ACIT 19(3), MUMBAI V. MONISHA R JAISING, MUMBAI

ITA 3662/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7631 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Notional interest
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA (PRESIDENT) AND SHRI AMIT SHUKLA, (JM) ITA NO. : 3662/MUM/2011 ASSESSMENT YEAR : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX -19(3) ROOM NO.305, 3 RD FLOOR PIRAMAL CHAMBERS, PAREL MUMBAI-400 012. VS. MONISHA R. JAISING 13B NIBBANA ANNEXURE 95A, PALI HILL ROAD BANDRA (W), MUMBAI-400 050. PAN NO: ADRPJ 4593 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C. MAURYA RESPONDENT BY : SHRI YO G ESH THAR DATE OF HEARING : 06.03.2012 DATE OF PRONOUNCEMENT : 28.03.2012 O R D E R PER AMIT SHUKLA (JM) THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST ORDER DATED 17.02.2011 PASSED BY CIT(APPEALS)-30, MUMBAI FOR TH E QUANTUM OF ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 ON THE F OLLOWING GROUND :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, WHETHER THE LD. CIT(A) HAS ERRED IN DELETING T HE ADDITION OF `. 24,30,000/- ON ACCOUNT OF NOTIONAL INTEREST ON INTE REST FREE DEPOSITS AND ADVANCE RENT RECEIVED BY THE ASSESSEE TO THE ALC OF THE PROPERTY RELYING UPON THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT IN THE CASE J.K. INVESTORS 112 TAXMANN 1 80 (BOM) IGNORING THE DECISION OF THE IN THE CASE OF ITO BAK ER TECHNICAL SERVICES (P) LTD. 126 TTJ MUMBAI (T M) 455. ITA NO. 3662/MUM/2011 MONISHA R. JAISING 2 (2) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RES TORED. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF ACQUIRING AND LETTING OUT PROPERTIES ON LEAVE AND LICENSE BAS IS. SHE ALSO CARRIED OUT THE BUSINESS AS A FASHION DESIGNER THROUGH HER PROP RIETARY CONCERN M/S. AZZURA INTERNATIONAL. THE RELEVANT FACTS FOR THE ADJUDICATION OF THE ISSUE INVOLVED ARE THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE APPELLANT HAD RECE IVED HUGE AMOUNTS OF DEPOSITS FROM THE TENANTS, HE THEREFORE, REQUIRED T O SHOW CAUSE AS TO WHY THE NOTIONAL INTEREST ON THE DEPOSITS SHOULD NOT BE ADDED ON THE RENT AMOUNT RECEIVED WHILE DETERMINING THE ANNUAL RATABL E VALUE OF THE LET OUT PROPERTIES COMPUTED UNDER THE HEAD INCOME FROM HOU SE PROPERTY. IN RESPONSE TO THE SAME, THE APPELLANT SUBMITTED THAT THE AMOUNT OF RENT / LICENSE FEE RECEIVED FAR EXCEEDS THE MUNICIPAL RAT ABLE VALUE OF THE PREMISES AND, THEREFORE, THE ACTUAL RENT RECEIVED SHOULD BE TAKEN AS ANNUAL VALUE U/S.23(1). IN SUPPORT OF THIS CONTENTION RELIANCE WAS PLACED ON THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS SATYA CO. LTD. REPORTED IN 75 TAXMAN 193 (CAL) AND ALSO THE DECISION OF BIRLA INTERNATIONAL PASSED BY THE ITAT MUMBAI BENCH. 2.1 THE ASSESSING OFFICER REJECTED THE CONTENTION O F THE APPELLANT AND HELD THAT THE NOTIONAL INTEREST ON DEPOSITS RECEIVE D HAS TO BE TAKEN AS PART OF ACTUAL RENT RECEIVED IN TERMS OF SECTION 23(1)(B ). AFTER RELYING UPON THE VARIOUS JUDGMENTS, THE CITATIONS OF WHICH HAVE BEEN GIVEN AT PAGE 5 OF THE ASSESSMENT ORDER, HE CALCULATED THE NOTIONAL INTERE ST @ 10% ON SUCH DEPOSITS AND ADDED THE SAME TO THE AMOUNT OF ACTUAL RENT RECEIVED. THEREBY AN ADDITION OF `. 24,30,000/- OVER AND ABOVE THE ACTUAL RENT RECEIVED WAS MADE BY THE ASSESSING OFFICER WHILE AR RIVING AT THE ANNUAL VALUE U/S.23(1)(B) OF THE ACT. ITA NO. 3662/MUM/2011 MONISHA R. JAISING 3 3. BEFORE THE CIT(APPEALS) THE ASSESSEE REITERATED THAT THE ACTUAL RENT RECEIVED FAR EXCEEDS THE MUNICIPAL RATABLE VALUE AN D, THEREFORE, THE ACTUAL RENT RECEIVED SHOULD BE COMPUTED AS THE ANNUAL LETT ING VALUE U/S.23(1)(B) OF THE ACT. ON THE ISSUE OF ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON DEPOSITS, THE APPELLANT HEAVILY RELIED UPON THE JUD GMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTORS REPORTED IN [2001] 248 ITR 723 . RELIANCE WAS ALSO PLACED ON CBDT CIRCULAR NO.204 DATED 24.07.1976 REPORTED IN 110 ITR (STAT) PAGE 21 AND 26 THAT FAIR RENT OF THE PROPERTY CANNOT EXCEEDS ITS MUNICIPAL RATABLE V ALUE. THE APPELLANT ALSO TRIED TO DISTINGUISH THE CASE LAWS AS RELIED UPON B Y THE ASSESSING OFFICER WHICH HAS BEEN DEALT WITH BY THE CIT(APPEALS) IN PA RA 3.9 PAGES 6 TO 9 OF THE APPELLATE ORDER. 3.1 AFTER CONSIDERING THE VARIOUS JUDGMENTS THE CIT (APPEALS) DELETED THE NOTIONAL INTEREST ON DEPOSITS FROM THE ANNUAL LETTI NG VALUE AND HELD THAT THE ACTUAL RENT RECEIVED SHOULD BE TAKEN AS ALV U/S .23(1)(B). IN ARRIVING TO THIS CONCLUSION, THE CIT(APPEALS) OBSERVED AS UNDER :- 3.13 I HAVE CONSIDERED THE SUBMISSIONS OF THE APP ELLANT AND ALSO THE ORDER OF CIT (A) -XIX FOR ASSESSMENT YEAR 2003-04 AND HAVE OBSERVED THAT THE FACTUAL POSITION DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE SAME AS THAT IN THE ASSESSMENT YEAR 2003-04. THE AC HAS CONSIDERED NOTIONAL INTERE ST ON INTEREST FREE SECURITY DEPOSITS TO BE PART OF ANNUA L VALUE U/S 23(1)(B) OF THE ACT. THE JURISDICTIONAL HIGH COURT HAS IN THE CASE OF J K INVESTORS 112 TAXMANN 180 (BOM) AND THE CALC UTTA HIGH COURT IN THE CASE OF SATY CO. LTD. (75 TAXMANN 193 )(CAL) HAVE CLEARLY HELD THAT NOTIONAL INTEREST ON INTEREST FRE E SECURITY DEPOSITS CANNOT BE TAKEN TO BE PART OF ANNUAL VALUE U/S 23(1)(B) OF THE ACT. IN THE FACTS OF THE CASE, THE QUESTION WHETHER NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSITS CAN BE TAKEN TO BE PART OF ANNUAL VALUE U/S 23(1)(A) DOES NOT ARISE. HOWEVE R, THIS CANNOT BE DONE EVEN U/S 23(1)(A). CBDT CIRCULAR NO. 204 DATED 24.7.1976 (PARA 9) AND THE RATIO OF THE DECISION OF THE JURISDICTIONAL BENCH OF ITAT INCLUDING THE DECISION IN THE CASE OF PARKPAPER INDUSTRIES LTD. (25 SOT 406)(MUM) ARE CLE AR ITA NO. 3662/MUM/2011 MONISHA R. JAISING 4 AUTHORITIES FOR THE PROPOSITION THAT MUNICIPAL RATA BLE VALUE NEEDS TO BE CONSIDERED FOR THE PURPOSES OF S. 23(1 )(A). RECENTLY, THE MUMBAI BENCH OF ITAT HAS IN THE CASE OF DCIT VS. RE CLAMATION REALTY INDIA PVT. LTD. (ITA NO. 1411/MUM/07, ASST Y EAR 2004- 05 ORDER DATED 26.11.2010), AFTER CONSIDERING ALL T HE DECISIONS ON THIS SUBJECT HELD THAT THE ANNUAL VALUE (ALSO RE FERRED TO AS MUNICIPAL VALUATION/ RATEABLE VALUE) ADOPTED BY THE MUNICIPAL AUTHORITIES IN RESPECT OF THE PROPERTY AT `.27,50,8 35 SHOULD BE THE DETERMINING FACTOR FOR APPLYING THE PROVISIONS OF SECTION 23(1)(A) OF THE ACT. SINCE THE RENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE SUM FOR WHICH THE PROPERTY MIGHT REAS ONABLY 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 INTEREST ON INTEREST FREE SECURITY DEPOSIT /RENT RECEIVED IN ADVANCE SHOULD NOT BE ADDED TO THE SAME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF J.K. INVESTORS (BOMBAY) LTD. (SUPRA). FURTHER, THE BOMBA Y HIGH COURT HAS IN THE CASE OF OTTERS CONSTRUCTION CO. (SUPRA) AND ALSO IN THE CASE OF CYGNUS NEGRI INVESTMENTS PVT. LTD. (SUPRA) UPHELD THE ACTION OF ITAT IN DELETING THE ADDITION TO ANNUAL V ALUE ON ACCOUNT OF NOTIONAL INTEREST. IN VIEW OF THIS AND A LSO FOR THE REASONS MENTIONED IN THE ORDER DATED NOVEMBER, 2006 PASSED BY CIT(A)XIX FOR ASSESSMENT YEAR 2003-04, I HOLD TH AT THE INCLUSION OF RS 24,30,000 IN THE ANNUAL VALUE OF LE T OUT PROPERTIES BE DELETED. THIS GROUND IS ALLOWED. 4. THE LEARNED AR APPEARING ON BEHALF OF THE ASSESS EE BESIDES RELYING UPON THE JUDGMENT OF CIT VS. J.K. INVESTORS (SUPRA) FURTHER RELIED UPON THE JUDGMENTS OF ITAT MUMBAI BENCH IN THE CASE OF RECLAMATION REALTY INDIA PVT. LTD. PASSED IN ITA NO. 1411/MUM/2007 AND OTHERS VIDE ORDER DATED 26.11.2010 AND IN THE CASE OF KRISHNA BHOJWANI IN ITA NO. 5819/MUM/2008 VIDE ORDER DATED 21.11.2011, WHEREIN AFTER ANALYZIN G THE VARIOUS JUDGMENTS OF THE CO-ORDINATE BENCH, HAV E COME TO THE CONCLUSION THAT THE NOTIONAL INTEREST ON DEPOSITS C ANNOT BE TAKEN PART OF THE ANNUAL LETTING VALUE U/S.23(1). ON THE OTHER H AND, THE LEARNED SR. DR RELIED UPON THE FINDING GIVEN BY THE ASSESSING OFFI CER AND SUBMITTED THAT BECAUSE OF THE HEAVY DEPOSITS RECEIVED BY THE ASSES SEE, THE ACTUAL RENT ITA NO. 3662/MUM/2011 MONISHA R. JAISING 5 RECEIVED HAVE BEEN REDUCED, OTHERWISE IT WOULD HAVE BEEN ON A MUCH HIGHER FIGURE. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS PASSED B Y THE CIT(APPEALS) AND THE ASSESSING OFFICER AND ALSO GONE THROUGH THE VARIOUS DECISIONS AS HAVE BEEN RELIED UPON BY THE PARTIES. SECTION 23 PR OVIDES FOR DETERMINATION ON ANNUAL VALUE OF THE PROPERTY IN THE FOLLOWING MA NNER :- [ ANNUAL VALUE HOW DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE 46 BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; O R (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER EOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AM OUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS I NCURRED BY THE OWNER ACCORDING TO THE METHOD OF ACCOUNTING REGULAR LY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROP ERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION.FOR THE PURPOSES OF CLAUSE (B) OR CLAU SE (C) OF THIS SUB-SECTION, THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO SUCH RULES AS MAY BE MADE IN THIS BEHALF, THE AMOUNT OF RENT WHICH THE O WNER CANNOT REALISE. (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURP OSES OF HIS OWN RESIDENCE; OR ITA NO. 3662/MUM/2011 MONISHA R. JAISING 6 (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY RE ASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSION CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUS E SHALL BE TAKEN TO BE NIL. (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT APP LY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE OWNER. (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE M AY, AT HIS OPTION, SPECIFY IN THIS BEHALF; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXER CISED AN OPTION UNDER CLAUSE (A), SHALL BE DETERMINED UND ER SUB- SECTION (1) AS IF SUCH HOUSE OR HOUSES HAD BEEN LET .] 5.1 EARLIER U/S.23, DETERMINATION OF THE ANNUAL VAL UE OF THE HOUSE PROPERTY WAS ORIGINALLY ON THE BASIS OF SUM FOR WHI CH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. TH ERE WAS NO CONCEPT OF ACTUAL RENT RECEIVED. IT WAS ONLY AFTER 01.04.1976 THAT SECTION 23(1)(B) WAS INTRODUCED, WHEREIN IT WAS PROVIDED THAT IF THE ANN UAL RENT RECEIVED BY THE ASSESSEE IS IN EXCESS OF SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR THEN THE ANNUAL V ALUE WOULD BE THE RENT RECEIVED OR RECEIVABLE. WHILE EXPLAINING THIS PROV ISION CBDT HAD ISSUED A CIRCULAR NO. 204 DATED 24.07.1976 IN THE FOLLOWING MANNER : HITHERTO, THE ANNUAL VALUE OF HOUSE PROPERTY, CHAR GEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPER TY WAS DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. IN MANY CASES , HOWEVER, THE ACTUAL RENT RECEIVED OR RECEIVABLE IN A YEAR EX CEEDS THE MUNICIPAL VALUATION OF THE PROPERTY . SUB SECTION (1) OF ITA NO. 3662/MUM/2011 MONISHA R. JAISING 7 SECTION 23 HAS BEEN AMENDED TO PROVIDE THAT THE WHE RE ANY PROPERTY IS IN OCCUPATION OF A TENANT AND THE ANNUA L RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, THE ANNUAL RENT RECEIVED OR RECEIVABL E SHALL BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY. 5.2 FROM THE SAID CIRCULAR IT IS CLEAR THAT IF THE MUNICIPAL VALUATION OF THE PROPERTY IS MORE THAN THE RENT RECEIVED OR RECE IVABLE THEN THE SAME SHOULD BE TAKEN FOR THE PURPOSE OF VALUATION. HOWE VER, IF THE RENT RECEIVED OR RECEIVABLE IS MORE THAN THE MUNICIPAL VALUE THEN THE ACTUAL RENT RECEIVED OR RECEIVABLE WILL BE TAKEN AS ANNUAL LETTING VALUE OF THE PROPERTY WITHIN THE MEANING OF SECTION 23(1). SO FAR AS THE MERIT OF CH ARGING OF NOTIONAL INTEREST ON DEPOSIT OVER AND ABOVE THE RENT RECEIVED IS CONC ERNED, WE NOTE THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTORS (SUPRA), WHEREIN IT HAS BEEN HELD THAT IF THE ACTUAL RENT RECEIVED BY THE ASSESS EE WAS MORE THAN THE FAIR RENT, THEN THE NOTIONAL INTEREST CANNOT FORM THE PA RT OF THE ACTUAL RENT AS CONTEMPLATED U/S.23(1)(B). THE HON'BLE HIGH COURT A LSO CONSIDERED THE WORD RECEIVABLE THAT IT CONNOTES THE PAYMENT OF A CTUAL ANNUAL RENT. THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT ARE AS UN DER :- HELD, THAT IT WAS FOUND THAT THE ACTUAL RENT RECEI VED BY THE ASSESSEE WAS MORE THAN THE FAIR RENT EVEN WITHOUT T AKING INTO ACCOUNT NOTIONAL INTEREST. GENERALLY, FAIR RENT IS FIXED EVEN UNDER THE BOMBAY MUNICIPAL CORPORATION ACT AND THE RENT ACT BY TAKING INTO ACCOUNT VARIOUS PRINCIPLES OF VALUAT ION, VIZ., THE CONTRACTORS METHOD, THE RENT METHOD. UNDER THE IN COME-TAX ACT, SECTION 23(1)(B) PROVIDES THAT WHERE THE ACTUAL REN T IS MORE THAN THE FAIR RENT, THE ACTUAL RENT WOULD BE THE ANNUAL VALUE OF THE PROPERTY. THEREFORE, THE NOTIONAL INTEREST WOULD N OT FORM PART OF ACTUAL RENT RECEIVED OR RECEIVABLE UNDER SECTION 23 (1)(B). 5.3 SO FAR AS THE DECISION OF THIRD MEMBER IN THE C ASE OF ITO VS. BAKER TECHNICAL SERVICES (P) LTD. REPORTED IN 126 TTJ (MU MBAI)(T M) 455, AS HAVE BEEN REFERRED IN THE GROUNDS OF APPEAL FILED B Y THE DEPARTMENT, IT IS ITA NO. 3662/MUM/2011 MONISHA R. JAISING 8 SEEN THAT THERE FACTS WERE THAT, THE ASSESSEE HAD L ET OUT THE PROPERTY FROM AUGUST, 1998 TO JULY, 1999 AT A MONTHLY RENT OF `. 1,12,500/-. THEREAFTER, THE SAME PROPERTY FROM 15.10.1999 WAS LET OUT TO A DIFFERENT PARTY ON A MONTHLY RENT OF `. 10,000/- AFTER TAKING HUGE DEPOSIT OF `. 30,00,000/- AND BANK GUARANTEE OF `. 62,00,000/-. THUS THE PROPERTY WHICH WAS LET OUT A T A MONTHLY RENT OF `. 1,12,500/- FOR THE INITIAL MONTHS WAS REDUCED SUBSTANTIALLY IN THE LAST 5 MONTHS TO A MONTHLY R ENT OF `. 10,000/- AFTER ACCEPTING THE INTEREST FREE DEPOSIT. ON THESE FACT S, THE HON'BLE THIRD MEMBER HELD THAT THE ACTUAL RENT RECEIVED AT `. 10,000/- CANNOT BE CONSIDERED TO BE A FAIR VALUATION OF THE PROPERTY. THE MATTER WAS THUS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DETERMINATION OF FAIR RENT TO BE ADOPTED IN SUCH A SITUATION. NO WHERE I T HAS BEEN CATEGORICALLY LAID DOWN THAT THE NOTIONAL INTEREST HAS TO BE ADDE D OVER AND ABOVE ON THE ANNUAL RENT RECEIVED. 5.4 HERE IN THIS CASE, THE FACTS ARE THAT THE APPEL LANT HAS SHOWN THE ACTUAL RENT RECEIVED WHICH WAS FAR MORE THAN THE MU NICIPAL RATABLE VALUE, WHICH HAS NOT BEEN DISPUTED EITHER BY THE ASSESSING OFFICER OR BY THE CIT(APPEALS). AFTER PERUSING THE DECISION OF THE I TAT MUMBAI BENCH IN THE CASE OF DCIT VS. RECLAMATION REALTY INDIA PVT. (SUPRA), IT IS SEEN THAT THE BENCH AFTER CONSIDERING THE CATENA OF CASE LAWS AND AFTER ANALYZING THE PROVISIONS OF SECTION 23(1)(A) AND 23(1)(B) AND ALS O THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF J.K. INVESTORS (SUPRA) AND ANOTHER JUDGMENT IN THE CASE OF M.V. SONAWALA VS. CIT REPORTED IN 177 ITR 246 HAVE COME TO THE CONCLUSION THAT THE JUDGMENT OF THIRD MEMBER DE CISION IN THE CASE OF ITO VS. BAKER TECHNICAL SERVICES (P) LTD. (SUPRA) CANNOT BE APPLIED BEING CONTRARY TO THE DECISION OF HON'BLE BOMBAY HIGH COU RT AND THE SAME CANNOT BE FOLLOWED. THE RELEVANT FINDING OF THE HO N'BLE ITAT ARE BEING REPRODUCED HERE UNDER :- ITA NO. 3662/MUM/2011 MONISHA R. JAISING 9 23. AS FAR AS DECISIONS RELIED UPON BY THE LEARN ED 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 BE NCH IN THE CASE OF ITO VS. MAKRUPA CHEMICALS (P) LTD. 108 ITD 95 (MUMBAI). IN THE CASE OF MAKRUPA CHEMICALS, IN PARA-14 OF THE DECISION IT HAS BEEN CLEARLY HELD THAT RATEABLE VALUE, IF CORRE CTLY 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 UNDER TH E MUNICIPAL LAW DOES NOT REPRESENT THE CORRECT FAIR RENT. IN C OMING TO THE ABOVE CONCLUSION, THE BENCH HAS FOLLOWED THE DECISI ON OF THE PATNA HIGH COURT IN THE CASE OF KASHI PRASAD KATARV KA VS. CIT 101 ITR 810 (PATNA). WE FIND THAT THE BOMBAY HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT HAS HELD THAT 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 F MAKRUPA 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 RENT HAS T O BE TAKEN. IN COMING TO THE ABOVE CONCLUSION THE TRIBUNAL HAS FOL LOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DEWAN DAULAT RAI KAPOOR (SUPRA). THUS THE DECISION IN TH E CASE OF BAKER TECHNICAL SERVICES (P) LTD. (SUPRA) BEING CONTRARY TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN OUR VIEW CANNOT BE FOLLOWED. 24. THE DECISION RELIED UPON BY THE LEARNED D.R. IN THE CASE OF FIZZ DRINKS LTD.(SUPRA), ARE DISTINGUISHABLE ON FACTS. THE FACTS IN THAT CASE WERE THAT THE AGREED RENT WAS RE.1/- P ER 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 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 WAS NO RENT AND O NLY A HUGE INTEREST FREE SECURITY DEPOSIT WAS TAKEN BY THE OWN ER. 25. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ANNUAL 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 ITA NO. 3662/MUM/2011 MONISHA R. JAISING 10 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 PROPER TY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, TH E ACTUAL RENT RECEIVED SHOULD BE THE ANNUAL VALUE OF THE PROPERTY U/S.23(1)(B) OF THE ACT. NOTIONAL INTEREST ON INTEREST FREE SECUR ITY DEPOSIT/RENT RECEIVED IN ADVANCE SHOULD NOT BE ADDED TO THE SAME IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF J.K.INVESTORS (BOMBAY) LTD. (SUPRA). WE HOLD ACCORD INGLY. THE APPEAL OF THE REVENUE IS DISMISSED. 5.5 ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH, WE CONFIRM THE ORDER OF THE CIT(APPEALS) DELETING THE NOTIONAL INT EREST OF `. 24,30,000/- AS HAS BEEN ADDED IN THE ANNUAL LETTING VALUE BY THE A SSESSING OFFICER. 6. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2012. S D/ - S D/ - ( G.E. VEERABHADRAPPA ) PRESIDENT ( AMIT SHUKLA ) JUDICIAL MEMBER MUMBAI, DT: 28.03.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI