ITO 12(3)(2), MUMBAI V. SAHAR DEVELOPERS, MUMBAI

ITA 3164/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8658 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Notional interest
• Section: 201; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.K. PANDA (AM) AND SMT ASHA VIJAYARAGH AVAN (JM) ITA NO.3164/MUM/2009) (ASSESSMENT YEAR-2004-05) THE ITO-12(3)(2), AAYAKAR BHAVAN, MUMBAI-400 020 VS. M/S. SAHAR DEVELOPERS, 1103, TULSIANI CHAMBERS, 212, NARIMAN POINT, MUMBAI-400 021 PAN-AAAFS 7166B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SURENDRA KUMAR RESPONDENT BY: SHRI AARTI VISANJI O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-XII, MUMBAI DATED 16.2.2009 FOR THE A.Y.2 004-05. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD RECEIVED RENT OF RS. 1,77,68,367/- DURING THE YEAR. THE ASSESSEE HAD AL SO RECEIVED INTEREST FREE SECURITY DEPOSIT OF RS. 1,48,33,200/-. THE ASSESSI NG OFFICER WAS OF THE VIEW THAT THE NOTIONAL INTEREST ON INTEREST FREE DEPOSIT SHOULD BE CALCULATED AND TAKEN INTO CONSIDERATION WHILE CALCULATING THE ALV OF THE PROPERTY. THE AO RELIED IN THE CASE OF TRIVOLI INVESTMENT & TRDG.CO. PVT. LTD. WHERE THE HONBLE TRIBUNAL HAD OBSERVED THAT THE LANGUAGE U/S . 23(1)(A) PROVIDES THAT THE ALV SHALL BE DEEMED TO BE THE SUM OF WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. TH E AO FURTHER OBSERVED THAT THE INTEREST FREE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE IS DEFINITELY A PART OF THE COMPENSATION TOWARDS THE BUYING OF THE PREMISES. AS SUCH, THE NOTIONAL INTEREST HAS TO BE INCLUDED TO FIND OUT TH E CORRECT ANNUAL VALUE. THE INTEREST FREE DEPOSIT FORM PART AND PARCEL OF T HE LICENSE AGREEMENT AND ITA NO. 3164/M/09 2 AS SUCH, THE SAID DEPOSIT HAS AN ELEMENT OF ANNUAL VALUE. THE RELIANCE PLACED BY THE ASSESSEE IN THE CASES OF J.K. INVESTO RS, SATYA & CO. AND THE CIT(A)S ORDER FOR A.Y. 2001-02 COULD NOT BE ACCEPT ED AS THE DECISIONS IN THOSE CASES HAVE NOT REACHED THE FINALITY. ACCORDIN GLY, THE AO CALCULATED 12% OF THE INTEREST FREE DEPOSIT AMOUNTING TO RS. 1 ,48,33,200/- I.E. RS. 17,79,984/- AND ADDED THE SAME TO THE RENT SHOWN BY THE ASSESSEE IN DETERMINING THE ALV. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEEPREFER RED AN APPEAL BEFORE THE LEARNED CIT(A) AND SUBMITTED AS FOLLOWS: IT WAS SUBMITTED THAT THE ADDITION OF NOTIONAL INT EREST WAS DONE WITHOUT VERIFYING THE FACTS. THE AO HAS WRONGLY AP PLIED THE DECISIONS IN THE CASE OF TRIVOLI INVESTMENT & TRDG. CO. LTD AS IN THE SAID CASE THE LANDLORD WAS NOT IN RECEIPT OF AN Y RENT AND THE ONLY COMPENSATION RECEIVED BY THE LANDLORD WAS THE INTEREST FREE DEPOSIT. THE RENT RECEIVED BY THE APPELLANT WAS RE ASONABLE AND COMPARABLE TO THE EXISTING RENT OF SIMILAR PROPERTI ES IN THE SAME BUILDING. THE AO FAILED TO CONSIDER THAT NOTIONAL INTEREST ON SECURITY DEPOSIT CAN BE ADDED ONLY IN LIEU OF RENT TO COMPENSATE SHORT PAYMENT OR NON-PAYMENT OF RENT. IN THE CASE OF THE APPELLANT, THE RENT PAYABLE HAS BEEN STIPULATED IN THE RESPECTIVE LEAVE & LICENSE AGREEMENT. THE SECURITY DEPOSIT WA S COLLECTED TO ENSURE THAT THE TENANT WILL VACATE THE PROPERTY AFT ER THE EXPIRY OF LEASE PERIOD AND TO CHECK THE MISUSE OR DAMAGE OF T HE PROPERTY. UNDER SIMILAR CIRCUMSTANCES AND FACTS OF THE CASE, THE CIT(A) HAD ALLOWED THE APPEAL OF THE APPELLANT FOR THE A.Y. 20 03-04. 4. THE LEARNED CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS MADE FOR THE APP ELLANT AND THE ASSESSMENT ORDER. IN THE CASE OF THE APPELLANT , THE CIT(A) HAD IN HIS ORDER DT. 2.8.2007 FOR A.Y. 2003-04 HELD THAT IN VIEW OF THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF J.K. INVESTORS (BOM) LTD. 248 ITR 723 (BOM) HAD HELD THAT AS THE A PPELLANTS CASE FALLS U/S. 23(1)(B) NO NOTIONAL INTEREST COULD BE TAKEN INTO ACCOUNT FOR DETERMINING THE ALV. THE FACTS OF THE CASE BEING THE SAME AS IN A.Y. 2003-04, THE AO IS DIRECTED TO DELE TE THE NOTIONAL INTEREST WHILE CALCULATING THE ALV OF THE PROPERTY LET OUT. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AND RA ISED THE FOLLOWING GROUNDS: ITA NO. 3164/M/09 3 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED. CIT(A) ERRED IN DELETING THE ADDI TION OF NOTIONAL INTEREST OF RS. 17,79,984/- UNDER THE H EAD INCOME FROM HOUSE PROPERTY BY HOLDING THAT THE ASSESSEES CASE WILL BE GOVERNED BY THE PROVISION O F SEC. 23(1)(B) AND NOT 23(1)(A) AND THAT THE ASSESSE ES CASE IS SQUARELY COVERED BY THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF CIT VS J.K. INVESTO RS 1A. WHILE ALLOWING RELIEF AND PLACING RELIANCE ON T HE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS J.K. INVESTORS (BOM) REPORTED IN 248 ITR 723 (BOM), THE LEARNED CIT(A) HAS IGNORED THE LAST PARA OF THE ABOVE RULING WHERE IT HAS LEFT OPEN THE SCOPE O F CONSIDERING THE INTEREST ON THE INTEREST FREE DEPOS IT AS FAIR RENT U/S. 23(1)(A). 6. WE HEARD BOTH THE PARTIES. WE FIND THAT THE ISS UE IS COVERED BY THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS RECLAMATION REALTY INDIA PVT. LTD., IN ITA NOS. 141 1-13/MUM/07 VIDE ORDER DT. 26.10.2010. WE ARE REPRODUCING THE RELEVA NT PORTION HEREUNDER: THE LEARNED D.R. SUBMITTED THAT THE CIT(A) WAS NOT CORRECT IN FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF J.K.INVESTORS (BOMBAY) LTD. (SUPRA) BECAUSE THAT DE CISION RELATED TO DETERMINATION OF ANNUAL VALUE U/S.23(1)(B) OF THE A CT. HE DREW OUR ATTENTION TO THE PENULTIMATE PARAGRAPH OF THE SAID DECISION AND SUBMITTED THAT THE HONBLE COURT HAS OBSERVED THERE IN AS FOLLOWS: WE ONCE AGAIN REPEAT THAT WHETHER SUCH NOTIONAL I NTEREST COULD FORM PART OF THE FAIR RENT UNDER S.23(1)(A), IS EXPRESSLY LEFT OPEN. HE FURTHER DREW OUR ATTENTION TO A THIRD MEMBER DEC ISION OF THE ITAT MUMBAI IN THE CASE OF ITO VS. BAKER TECHNICAL SERVICES (P) LTD. 126 TTJ (MUMBAI)(T M) 455 WHEREIN IT WAS HELD THAT ANNUAL VALUE DETERMINED BY THE MUNICIPAL AUTHORITIES IS NOT BIND ING ON THE AO WHILE DETERMINING THE ANNUAL VALUE UNDER SEC.23(1)(A), IF IT CAN BE SHOWN THAT THE RATEABLE VALUE UNDER THE MUNICIPAL LAWS DO ES NOT REPRESENT THE CORRECT FAIR RENT. IT WAS SUBMITTED BY HIM THA T THE RENT CONTROL LAWS ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE THE TENANT WAS A BANK WITH A SHARE CAPITAL EXCEEDING A PARTICU LAR LIMIT. IN SUCH ITA NO. 3164/M/09 4 CIRCUMSTANCES ACCORDING TO HIM THE YARDSTICK OF STA NDARD RENT UNDER THE RENT CONTROL LAWS CANNOT ALSO BE ADOPTED. IT W AS THEREFORE CONTENDED BY HIM THAT THE ANNUAL VALUE HAS TO BE DE TERMINED IN THE CASE OF THE ASSESSEE BY TAKING INTO CONSIDERATION V ARIOUS FACTORS AND THE METHOD DONE BY THE AO BY ADJUSTING THE ACTUAL R ENT RECEIVED BY ADDING THERETO NOTIONAL INTEREST ON INTEREST FREE S ECURITY DEPOSIT/ADVANCE RENT RECEIVED WAS A REASONABLE BASI S AND THAT REPRESENTS THE SUM FOR WHICH THE PROPERTY MIGHT BE EXPECTED TO LET FROM YEAR TO YEAR. THE ITAT MUMBAI BENCH IN THE C ASE OF BAKER TECHNICAL SERVICES (P) LTD. (SUPRA) HAVE IN TURN RE LIED ON A DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF ITO VS. MAKRUP A CHEMICALS (P) LTD. 108 ITD 95 (MUMBAI). HE FURTHER RELIED ON THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF FIZZ DRINKS LTD. VS. DCI T 95 TTJ (DEL) 249, WHEREIN IT WAS HELD ANNUAL VALUE CAN BE DETERMINED BY TAKING NOTIONAL INTEREST ON SECURITY DEPOSIT. IT WAS FURTHER HELD IN THIS DECISION THAT THE FACT THAT THE INTEREST RECEIVED BY THE ASSESSEE ON INVESTMENT OF THE INTEREST FREE SECURITY DEPOSIT WAS OFFERED TO TAX W OULD NOT BE RELEVANT. FINALLY REFERENCE WAS MADE TO THE DECISION OF THE I TAT MUMBAI BENCH IN THE CASE OF TIVOLI INVESTMENT & TRADING CO. (P) LTD. VS. ACIT 90 ITD 163(MUM). IT WAS THUS SUBMITTED BY THE LEARNED D.R . THAT THE ESTIMATION OF ANNUAL VALUE AS DONE BY THE AO IS COR RECT AND HAS TO BE ACCEPTED. . THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE PLEA AS WAS PUT FORTH BY THE ASSESSEE BEFORE THE CIT(A). SHE R ELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AKSHAY TEXTILES TRADING AND AGENCIES PVT. LTD. 304 ITR 401 (BOM)., WHEREIN IT WAS HELD THAT THE EXPRESSION RECEIVABLE AS APPEAR ING IN SEC.23(1)(B) CANNOT BE GIVEN A WIDER MEANING. THE HONBLE COURT AFTER NOTICING THE AMENDMENT TO SEC.23(1), WHEREBY IT WAS LAID DOWN TH AT IF RENT RECEIVED IS MORE THAN THE MUNICIPAL RATEABLE VALUE THEN THE ACTUAL RENT RECEIVED WILL BE THE YARDSTICK FOR DETERMINING THE ANNUAL VA LUE, HELD THAT THE EXPRESSION RECEIVABLE MEANS WHAT IS ACTUAL RECEIV ED AND AN EXTENDED MEANING CANNOT BE GIVEN TO THAT EXPRESSION . IT WAS HER SUBMISSION THAT THE AMOUNT ACTUALLY RECEIVED AS REN T CANNOT THEREFORE BE SUBSTITUTED BY ADDING ANY NOTIONAL INTEREST ON I NTEREST FREE SECURITY DEPOSIT/ADVANCE RENT RECEIVED. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMITAB EN N. AMBANI VS. CWT 323 ITR 104 (BOM) WHEREIN THE HONBLE BOMBAY H IGH COURT IN THE CONTEXT OF RULE 1BB TO THE WEALTH TAX RULES, WH ICH USES THE SAME EXPRESSION THE SUM FOR WHICH THE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN S EC.23(1)(A) OF THE ACT, HELD THAT RATEABLE VALUE AS DETERMINED BY THE MUNIC IPAL AUTHORITIES SHALL BE THE YARDSTICK. IN COMING TO THE ABOVE CON CLUSION, THE HONBLE COURT FOLLOWED ITS OWN DECISION IN THE CASE OF M.V. SONAVALA (SUPRA) A DECISION RENDERED IN THE CONTEXT OF SEC.23 OF THE A CT. A REFERENCE WAS MADE TO THE CBDT CIRCULAR NO.204 DATED 24/7/1976 WH EREIN IT WAS EXPLAINED THAT THE SUM FOR WHICH THE PROPERTY MIGH T BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN S EC.23(1) OF THE ACT ITA NO. 3164/M/09 5 REFERS TO THE RATEABLE VALUE AS DETERMINED BY THE M UNICIPAL AUTHORITIES. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DISTINGUI SHED THE CASE LAWS RELIED UPON BY THE LEARNED D.R. IT WAS SUBMITTED T HAT THE DECISION IN THE CASE OF BAKER TECHNICAL SERVICES (P) LTD., WAS A CASE WHERE THE FACTS WERE THAT IN THE FIRST FOUR MONTHS OF THE PRE VIOUS YEAR, THE MONTH RENT WAS RS.1,12,500/- AND THEREAFTER THE MONTHLY R ENT BECAME RS.10,000/- AND A SUBSTANTIAL INTEREST FREE SECURIT Y DEPOSIT WAS TAKEN. THIS WAS A VERY VITAL FACTOR WHICH WEIGHED IN THE M IND OF THE TRIBUNAL WHILE DECIDING THE AFORESAID CASE. SIMILARLY IN TH E CASE OF FIZZ DRINKS LTD.(SUPRA), THE FACTS WERE THAT THE AGREED RENT WA S RE.1/- PER MONTH AND INTEREST FREE SECURITY DEPOSIT OF RS.1,62,36,00 0/- WAS TAKEN BY THE OWNER. IT WAS AGAIN THIS FACTOR WHICH WEIGHED IN T HE MIND OF THE TRIBUNAL AS IS EVIDENT FROM THE OBSERVATIONS IN PAR A-8 OF ITS ORDER WHERE THEY HAVE HELD THAT ANY FAIR JUDICIAL ADMINIS TRATION WOULD NOT ALLOW SUCH THINGS TO HAPPEN. THE DECISION IN THE C ASE OF TIVOLI INVESTMENT & TRADING CO. (P) LTD. (SUPRA) WAS AGAIN DISTINGUISHED BY POINTING OUT THAT IT WAS A CASE WHERE THERE WAS NO RENT AND ONLY A HUGE INTEREST FREE SECURITY DEPOSIT WAS TAKEN BY TH E OWNER. IT WAS FINALLY SUBMITTED THAT THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT ON THE ISSUE STILL HOLD GOOD AND THEY HAVE TO BE FO LLOWED. IT WAS SUBMITTED THAT THE ACTUAL RENT RECEIVED WAS RS.2,87 ,87,660/-. THE ANNUAL VALUE (ALSO REFERRED TO AS MUNICIPAL VALUATI ON) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROPERTY WA S RS.27,50,835 AND THAT SHOULD BE THE DETERMINING FACTOR FOR APPLYING THE PROVISIONS OF SEC.23(1)(A) OF THE ACT. SINCE THE RENT RECEIVED W AS MORE 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 INTERE ST ON INTEREST FREE SECURITY DEPOSIT/RENT RECEIVED IN ADVANCE SHOULD NO T BE ADDED TO THE SAME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J.K.INVESTORS (BOMBAY) LTD. (SUPRA). 7. THE TRIBUNAL FURTHER HELD AS FOLLOWS: THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMITA BEN N. AMBANI VS. CWT 323 ITR 104 (BOM) IN THE CONTEXT OF RULE 1BB TO THE WEALTH TAX RULES, WHICH USES THE SAME EX PRESSION THE SUM FOR WHICH THE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN SEC.23(1)(A) OF THE ACT, HELD THAT RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL AUTHORITIES SHALL BE THE YARDSTICK. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVERAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT THE MUNICIPAL VALUE SHOULD BE THE B ASIS OF DETERMINING THE ANNUAL VALUE. WE ARE NOT MAKING REF ERENCE TO THOSE DECISIONS, SINCE, IN OUR OPINION THE AFORESAI D PRONOUNCEMENT OF HON'BLE BOMBAY HIGH COURT CONSIDER S THE DECISIONS OF HONBLE CALCUTTA HIGH COURT WHICH IN T URN HAS CONSIDERED THE LAW LAID DOWN BY THE HON'BLE APEX CO URT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHARGE ITA NO. 3164/M/09 6 U/S. 22 IS NOT ON THE MARKET RENT; BUT IS ON THE AN NUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT, MUNIC IPAL VALUE WOULD BE A PROPER YARDSTICK FOR DETERMINING THE ANNUAL VA LUE. IF THE PROPERTY IS SUBJECT TO RENT CONTROL LAWS AND THE FA IR RENT DETERMINED IN ACCORDANCE WITH SUCH LAW IS LESS THAN THE MUNICIPAL VALUATION THEN ONLY THAT CAN BE SUBSTITUT ED BY THE MUNICIPAL VALUE. THE DECISION IN 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 DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRA BHABATI BANSALI (SUPRA) THAT STANDARD RENT, IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE O F MUNICIPAL VALUATION. AS FAR AS DECISIONS RELIED UPON BY THE LEARNED 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 T HE CASE OF ITO VS. MAKRUPA CHEMICALS (P) LTD. 108 ITD 95 (MUMB AI). IN THE CASE OF MAKRUPA CHEMICALS, IN PARA-14 OF THE DECISI ON IT HAS BEEN CLEARLY HELD THAT RATEABLE VALUE, IF CORRECTLY DETERMINED UNDER THE MUNICIPAL LAWS CAN BE TAKEN AS ALV U/S.23 (1)(A) OF THE ACT AND IN THIS REGARD THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SHEILA KAUSHISH(SUPRA) HAS BEEN FOLL OWED. IT HAS FURTHER BEEN OBSERVED THAT THE RATEABLE VALUE IS NO T BINDING ON THE AO, IF THE AO CAN SHOW THAT RATEABLE VALUE UNDE R THE MUNICIPAL LAW DOES NOT REPRESENT THE CORRECT FAIR R ENT. IN COMING TO THE ABOVE CONCLUSION, THE BENCH HAS FOLLOWED THE DECISION OF THE PATNA HIGH COURT IN THE CASE OF KASHI PRASAD KA TARVKA VS. CIT 101 ITR 810 (PATNA). WE FIND THAT THE BOMBAY H IGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT HAS HELD THA T THE RATEABLE VALUE UNDER THE MUNICIPAL LAW HAS TO BE ADOPTED AS ANNUAL VALUE U/S.23(1)(A) OF THE ACT AND THEREFORE THE DECISION IN THE CASE OF AKRUPA CHEMICALS (SUPRA) TO THE CONTRARY CANNOT BE FOLLOWED. FURTHER IN PARA-13 OF ITS DECISION IN THE CASE OF M AKRUPA CHEMICALS, THE TRIBUNAL HAS VERY CATEGORICALLY HELD THAT IF RATABLE VALUE IS LESS THAN THE STANDARD RENT (WHERE THE PRO PERTY IS SUBJECT TO RENT CONTROL LAWS) THEN ONLY STANDARD RE NT HAS TO BE TAKEN. IN COMING TO THE ABOVE CONCLUSION THE TRIBUN AL HAS FOLLOWED THE DECISION OF 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. (SUPRA) BEING CONTRARY TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN OUR VI EW CANNOT BE FOLLOWED. THE DECISION RELIED UPON BY THE LEARNED D.R. IN THE CASE OF FIZZ DRINKS LTD.(SUPRA), ARE DISTINGUISHABLE ON FAC TS. 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 ITA NO. 3164/M/09 7 TRIBUNAL AS IS EVIDENT FROM THE OBSERVATIONS IN PAR A-8 OF ITS ORDER WHERE THEY HAVE HELD THAT ANY FAIR JUDICIAL ADMINIS TRATION WOULD NOT ALLOW SUCH THINGS TO HAPPEN. THE DECISION IN T HE CASE OF TIVOLI INVESTMENT & TRADING CO. (P) LTD. (SUPRA) IS AGAIN DISTINGUISHABLE BECAUSE IT WAS A CASE WHERE THERE W AS NO RENT AND ONLY A HUGE INTEREST FREE SECURITY DEPOSIT WAS TAKEN BY THE OWNER. `FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ANNU AL VALUE (ALSO REFERRED TO AS MUNICIPAL VALUATION/ RAT EABLE VALUE) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROPERTY AT RS.27,50,835 SHOULD BE THE DETERMINING FACTOR FOR A PPLYING THE PROVISIONS OF SEC.23(1)(A) OF THE ACT. SINCE THE R ENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE SUM FOR WHICH THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR, THE ACTUAL RENT RECEIVED SHOULD BE THE ANNUAL VALUE OF THE PRO PERTY U/S.23(1)(B) OF THE ACT. NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT/RENT RECEIVED IN ADVANCE SHOULD NO T BE ADDED TO THE SAME IN VIEW OF THE DECISION OF THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF J.K.INVESTORS (BOM BAY) LTD. (SUPRA). WE HOLD ACCORDINGLY. THE APPEAL OF T HE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDI NATE BENCH OF THE MUMBAI TRIBUNAL, WE DISMISS THIS GROUND RAISED BY THE REVENUE. 8. GROUND NO. 2 RAISED BY THE REVENUE READS AS FOLL OWS: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 4,58,096/- ON ACCOUNT OF THE MAINTENANCE EXPENSES T HUS IGNORING THE FACT THAT THERE IS NO PROVISION TO ALLOW SAME U NDER THE HEAD INCOME FROM HOUSE PROPERTY. 9. BEFORE THE LEARNED CIT(A) THE ASSESSEE SUBMITTED THAT THE MAINTENANCE EXPENSES OF RS. 4,58,096/- RELATES TO P ROVIDING OF AMENITIES WHICH THE ASSESSEE RECOVERS FROM THE TENANTS. IT W AS FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY THE HONBLE ITATS DECISION DT. 6.5.2008 IN ITS OWN CASE FOR THE A.Y. 1998-99 IN ITA NO. 1039/M/04. 10. THE LEARNED CIT(A) HELD AS FOLLOWS: ITA NO. 3164/M/09 8 I HAVE CONSIDERED THE SUBMISSIONS MADE FOR THE APP ELLANT AND THE ASSESSMENT ORDER. AS THE ISSUE IS COVERED BY T HE HONBLE ITATS DECISION DT. 6.5.2008 IN APPELLANTS OWN CAS E AND IN ITS FAVOUR, RESPECTFULLY FOLLOWING THE SAID ORDER, THE AO IS DIRECTED TO ALLOW THE OUTGOING MAINTENANCE EXPENSES AMOUNTING T O RS. 4,58,096/-. 11. WE HEARD BOTH THE PARTIES. WE FIND THAT THIS I SSUE IS COVERED BY THE HONBLE ITATS DECISION DT. 6.5.2008 IN ASSESSEES OWN CASE FOR THE A.Y. 1998-99 WHEREIN IT HAS BEEN HELD AS FOLLOWS: DURING THE ASSESSMENT PROCEEDING IT WAS NOTED BY T HE AO THAT IN EARLIER YEAR THE ASSESSEE FIRM HAD UNDERTAKEN TW O PROJECTS FOR CONSTRUCTION OF COMMERCIAL PREMISES AT SAHAR. ONE OF THE PROJECTS WAS COMPLETED IN MARCH, 1995 WHILE THE OTHER WAS COMPLE TED IN MARCH, 1997. HOWEVER, THE ASSESSEE FIRM HAD UNSOLD UNITS IN ITS POSSESSION WHICH WERE RETAINED AND LEASED OUT. FURTHER THE AS SESSEE HAD UNSOLD PARKING UNITS SOME OF WHICH WERE SOLD DURING THE YE AR UNDER CONSIDERATION. THE LEASE RECEIPTS WERE OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THE INCOME AND EXPE NDITURE ACCOUNT, THE ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPENSES OF RS. 56,99,654/-. THESE INCLUDED OFFICE OUTGOING EXPENSES OF RS. 10,9 1,454/-. THE AO NOTICED DURING THE ASSESSMENT PROCEEDINGS THAT THES E EXPENSES WERE ON ACCOUNT OF MAINTENANCE OF LEASED OUT OF COMMERCI AL UNITS IN BONANZA AND MIDAS, THE INCOME FROM WHICH WAS OFFERED FOR TA X UNDER THE HEAD HOUSE PROPERTY. BECAUSE THIS EXPENSES RELATED TO T HE PROPERTY INCOME, WHICH IS ASSESSED TO TAX UNDER THAT HEAD, THE AO DI D NOT ALLOW THE SAME UNDER THE HEAD BUSINESS. ACCORDINGLY, THE DI SALLOWANCE OF RS. 10,19,454/- WAS MADE. 12. THE HONBLE ITAT FURTHER HELD AS FOLLOWS: IN FURTHER APPEAL BEFORE TRIBUNAL IT WAS SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF VARIOUS BENCHES I.E. IN CASE OF BOMBAY OIL INDUSTRIES LTD IN ITA NO. 550/M/2000 ORD ER DT. 15.11.2000. IN THIS CASE, THE DECISIONS OF THE DEL HI BENCH OF THE TRIBUNAL IN THE CASES OF NEELAM CABLE MFG. IN 63 I TR 01 AND IN CASE OF LEKHRAJ CHANNA IN 37 TTJ 297 AND THE DECISI ON OF THE BOMBAY BENCH OF THE TRIBUNAL IN CASE OF BLUE MELLOW INVESTMENT & FINANCE (P) LTD. ITA NO. 1757/BOM/1993 ORDER DT. 6.5.1993 WERE FOLLOWED AND IT WAS HELD THAT MAINTENANCE CHAR GES HAVE TO BE DEDUCTED EVEN WHILE ARRIVING AT THE ANNUAL LETTI NG VALUE OF THE PROPERTY U/S. 23. FOLLOWING THE ORDER OF THE TRIBUNAL THE ISSUE WAS D ECIDED IN FAVOUR OF THE ASSESSEE. HERE ALSO THE FACTS ARE SIMILAR TO THE FACTS IN CASE OF SMT. SHARMILA TAGORE (SUPRA). WE DIRECT THE AO TO RECALCULATE THE INCOME OF THE ASSESSEE AFTER ALLOWI NG THE ITA NO. 3164/M/09 9 DEDUCTION ON ACCOUNT OF VARIOUS MAINTENANCE CHARGES . WE ORDER ACCORDINGLY. RESPECTFULLY FOLLOWING THE ABOVE DECISION IN ASSESS EES OWN CASE FOR THE A.Y. 1998-99, WE DISMISS THIS GROUND RAISED BY THE REVENUE. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 28 TH DAY OF JANUARY, 2011 SD/- SD/- (R.K. PANDA) ( ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 28 TH JANUARY, 2011. RJ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CENTRAL - I CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASST. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3164/M/09 10 DATE INITIALS 1 DRAFT DICTATED ON: 12. 01. 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 13. 01 .201 1 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/ PS 6. KEPT FOR PRONOUNCEMENT ON: ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: ______ 9 DATE ON WHICH FILE GOES TO THE AR 10 . DATE OF DISPATCH OF ORDER: ______