M/S Ragini Priya Trust, Indore V. THE ACIT-3(1), Indore

ITA 333/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5648 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-10-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 13-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N AGRAWAL; SHRIPANKAJ MOGRA
• Assessee Lawyers: MOHD JAVED
• Keywords: Reopening of assessment; Rule of consistency; Notional interest
• Section: 147

Judgement Text

M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NOS.332 TO 334/IND/2016 ASSESSMENT YEARS: 2002-03, 2003-04 & 2005-06 M/S RAGINI PRIYA TRUST INDORE PAN AAATR3382G :: APPELLANT VS ACIT CIRCLE 3(1) RANGE 2,INDORE :: RESPONDENT REVENUE BY SHRI S.N. AGRAWAL & SHRIPANKAJ MOGRA ASSESSEE BY SHRI MOHD. JAVED ! ' #$ DATE OF HEARING 4.10.2016 %&'( #$ DATE OF PRONOUNCEMENT 7.11.2016 * O R D E R PER SHRI D.T. GARASIA, JM THESE APPEALS HAVE BEEN DIRECTED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, INDORE, DAT ED 7.12.2015. M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 2 2. IN ITA NOS. 332 AND 333/IND/2016 GROUND NO. 1 RELATES TO CONFIRMING THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT. AT THE TIME OF HEARING, THIS GROUND WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE, THEREFORE, DISMISS THE SAME AS NOT PRESSED. 2. THE COMMON GROUND IN ALL THESE APPEALS READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN MAINTAINING THE DISALLOWANC E OF CLAIM OF INTEREST OF RS.8,44,525/- AS MADE BY THE A .O. FROM THE INCOME FROM OTHER SOURCES BY HOLDING THAT THE ASSESSEE HAS UTILISED/INVESTED ITS FUNDS FOR NON-IN COME EARNING ASSETS WITHOUT PROPERLY APPRECIATING THE FA CTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TRUST HAS FILED THE RETURN OF INCOME ON 18.7.2002. THE ASS ESSEE TRUST OWNS RESIDENTIAL FLAT IN EMBASSY BUILDING, MUMB AI. M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 3 THE SAID FLAT WAS LET OUT DURING THE YEAR TO BANK OF NOV A SCOTIA ON MONTH RENT OF RS.14,000/-. THE ASSESSEE HAD ALSO RECEIVED INTEREST FREE DEPOSIT OF RS. 2 CRORES. THE RETURN OF TOTAL INCOME OF THE TRUST WAS FILED AS PER T HE ORDER OF ITAT IN ITA NO. 4/IND/1989 FOR THE ASSESSMENT YEAR 1985-86. THE RETURNS FOR THE PAST SEVERAL YEARS HAVE BE EN FILED AS PER THE SAID DECISION OF ITAT WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. IN THE YEAR UNDER CONSIDERATION THE LEARNED CIT(A) HAS NOT FOLLOWED THE ITAT ORDER IN RESPECT OF INTEREST FROM OTHER SOURCES. TH E ASSESSEE HAS GIVEN HOUSE PROPERTY ON RENT TO TENANTS. THE TENANT HAS GIVEN INTEREST FREE DEPOSIT OF RS.2.5 CROR ES TO THE ASSESSEE. AS PER THE ITAT OBSERVATION IN THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 1985-86 THE PREMISES WERE GIVEN AT A RENT LOWER THAN THE MARKET RENT TO COMPENSATE FOR LOWER RENT. THE TENANT HAD GIVEN INTERE ST FREE DEPOSIT TO THE ASSESSEE. THE ITAT HAS GIVEN DIR ECTION M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 4 THAT THE INTEREST @ 15% ON FREE DEPOSIT SHOULD BE TR EATED AS PART OF RENT FROM HOUSE PROPERTY. SINCE THE ASSESSM ENT YEAR 1985-86 THE ASSESSEE HAS KEPT THE ENTIRE INTERES T FREE DEPOSIT IN FDR OR INCOME GENERATED ASSETS, THE ITAT G AVE A DIRECTION THAT EQUIVALENT INTEREST WHICH THE ASSESSEE H AS OTHERWISE HAS OFFERED AS INCOME FROM OTHER SOURCES SH OULD BE DEDUCTED. THE ASSESSEE CONTENDED THAT THE AMOUNT OF SECURITY DEPOSIT AS RECEIVED BY THE ASSESSEE WAS NOT F ULLY UTILISED TO EARN INCOME BUT SOME PART OF ADVANCE OF DEP OSIT TO HIS GROUP COMPANY. THE MATTER TRAVELLED TO THE LEARN ED CIT(A) AND THE LEARNED CIT(A) HAS DISMISSED THE APPEAL, THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED INTEREST PAYMENT OF R S.844525/- OUT OF INTEREST CLAIMED ON NOTIONAL BASIS OF RS.37,95,000/- BY HOLDING THAT THE ASSESSEE HAS NOT UTILISED INTEREST FREE DEPOSIT FOR EARNING ANY INCOME THEREBY M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 5 UTILISING THE FUNDS FOR INVESTMENT IN NON-INCOME EAR NING ASSETS. THE ASSESSING OFFICER HAS DISALLOWED THE INTE REST ON THE GROUND THAT THE ASSESSEE HAS CLAIMED DEDUCTION U /S 24 OF THE ACT ON THE AMOUNT OF NOTIONAL INTEREST AT RS.3,79,500/- AS NOTIONAL ALV WHICH COMES TO RS.10,28,630/- WHICH WAS WRONGLY CLAIMED BY THE ASSESS EE AND THE SAME WAS DISALLOWED WHILE PASSING THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS INTERPRETED THE OR DER OF THE TRIBUNAL IN HIS OWN WAY AND THE TRIBUNAL HAS NOT GIVEN ANY FINDING. THE TRIBUNAL HAS DECIDED THE APPEAL FOR THE ASSESSMENT YEAR 1985-86 AND HELD THAT THE AMOUNT OF INTEREST CALCULATED @ 15% ON THE AMOUNT OF DEPOSIT SH OULD BE ADDED FOR CALCULATING THE ANNUAL LETTING VALUE OF THE PROPERTY ON NOTIONAL BASIS AND THE AMOUNT SO ADDED SHOULD BE REDUCED FROM THE INCOME FROM OTHER SOURCE S. THE ASSESSEES CONTENTION WAS ACCEPTED IN THE ASSESSMEN T YEAR 1990-91. THEREFORE, THE DISALLOWANCE OF INTEREST OF M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 6 RS.8,44,252/- FOR THE ASSESSMENT YEAR 2002-03 MUST B E ALLOWED. SIMILARLY, THE INTEREST OFRS. 8,11,252/- TO BE ALLOWED IN THE ASSESSMENT YEAR 2003-04 AND RS.15,48,414/- SHOULD BE ALLOWED IN THE ASSESSMENT YE AR 2005-06. 4. THE LEARNED DR SUBMITTED THAT AN ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE DEPOSIT AND ADVANCE AGAINST RENT, THE EVIDENCE IS COMPUTATION OF INCOME FILED WHEREIN THE NOTIONAL INTEREST ON INTERE ST FREE DEPOSIT AND ADVANCE AGAINST RENT HAS BEEN DEDUCTED TWICE FROM THE HEAD OF RENT AND ALSO FROM HEAD OF INTEREST INCOME. THE ASSESSEE HAS TAKEN DOUBLE DEDUCTION FOR NOTIONAL INTEREST ON INTEREST FREE DEPOSIT AND THE ADV ANCE AGAINST RENT FROM THE INCOME OF RENT AS WELL AS INTERES T, THEREFORE, THE ASSESSING OFFICERS ACTION REGARDING N OT ALLOWING 30% ON REPAIR AND MAINTENANCE ON NOTIONAL M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 7 INTEREST AND INTEREST FREE DEPOSIT AND ADVANCE AGAINST R ENT TO BE CONFIRMED. 5. WE HAVE HEARD BOTH THE SIDES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE WHOLE I SSUE ARISES FROM THE ORDER OF THE ASSESSEES OWN CASE IN I TATS ORDER IN ITA NO. 4/IND/1989 FOR THE ASSESSMENT YEAR 1 985- 86 WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE IN TH E ASSESSEES OWN CASE AND THE SAME HAS BEEN FOLLOWED AND INTERPRETED BY THE REVENUE AUTHORITIES. FOR THE SAKE OF BREVITY, WE REPRODUCE THE ORDER OF THE TRIBUNAL WHIC H READS AS UNDER :- 6. WE HAVE MINUTELY CONSIDERED THE RESPECTIVE SUBMISSIONS OF THE PARTIES. IT IS DIFFICULT TO ACCE PT THE STAND OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT RS.60,000/- SHOULD BE CCEPTED AS ACTUAL RENT RECEIV ED WHEN IN FACT THE ASSESSEE HAS DERIVED BENEFIT OF GE TTING INTEREST FREE DEPOSIT OFRS.25 LAKHS. MOREOVER, IN T HE M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 8 EARLIER YEARS, THE ACTUAL RENT RECEIVED WAS RS.1,92,000/-. AT THE FACE OF THIS FACT, IT IS DIFF ICULT TO ACCEPT THAT THE ACTUAL RENT RECEIVED AT RS. 60,000/ - SHOULD BE TREATED AS ANNUAL LETTING VALUE OF THE PROPERTY. IN THE CIRCUMSTANCES OF THE CASE, IT IS J UST AND PROPER TO TAKE THE ANNUAL LETTING VALUE OF THE PROP ERTY AT RS.60,000/- PLUS RS.3,75,000/- BEING THE AMOUNT OF INTEREST AT 15% PER ANNUM OF RS.25 LAKHS. ITO IS, THEREFORE, DIRECTED TO ADOPT THE ANNUAL LETTING VAL UE OF THE PROPERTY AT RS.4,35,000/-. HOWEVER, THE AMOUNT OF RS.3,75,000/- ADDED TO THE ANNUAL LETTING VALUE OF THE PROPERTY MUST BE AL LOWED AS A DEDUCTION AGAINST THE INCOME SHOWN BY THE ASSESSEE FROM OTHER SOURCES AND IF THERE IS A LOSS IT SHOULD BE ADJUSTED AGAINST THE INCOME FROM THE HOUS E PROPERTY. THE REASON IS OBVIOUS. THERE CANNOT BE DO UBLE TAXATION OF THE SAME INCOME. ONCE THE BENEFIT DERIV ED M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 9 BY THE ASSESSEE IN LETTING OUT THE HOUSE PROPERTY I S TAXED, THE INCOME EARNED BY THE ASSESSEE THEREFROM CANNOT BE TAXED. IN OTHER WORDS, WHATEVER INCOME TH E ASSESSEE HAS DERIVED FROM THE SAID DEPOSIT OFRS.25 LAKHS AND HAS SHOWN AS INCOME FROM OTHER SOURCES, T HE ASSESSEE HAS PAID INTEREST ON RS.3,75,000/- TO THE PROPERTY ACCOUNT. WE HAVE EXAMINED THE BALANCE SHEE T AND THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR T HE INSTANT YEAR. IT IS QUITE PLAIN THAT NO PART OF THE INCOME FROM THOSE RS. 25 LAKHS WAS UTILISED BY THE ASSESSE E OTHERWISE THAN EARNING INCOME. THE BALANCE SHEET SHOWS THAT THERE WAS CASH IN HAND OF RS.480/- AND THERE WAS CREDIT BALANCE OF RS.29,347/- IN THE CURR ENT ACCOUNT WITH THE BANKS. FURTHER, THE BALANCE SHEETS SHOWS THAT THERE WAS DEPOSIT OF RS.10,000/- AGAINST VEHICLE BOOKING AND ADVANCE PAYMENT OF INCOME TAX O F RS.16,268/- AND PRE-PAID EXPENSES OF RS.45,363/- AN D M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 10 THE REFUNDABLE INCOME TAX ADVANCE OF RS.5,073/-. EV EN IF THESE ARE TREATED AS NON EARNING ASSETS, IT IS SIGNIFICANT TO NOTE THAT EACH OF THE TWO BENEFICIAR IES OF THE TRUST HAD A CAPITAL BALANCE OF RS.3,59,708/- TH US IT IS CRYSTAL CLEAR THAT NO PART OF THE AMOUNT OF RS. 25 LAKHS WAS UTILISED BY THE ASSESSEE OTHERWISE THAN EARNING INCOME THEREFROM. IN THIS VIEW OF THE MATTE R, IT DIRECTED THAT THE ITO SHALL ALLOW DEDUCTION OF RS.3,75,000/- FROM THE INCOME UNDER THE HEAD OTHER SOURCES. 6. WE HAVE GONE THROUGH THE ORDER OF ITAT AND AS PER THE DIRECTION OF ITAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1990-91 FROM THE SAME ITAT ORDER, THE REVENUE HAS ACCEPTED AND ALLOWED THE CLAIM OF THE ASSESSE E REGARDING INTEREST. WE FIND THAT WHEN THE DEPARTMENT HAS ACCEPTED THE ITAT ORDER FOR THE ASSESSMENT YEAR 1990-9 1 THE DEPARTMENT CANNOT CHANGE THE STAND IN THE SUBSEQUENT M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 11 YEAR BECAUSE THE STAND HAS BEEN ACCEPTED BY THE DEPARTMENT AS PER THE ORDER OF ITAT(SUPRA). WE FIND THAT SIMILAR FACTS ARE IN ALL THESE ASSESSMENT YEARS THEREFOR E AS A RULE OF CONSISTENCY; WE FOLLOW THE SAME AND ALLOW THE APPEALS OF THE ASSESSEE FOR ALL THE YEARS. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED ON COMMON GROUND NO. 1 IN ALL THE ASSESSMENT YEARS. 8. THE COMMON GROUND IN THE ASSESSMENT YEARS 2002- 03 AND 2003-04 READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN MAINTAINING THE DISALLOWANC E AS MADE BY THE A.O. IN RESPECT OF SOCIETY CHARGES OF RS.2,67,168/- (RS.366232-RS.99064) WHICH WAS PAID BY THE ASSESSEE DURING THE YEAR UNDER APPEAL. 9. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED SOCIETY CHARGES OF RS.366323/- FOR THE ASSESSM ENT YEAR 2002-03 AND RS.413566/- FOR THE ASSESSMENT YEAR M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 12 2003-04 AS DEDUCTION FROM HOUSE PROPERTY. THE ASSESS ING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS PRODUCED THE VOUCHERS WHICH WERE ISSUED BY THE SOCIETY AND NOT BY THE MUNICIPAL CORPORATION, THEREFORE, IT WAS DISALLOWED. 10. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) DISMISSED THE APPEAL. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS GIVEN DETAILS OF EXPENSES INCURRED BY THE ASSESSEE SOCIETY AND COPIES OF THE SAME ARE FILE. THES E MAINTENANCE CHARGES ARE SHOWN TOWARDS ELECTRIC, INCLUDIN G PROPERTY TAX, SHARE OF WATER TAX AND OTHER INCIDENTAL CHARGES RELATING TO THE APARTMENT AND THEY ARE ALLOWABLE IN NATURE. THE LEARNED DR OBJECTED TO IT. 12. WE HAVE HEARD BOTH THE SIDES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE SOCIETY CH ARGES AND MUNICIPAL WATER CHARGES ARE ALLOWABLE EXPENSES BUT M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 13 BILL SHOULD BE ISSUED BY THE CONCERNED AUTHORITIES. THEREFORE, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERIFY THE SAME AND ALLO W THE CLAIM OF THE ASSESSEE AS PER LAW. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 7 NOVEMBER, 2016. SD SD ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 7 NOVEMBER, 2016. DN/ M/S RAGINI PRIYA TRUST ITA NOS. 332 TO 334/IND/2016 14