JMP INVESTMENTS P. LTD ( NOW KNOWN AS JMP TRADING & PROPERTIES P.LTD ), MUMBAI V. ITO 2(2)(1), MUMBAI

ITA 3127/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1861 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 23-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TUSHAR SINGH
• Assessee Lawyers: MRS ARATI VISSANJI
• Section: 131; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 3127/MUM/2011 (ASSESSMENT YEAR: 2007-08) M/S. JMP INVESTMENTS PVT. LTD., (NOW KNOWN AS JMP TRADING & PROPERTIES PVT. LTD.) ROHIT CHAMBERS, JANMABHOOMI MARG, FORT, MUMBAI -400 001 PAN AAACJ 3002 E VS INCOME-TAX OFFICER 2(2)(1), ROOM NO. 549, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. ARATI VISSANJI RESPONDENT BY : SHRI TUSHAR SINGH DATE OF HEARING: 23.01.2013 DATE OF PRONOUNCEMENT: 30.01.2013 O R D E R PER VIVEK VARMA, JM: THE INSTANT APPEAL ARISES FROM THE ORDER OF CIT(A) 5, MUMBA I DATED 17.01.2011 WHEREIN THE SOLITARY GROUND IS AGAINST TH E ADOPTION OF NOTIONAL RENT AS INCOME FROM HOUSE PROPERTY IN PLACE O F ACTUAL RENT RECEIVED BY THE ASSESSEE. 2. THE FACTS OF THE CASE ARE THAT A FLAT ADMEASURING 625 SQ. FT. AT AMITA FLAT, MALABAR HILL WAS GIVEN ON RENT TO MS. SONALI PATEL, DAUGHTER OF MR. R.J. PATEL, ONE OF THE DIRECTORS OF THE ASS ESSEE COMPANY AT A MONTHLY RENT OF RS. 5,000/-, AS PER THE AGREEMENT BETWEEN MS. SONALI PATEL AND THE ASSESSEE, WHICH ALSO GAVE HER A RIGHT OF FIRST PURCHASE OF THE SAID FLAT. ON AN INQUIRY FROM THE AO, THE ABOVE M/S. JMP INVESTMENTS PVT. LTD. (NOW KNOWN AS JMP TRADING & PROPERTIES PVT. LTD.) ITA NO. 3127/MUM/2011 2 DETAILS WERE SUBMITTED TO HIM, WHICH DID NOT FIND F AVOUR WITH THE AO. THE AO, THEREFORE, WENT ON TO ESTIMATE THE RENT AS REAS ONABLY EXPECTED IN THE AREA, WHICH, ACCORDING TO THE AO, WOULD HAVE BEEN A T RS. 30,000/- PER MONTH I.E. RS. 3,60,000 PER ANNUM, AND MADE AN ADDI TION OF RS. 3,00,000 (RS. 3,30,000 RS. 60,000). 3. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 4. BEFORE US, THE AR SUBMITTED THAT NOTIONAL RENT C ANNOT BE ACCEPTED WHERE THERE IS A PROPER AGREEMENT, ACCORDING TO WHI CH, THE RENT IS BEING RECEIVED. THE AR ALSO POINTED OUT THAT THE ISSUE WH ETHER THE ADOPTION OF NOTIONAL RENT HAD TO BE PREFERRED OVER THE ACTUAL R ENT, HAS BEEN SET AT REST BY THE HONBLE BOMBAY HIGH COURT AND HAVE BEEN FOLLOWE D BY THE COORDINATE BENCHES OF ITAT AT MUMBAI AND ELSEWHERE. THE AR PLA CED BEFORE US THE DECISION OF COORDINATE BENCH IN THE CASE OF GAGAN T RADING CO. LTD. VS. ACIT, ITA NO. 4088/MUM/2010, WHEREIN, THE DEPARTMENT HAD ASSESSED THE INCOME FROM HOUSE PROPERTY ON THE BASIS OF NOTIONAL RENT ( PARA 4). THE AR POINTED OUT THAT THE ISSUE HAS BEEN EXPLAINED IN THE CASE C ITED, WHICH READS AS, 8. THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE O F RECLAMATION REALTY INDIA P. LTD. ALSO TOOK NOTE OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MRS. SHEILA KAUSHISH V S. CIT 131 ITR 435 (SC), WHEREIN THE QUESTION AROSE IN THE CON TEXT OF PROVISIONS OF SECTION 23 OF THE INCOME TAX ACT AND IT WAS HELD BY THE HONBLE SUPREME COURT THAT THE RATIO OF ITS DECISION IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) WOULD BE EQ UALLY APPLICABLE IN INTERPRETING THE DEFINITION OF ANNUA L VALUE GIVEN IN SECTION 23(1) OF THE INCOME TAX ACT. IT WAS HELD THAT THESE DEFINITIONS ARE GIVEN IN IDENTICAL TERMS AND IT WAS IMPOSSIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE GIVEN IN SECTION 23(1) OF THE INCOME TAX ACT FROM THE DEFINITION OF THAT T ERM GIVEN IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND THE PUNJAB MUNICIPAL ACT, 1911. IT WAS THEREFORE HELD ADOPTING IDENTICAL LINE OF REASONING THAT EVEN IF THE STANDARD RENT OF A BUILD ING HAS NOT BEEN FIXED BY THE CONTROLLER, THE ANNUAL VALUE OF T HE BUILDING AS PER SECTION 23(1) OF THE INCOME TAX ACT MUST BE HEL D TO BE A STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT CONTROL ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE TENANT. THE HONBLE APEX COURT ALSO OBSERVED TH AT THIS INTERPRETATION WHICH WAS BEING PLACED ON THE LANGUA GE OF SECTION 23(1) OF THE INCOME TAX ACT CAN BE SAID TO HAVE RECEIVED LEGISLATIVE APPROVAL BY THE AMENDMENT MADE IN THE SAID PROVISIONS WHEREBY IT WAS PROVIDED IN SECTION 23(1) (B) THAT WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEI VED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EX CESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET M/S. JMP INVESTMENTS PVT. LTD. (NOW KNOWN AS JMP TRADING & PROPERTIES PVT. LTD.) ITA NO. 3127/MUM/2011 3 FROM YEAR TO YEAR, THE AMOUNT SO RECEIVED OR RECEIV ABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY. 9. THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REALTY INDIA P. LTD. (SUPRA) THEN WENT ON TO REFER TO THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI BANSALI, 141 ITR 419 WHEREIN IT WAS HELD THAT RELYI NG ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DEWAN DAULAT RAI KAPOOR (SUPRA) AND MRS. SHEILA KAUSHISH (SUPRA) WHILE DECIDING THE ISSUE RELATING TO DETERMINATION OF ACTUAL VALUE OF THE ASSESSEES PROPERTY IN MUMBAI THE INCOME FRO M HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR AND WITH THE ANNUAL MUNICIPAL VALUE PROVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVABLE AND THE SAME COULD BE ADOPTED AS THE SAFEST GUIDE FOR THIS PURPOSE. AS MENTIONED BY THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REAL TY INDIA P. LTD. (SUPRA), THE SAID DECISION WAS RENDERED BY THE HONBLE CALCUTTA HIGH COURT AFTER TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 154 OF THE BOMBAY MUNICIPAL C ORPORATION ACT WHEREIN THE MANNER OF DETERMINATION OF RATABLE VALUE WAS LAID DOWN WHICH WAS BASED ON THE ANNUAL RENT FOR WH ICH THE PROPERTY MIGHTY REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE HONBLE CALCUTTA HIGH COURT HELD THAT THE MUNIC IPAL VALUATION AND ANNUAL VALUE U/S 23(1)(A) OF THE INCO ME TAX ACT THUS ARE ONE AND SAME. AS NOTED BY THE TRIBUNAL IN ITS ORDER PASSED IN THE CASE OF RECLAMATION REALTY INDIA P. L TD. (SUPRA) THE SAID DECISION OF THE HONBLE CALCUTTA HIGH COUR T IN THE CASE OF PRABHABATI BANSALI (SUPRA) HAS BEEN SUBSEQUENTLY FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M.V . SONAVALA VS. CIT 177 ITR 246 (BOM) WHEREIN THE QUESTION POSE D TO THEIR LORDSHIPS WAS WHETHER THE ACTUAL COMPENSATION RECEI VED COULD BE TAKEN AS ANNUAL VALUE OF THE PROPERTY AS AGAINST THE MUNICIPAL RATABLE VALUE AND THE SAME WAS ANSWERED B Y THE HONBLE BOMBAY HIGH COURT IN THE NEGATIVE THAT IS A GAINST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. 10. IN OUR OPINION, THE SIMILAR ISSUE AS INVOLVED IN THE PRESENT CASE THUS HAS BEEN DECIDED BY THE COORDINATE BENCH OF TH IS TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE CASE OF RECLAMATIO N REALITY INDIA P. LTD. (SUPRA) AND SINCE THE SAID DECISION H AS BEEN RENDERED BY THE TRIBUNAL RELYING ON AND FOLLOWING T HE JUDGMENTS OF HONBLE APEX COURT AND THE HONBLE JURISDICTIONA L HIGH COURT, WE ARE OF THE VIEW THAT THE JUDICIAL PROPRIETY AND JUDICIAL DISCIPLINE REQUIRE US TO FOLLOW THE SAME. ACCORDING LY, RESPECTFULLY FOLLOWING THE SAID JUDICIAL PRONOUNCEMENT, WE MODIF Y THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND DIRECT THE AO TO ACCEPT THE INCOME FROM HOUSE PROPE RTY DECLARED BY THE ASSESSEE ADOPTING THE MUNICIPAL RATABLE VALU E AS ANNUAL LETTING VALUE OF ITS PROPERTY. GROUND NO.1 OF THE A SSESSEES APPEAL IS ACCORDINGLY ALLOWED WHEREAS THE SOLITARY GROUND RAISED IN THE REVENUES APPEAL IS DISMISSED. 5. SINCE THE ISSUE IN THE INSTANT CASE IS IDENTICAL AS IT W AS IN THE CASE OF GAGAN TRADING (SUPRA), WE ARE INCLINED TO FOLLOW THE DECISION [AS ALSO, BECAUSE ONE OF US WAS A PARTY IN THAT CASE]. RESPEC TFULLY, M/S. JMP INVESTMENTS PVT. LTD. (NOW KNOWN AS JMP TRADING & PROPERTIES PVT. LTD.) ITA NO. 3127/MUM/2011 4 THEREFORE, FOLLOWING THE DECISION IN GAGAN TRADING (SUPRA), WE DELETE THE ADDITION. 6. IN THE RESULT, THE ORDER OF THE CIT(A) ON THIS ISSUE IS SET ASIDE AND WE DIRECT THE AO TO DELETE THE ADDITION MADE AT RS. 3,00,000 (RS. 3,60,000 RS. 60,000). 7. THE APPEAL, AS FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 30 TH JANUARY, 2013. SD/- (D. KARUNAKARA RAO) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 30 TH JANUARY, 2013 COPY TO : 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- 5 , MUMBAI. 4) THE CIT 2, MUMBAI, 5) THE D.R. J BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN