE, IT IS STATED THAT T HE LEARNED CIT(A) HAS GIVEN DOUBLE BENEFIT TO THE ASSESSEE FIRSTLY BY ALLOWING THE REPAIRS AND RENOVATIONS EXPENSES ACTUALLY INCURRED WHICH WERE NOT CLAIMED IN THE ASSESSMENT PROCEEDINGS AND SECON DLY BY REDUCING THE RATE OF NOTIONAL INTEREST FROM 12% TO 7% WHICH HE SHOULD HAVE DONE EITHER WAY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE FACT THAT THE LEA RNED CIT(A) HAS CONFIRMED THE STAND OF THE AO FOR AY 2003-04 OF ADO PTING THE NOTIONAL INTEREST @ 12% ON THE WHOLE AMOUNT IN THE CASE OF SMT. GODAVARI R. DAGA WHERE THE ISSUE INVOLVED IS SAME. 3. THE BRIEF FACTS LEADING TO THE ISSUE ARE THAT ASSES SEE OWNED A DUPLEX RESIDENTIAL FLAT NO. 4A OF THE BUILDING KNOWN AS SU RAJ APARTMENT, MILLENNIUM TOWER, 71, BHULABHAI DESAI ROAD, MUMBAI ALONG WITH ONE RESERVED CAR PARKING SPACE. DURING THE PREVIOUS YEA R RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE FLAT WAS LEASED TO M/ S. OM KOTAK MAHINDARA LIFE INSURANCE CO. LTD. UNDER A LEAVE AND LICENCE A GREEMENT DATED 29.5.2003. THE FLAT WAS LEASED OUT AT A MONTHLY REN T OF RS. 25,000/- AND THE ASSESSEE OFFERED A SUM OF RS. 2,25,000/- BY WAY OF RENTAL INCOME FOR THE PERIOD ENDED 31.03.2004. BESIDES THIS, INTEREST FR EE SECURITY DEPOSIT OF RS. 1.50 CRORES WAS PAID TO THE ASSESSEE BY THE LESSEE. THE ASSESSING OFFICER ADDED THE NOTIONAL INTEREST OF 12% ON THE SECURITY DEPOSIT TO THE ACTUAL RENT RECEIVED. THE A.O. WAS OF THE VIEW THAT THE LICENCE FEE CHARGED BY ASSESSEE ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 3 APPEARED TO BE VERY LOW COMPARED TO THE PRIME AREA IN WHICH THE PROPERTY WAS LOCATED AND ITS SIZE (3000 SQ.FT.). ACCORDING T O THE ASSESSING OFFICER, THE LOW RENT HAD BEEN CONVENIENTLY COMPENSATED BY GIVIN G HUGE INTEREST FREE LOAN OF RS. 1.5 CRORES. THE ASSESSING OFFICER WAS O F THE VIEW THAT THE WORDS USED IN SECTION 23(1)(A) WAS MIGHT AND NOT CAN OR IS AND THUS THE NOTIONAL INCOME WAS TO BE GATHERED FROM WHAT A HYPOTHETICAL TENANT WOULD PAY WHICH WAS TO BE OBJECTIVELY ASCERTAINED ON A REASONABLE B ASIS IRRESPECTIVE OF THE FACT WHETHER THE PROPERTY WAS LET OUT OR NOT. RELIA NCE WAS PLACED BY THE ASSESSING OFFICER ON THE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF SULTAN BROTHERS VS. CIT (1964) 51 ITR 353. THE ASSE SSING OFFICER DREW FURTHER SUPPORT FROM THE JUDGMENT IN THE CASE OF J. K. INVESTORS (BOM) LTD., 248 ITR 723. THE ASSESSING OFFICER ALSO PLACED RELI ANCE ON THE MADRAS HIGH COURT JUDGMENT IN THE CASE OF N. NATRAJ VS. DCIT, 2 66 ITR 277. IT WAS HELD BY THE ASSESSING OFFICER THAT NOTIONAL INTEREST ON SECURITY DEPOSIT HAD A DEFINITE ROLE IN DETERMINING THE SUM OF RENT FOR WH ICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR IN ACCORDANCE WITH THE PROVISIONS U/S. 23(1)(A). THUS, THE ASSESSING OFFIC ER WORKED OUT THE NOTIONAL INTEREST ON THE DEPOSIT OF RS. 1.50 CRORES @ 12% AT RS. 18 LAKHS PER ANNUM. SINCE, THE PROPERTY HAD BEEN LET OUT FOR NINE MONTH S DURING THE SUBJECT YEAR; THE NOTIONAL INTEREST FOR NINE MONTHS WAS WOR KED OUT AT RS. 13,50,000/- WHICH WAS ALSO TAKEN INTO CONSIDERATION TO DETERMINE THE ANNUAL RATEABLE VALUE OF THE PROPERTY IN ADDITION T O THE RENT RECEIVED. LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4. LEARNED CIT(A), HOWEVER, REDUCED THE PERCENTAGE OF NOTIONAL INTEREST FROM 12% TO 7% FOR THE REASONS GIVEN IN PARA 7.1 & 7.2 OF HIS ORDER. AGGRIEVED BY THE ORDER OF LEARNED CIT(A) IN NOT DEL ETING ENTIRE ADDITION OF NOTIONAL INTEREST MADE BY THE ASSESSING OFFICER BY ASSESSING OFFICER, THE ASSESSEE HAS RAISED GROUND NO. 1 IN ITA NO.3127/MUM /2009. AGGRIEVED BY THE ACTION OF THE LEARNED CIT(A) IN REDUCING THE PE RCENTAGE OF NOTIONAL INTEREST FROM 12% TO 7%, THE REVENUE HAS RAISED GRO UND NO. 1 TO 6 IN ITA NO. 3010/MUM/2009. ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 4 5. FIRST, WE SHALL DEAL WITH THE APPEAL OF THE ASSESSE E. AT THE TIME OF HEARING THE LEARNED COUNSEL SUBMITTED THAT THE ISSU E IS COVERED IN ASSESSEES FAVOUR BY VARIOUS DECISIONS OF THE ITAT IN THE CASES OF ASSESSEES FATHER AND MOTHER IN VARIOUS ASSESSMENT YEARS AND F ILED COPIES OF THE ORDERS OF THE ITAT ALONGWITH THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. PUSHYA PROPERTIES (P) LTD. 30 SOT 219 (MUM) AND JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASIAN HOTELS LTD. 323 ITR 490. 6. THE LEARNED D.R., HOWEVER, OBJECTED TO THE ABOVE ST ATING THAT THE CIT(A) HAS RELIED ON THE DECISION OF THE HON'BLE IT AT IN THE CASE OF TIVOLI INVESTMENT & TRADING CO. PVT. LTD. VS. ACIT 90 ITD 163(MUM) AND THE MATTER IS NOW REFERRED TO THE SPECIAL BENCH AND ACC ORDINGLY THE APPEAL MAY BE KEPT PENDING TILL THE DECISION OF THE SPECIAL BE NCH. 7. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THE DEC ISION RELIED UPON BY THE CIT(A) WAS WITH REFERENCE TO THE DECISION OF THE TIVOLI INVESTMENT AND TRADING CO. P. LTD. 90 ITD 163 AND REFERRED TO PARA 18 OF THE ITAT ORDER WHERE IT WAS SUBMITTED THAT THERE WAS NO SCOPE OR J USTIFICATION WHATSOEVER FOR MAKING ANY ADDITION FOR ANY NOTIONAL INTEREST F OR DETERMINING THE ANNUAL LETTING VALUE.. FURTHER, VIDE PARA 19 IT WAS HELD T HAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTORS (BOMBAY ) LTD. 248 ITR 723 ON SIMILAR ISSUE IT WAS HELD THAT NOTIONAL INTEREST WO ULD NOT FORM PART OF ANNUAL RENT RECEIVED OR RECEIVABLE UNDER SECTION 23(1)(B) OF THE I.T. ACT. IT WAS HIS SUBMISSION THAT EVEN IN THE ORDER RELIED UPON BY TH E CIT(A) THERE WAS A FINDING ON PRINCIPLES OF LAW THAT ADDITION FOR ANY NOTIONAL INTEREST DOES NOT ARISE. HOWEVER, ON THE SET OF FACTS IN THAT CASE WH ERE NO RENT WAS RECEIVED AND ONLY DEPOSIT WAS RECEIVED, THE TRIBUNAL HELD TH AT THE NOTIONAL INTEREST CAN BE CONSIDERED FOR FIXING THE RENT UNDER SECTION 23(1)(A). FURTHER IT WAS SUBMITTED THAT THE ISSUE BEFORE THE SPECIAL BENCH W AS WITH REFERENCE TO WHETHER WHEN THE INTEREST IS RECEIVED AND TAXED SEP ARATELY THE SAME CAN ALSO BE CONSIDERED AS PART OF ALV, WHICH IS NOT THE FACT IN THIS CASE. IT WAS SUBMITTED THAT ACTUAL RENT RECEIVED UNDER SECTION 2 3(1)(B) IS MORE THAN THE ANNUAL LETTING VALUE FIXED UNDER SECTION 23(1)(A) A ND THE BRIHAN MUMBAI CORPORATION HAS FIXED RENT OF THE PROPERTY AT RS.2, 44,301/- WHICH IS LESS ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 5 THAN THE ACTUAL RENT RECEIVED AT RS.3,00,000/ @ 25, 000 PM. ACCORDINGLY THERE IS NO NEED FOR CONSIDERING THE SPECIAL BENCH DECISION, AND COORDINATE BENCH DECISIONS IN OTHER GROUP CASES ARE APPLICABLE . 8. WE HAVE CONSIDERED THE ISSUE AND ARGUMENTS OF RIVAL PARTIES. SINCE ISSUE PENDING BEFORE THE SPECIAL BENCH IS ON A DIFF ERENT POINT AND HAS NO BEARING ON THE ISSUE IN THESE APPEALS, WE REJECT TH E LEARNED D.R.S OBJECTION AS THERE IS NO MERIT IN THE SUBMISSION TO KEEP THE APPEAL PENDING. ACCORDINGLY WE PROCEED TO DISPOSE OFF THESE APPEALS . 9. SIMILAR ISSUE WAS DECIDED IN THE FOLLOWING CASES BY THE ITAT IN ASSESSEES FAMILY MEMBERS CASES AS DETAILED BELOW: - I) SHRI RAMKUMAR R. DAGA (ASSESSEES FATHER) FOR A.Y. 2003-04 IN ITA NO. 796/MUM/2008 DATED 26.06.2009 IN RESPECT OF THE PROPERTIES SITUATED AT SURAJ APARTMENTS, MILLENNIUM TOWER, 71- B, DESAI ROAD, MUMBAI. II) SMT. GODAVARI DAGA (MOTHER OF THE ASSESSEE) FOR A.Y . 2003-04 IN ITA NO. 797/MUM/2008 DATED 06.10.2009 IN RESPECT OF THE PROPERTIES SITUATED AT SURAJ APARTMENTS, MILLENNIUM TOWER, 71-B, DESAI ROAD, MUMBAI. III) SMT. GODAVARI DAGA (MOTHER OF THE ASSESSEE) FOR A.Y . 2004-05 AND 2005-06 IN ITA NOS. 3125 & 3126/MUM/2009 DATED 22.0 2.2010IN RESPECT OF THE PROPERTIES SITUATED AT SURAJ APARTME NTS, MILLENNIUM TOWER, 71-B, DESAI ROAD, MUMBAI. IV) SMT. GODAVARI DAGA (MOTHER OF THE ASSESSEE) FOR A.Y . 2005-06 AND 2004-05 IN ITA NOS. 3013 & 3014/MUM/2009 DATED 09.0 3.2010 IN RESPECT OF THE PROPERTIES SITUATED AT SURAJ APARTME NTS, MILLENNIUM TOWER, 71-B, DESAI ROAD, MUMBAI. V) SHRI RAJKUMAR DAGA V. ITO AND VICE VERSA (FATHER O F THE ASSESSEE) FOR A.Y. 2004-05 AND 2005-06 IN ITA NOS. 3128 & 3129/MUM/2009 DATED 06.10.2009 IN RESPECT OF THE PR OPERTIES SITUATED AT SURAJ APARTMENTS, MILLENNIUM TOWER, 71- B, DESAI ROAD, MUMBAI. 10. IN ITA 3125/MUM/2009 FOR A.Y. 2004-05, THE ITAT IN THE CASE OF SMT. GODAVARI R. DAGA HAS CONSIDERED SIMILAR ISSUE AND HELD AS FOLLOWS: - AT THE TIME OF HEARING, IT WAS BROUGHT TO OUR NOTI CE THAT IN THE CASE OF HUSBAND OF THE ASSESSEE, WHO IS OTHER CO-OWNER OF T HE PROPERTY IN QUESTION, SIMILAR ADDITION HAD BEEN MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY LEARNED CIT(A). THE ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF THE HUSBAND OF T HE ASSESSEE IN ITA NO. 796/MUM/08 AND THIS TRIBUNAL HELD AS FOLLOWS :- ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 6 THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI VIJAY M EHTA SUBMITTED BEFORE US THAT A SIMILAR ISSUE WAS DECIDE D IN THE CASE OF ITO VS. PUSHYA PROPERTIES PVT. LTD., 30 SOT 219 (MUM) AND ALSO IN THE CASE OF ACIT VS. SHRI VIJAY J. LAZARUS IN ITAT MUMBAI F BENCH IN ITA NO. 6751 & 6752/M/07 VIDE ORDER DA TED 25.3.2009 IN WHICH IT HAS BEEN HELD AS FOLLOWS :- UNDISPUTED FACTUAL POSITION IS THAT ACTUAL RENT OF RS. 1,00,000/- RECEIVED BY THE ASSESSEE WAS MUCH HIGHER THAN THE ANNUAL VALUE AS WORKED OUT IN TERMS OF SECTION 23(1)(A) OF THE ACT. THUS, ANNUAL VALUE IN THE CASE OF THE A SSESSEE WAS TO BE DETERMINED IN TERMS OF SECTION 23(1)(A) O F THE ACT VIZ., ACTUAL RENT RECEIVED. HON'BLE BOMBAY HIGH COU RT IN THE CASE OF J.K. INVESTORS (BOM) LTD. HAS HELD THAT FOR THE PURPOSE OF SECTION 23(1)(B), IT IS THE ACTUAL RENT RECEIVED THAT HAS TO BE CONSIDERED AS NOTIONAL INTEREST ON SECURI TY DEPOSIT CANNOT BE ADDED TO THE ACTUAL RENT RECEIVED . IN VIEW OF THIS AND PARTICULARLY FOLLOWING THE JURISDICTION AL HIGH COURT, ADDITION OF NOTIONAL INTEREST TO THE ACTUAL RENT RECEIPT IS NOT CORRECT. IN THE PRESENT CASE ALSO IT IS NOT DISPUTED THAT AC TUAL RENT RECEIVED IS MORE THAN ANNUAL RATEABLE VALUE BEING R S. 1,40,640/-AS PER CERTIFICATE DATED 1.3.2005 OF BRUH AN MUMBAI MUNICIPAL CORPORATION. THEREFORE RESPECTFULLY FOLLO WING THE DECISION OF THE CO-ORDINATE BENCH OF THE MUMBAI TRI BUNAL, WE ALLOW ASSESSEES APPEAL ON THIS ISSUE. IN VIEW OF THE ABOVE DECISION IN THE CASE OF THE CO -OWNER, WE HOLD THAT NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT CANNOT BE ADDED TO THE ANNUAL LETTING VALUE. GROUND NO. 1 TO 3 ARE ALLOWE D. 11. NOT ONLY THAT, THE DECISION IN ITO VS. PUSHYA PROPE RTIES (P.) LTD. 30 SOT 218 (MUM) IS ALSO ON SIMILAR LINES WHERE IT IS HELD AS UNDER: - THE PROVISIONS OF S. 23(1)(A) APPLY BOTH TO OWNER- OCCUPIED PROPERTY AS ALSO TO PROPERTY WHICH IS LET OUT. THE MEASURE OF V ALUATION TO DECIDE THE ANNUAL VALUE IS THE STANDARD RENT OR THE FAIR RENT. HOWEVER, S. 23(1)(B) ONLY APPLIES TO CASES WHERE THE ACTUAL RENT RECEIVE D IS MORE THAN THE REASONABLE RENT UNDER S. 23(1)(A) AND IT IS FOR THI S REASON THAT S. 23(1)(B) CONTEMPLATES THAT IN SUCH CASES THE ANNUAL VALUE SH OULD BE DECIDED ON THE BASIS OF THE ACTUAL RENT RECEIVED. GENERALLY, T HE FAIR RENT IS FIXED EVEN UNDER THE BOMBAY MUNICIPAL CORPORATION ACT AND THE RENT ACT BY TAKING INTO ACCOUNT VARIOUS PRINCIPLES OF VALUATION, VIZ., THE CONTRACTORS METHOD, THE RENT METHOD, ETC. HOWEVER, THAT EXERCIS E IS UNDERTAKEN TO DECIDE THE FAIR RENT OF THE PROPERTY. IN THAT CONNE CTION, THE ACTUAL RENT RECEIVED ALSO PROVIDES A PIECE OF EVIDENCE TO DECID E THE FAIR RENT OF THE PROPERTY. HOWEVER, UNDER THE INCOME-TAX ACT, THE SC HEME IS SLIGHTLY ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 7 DIFFERENT. SECTION 23(1)(B) PROVIDES THAT WHERE THE ACTUAL RENT IS MORE THAN THE FAIR RENT, THE ACTUAL RENT WOULD BE THE AN NUAL VALUE OF THE PROPERTY. IN THE CIRCUMSTANCES, THE VALUE OF THE NO TIONAL ADVANTAGE, LIKE NOTIONAL INTEREST IN THIS CASE, WILL NOT FORM PART OF THE ACTUAL RENT RECEIVED AS CONTEMPLATED BY S. 23(1)(B). UNDER SECTION 23(1) (A), THE ASSESSING OFFICER HAS TO DECIDE THE FAIR RENT OF THE PROPERTY . WHILE DECIDING THE FAIR RENT, VARIOUS FACTORS CAN BE TAKEN INTO ACCOUNT. IN SUCH CASES VARIOUS METHODS LIKE THE CONTRACTORS METHOD COULD BE TAKE N INTO ACCOUNT. IF ON COMPARISON OF THE FAIR RENT WITH THE ACTUAL RENT RE CEIVED, THE ASSESSING OFFICER FINDS THAT THE ACTUAL RENT RECEIVED IS MORE THAN THE FAIR RENT DETERMINABLE AS ABOVE, THEN THE ACTUAL RENT SHALL C ONSTITUTE THE ANNUAL VALUE UNDER SECTION 23(1)(B). APPLYING THE ABOVE TEST TO THE FACTS OF THIS CASE, THOUGH THE ASSESSING OFFICER HAD MENTIONED SECTION 23 (1)(A) IN HIS ORDE R BUT HIS WORKING OF ANNUAL VALUE IS ON THE BASIS OF SECTION 23(1)(B), B ECAUSE IN THE CASE UNDER CONSIDERATION THE ASSESSEE RECEIVED ACTUAL RE NT. SECTION 23(1)(B) CLEARLY PROVIDES THAT WHERE THE PROPERTY OR ANY PAR T OF THE PROPERTY IS LET AND THE ACTUAL RECEIVED OR RECEIVABLE IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), SECTION 23(1)(B) GIVES LIMITED POWER TO THE ASSESSING OFFICER TO EXAMINE WHETHER RENT RECEIVED IS MORE THAN THE R EASONABLE RENT UNDER SECTION 23(1)(A). THE ASSESSING OFFICER HAS TO FIND OUT ANNUAL RENT UNDER SECTION 23(1)(A) AND THEN SIMPLY COMPARE WHETHER TH E ACTUAL RENT RECEIVED IS MORE THAN THE AMOUNT CALCULATED BY THE ASSESSING OFFICER UNDER SECTION 23(1)(A), THEN ONLY ACTUAL RECEIVED I S TO BE TAKEN. BUT IN THE CASE UNDER CONSIDERATION THE ASSESSING OFFICER HAS ENHANCED THE ACTUAL RENT RECEIVED BY MAKING 10 PER CENT ADDITION OF THE INTEREST FREE AMOUNT RECEIVED. THUS, BY MERELY BY MENTIONING SECTION 23( 1)(A) BY THE ASSESSING OFFICER, IT COULD NOT BE HELD THAT SECTIO N 23(1) (A) HAD BEEN INVOKED. IN FACT, THE ASSESSING OFFICER HAD INVOKED SECTION 23(1)(B). THAT ACTION OF THE ASSESSING OFFICER WAS CONTRARY TO THE JUDGMENT OF THE HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTORS (BOMBAY ) LTD. (2001) 248 ITR 723/(2000) 112 TAXMAN 107 (BOM), WHEREIN IT HAS BEE N HELD THAT WHEN ACTUAL RENT RECEIVED BY ASSESSEE IS MORE THAN THE F AIR RENT OF THE HOUSE PROPERTY SECTION 23(1)(B) IS TO BE INVOKED, NOTIONA L INTEREST ON DEPOSIT CANNOT BE TAKEN INTO ACCOUNT FOR DETERMINING ANNUAL VALUE. SINCE THE ACTION OF THE ASSESSING OFFICER WAS CONTRARY TO THE JUDGMENT OF HIGH COURT, SAME WAS LIABLE TO BE QUASHED. APART FROM ABOVE DISCUSSION, EVEN IF IT IS PRESUMED THAT THE ASSESSING OFFICER HAD INVOKED SECTION 23(1)(A), THEN, ACCORDI NG TO THE REQUIREMENT OF THAT S. 23(1)(A), ONUS IS ON THE ASSESSING OFFICER TO ESTABLISH THAT THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR BECAUSE THE ADMITTED FACTS OF THE CASE ARE THA T THE ASSESSEE RECEIVED ACTUAL RENT. IT WAS THE ASSESSING OFFICER S CASE THAT CASE OF ASSESSEE FELL UNDER SECTION 23(1)(A), THEN, ONUS WA S ON THE ASSESSING OFFICER TO SHOW THAT ANNUAL VALUE CALCULATED UNDER SECTION 23(1)(A) WAS HIGHER THAN THE ACTUAL RENT RECEIVED. THE ASSESSING OFFICER HAD FAILED TO DISCHARGE THAT BURDEN BECAUSE ANNUAL VALUE GIVEN BY A SEMI- ITA NO. 3127 & 3010/MUM/2009 SHRI RAJESH R. DAGA 8 GOVERNMENT AUTHORITY, MUNICIPAL CORPORATION OF GREA TER MUMBAI, WAS LOWER THAN THE ACTUAL RENT RECEIVED BY THE ASSESSEE . 12. IN VIEW OF THE DECISIONS IN ASSESSEES OWN GROUP C ASES AND ALSO THE DECISION OF THE COORDINATE BENCH REPORTED ABOVE, IT IS HELD THAT NOTIONAL INTEREST ON SECURITY DEPOSIT SHOULD NOT BE ADDED TO THE ACTUAL RENT RECEIVED. IN VIEW OF THIS ASSESSEES GROUNDS ARE TO BE ALLOWE D. ITA NO. 3010/MUM/2009 13. SINCE THE ISSUE OF ADDITION OF NOTIONAL INTEREST TO THE ACTUAL RENT RECEIVED IS DECIDED IN FAVOUR OF THE ASSESSEE IN TH E ABOVE APPEAL, THE QUESTION OF CONSIDERING THE RATE OF INTEREST RAISED IN THE GROUNDS BY THE REVENUE DOES NOT ARISE. SINCE NO NOTIONAL INTEREST CAN BE CONSIDERED AS AN ADDITION UNDER SECTION 23(1)(B) TO THE ACTUAL RENT RECEIVED, THE RATE OF INTEREST, WHETHER IT IS 12% OR 7%, DOES NOT REQUIRE CONSIDERATION AND THE GROUNDS RAISED BY THE REVENUE ON ADOPTION OF LESSER RATE OF INTEREST BY THE CIT(A) ARE TO BE REJECTED. ACCORDINGLY THE GROUNDS ARE REJECTED. 14. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWED AN D APPEAL BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIV, MUMBAI 4. THE CIT XIV, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.