ITO WD 23(1)(1), MUMBAI V. YOGESH TRADING COMPANY, MUMBAI

ITA 3849/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48770 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: APURVA R SHAH
• Keywords: Notional interest
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI V. DURGA RAO (J M) I.T.A.NO.3847/MUM/2008 (A.Y. 2004-05) INCOME-TAX OFFICER, WARD 23(1)(1), 1 ST FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI. VS. M/S. S. SUDARSHAN & CO., KAYSONS NO.11, MEHRA ESTATE, LBS RD., VIKHROLI, MUMBAI-400 083. PAN: AAAFS5338K APPELLANT RESPONDENT I.T.A.NO.3848/MUM/2008 (A.Y . 2004-05) INCOME-TAX OFFICER, WARD 23(1)(1), 1 ST FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI. VS. M/S. AJAY ENGINEERING WORKS, KAYSONS NO.11, MEHRA ESTATE, LBS RD., VIKHROLI, MUMBAI-400 083. PAN: AAAFA1986F APPELLANT RESPONDENT I.T.A.NO.384 9/MUM/2008 (A.Y. 2004-05) INCOME-TAX OFFICER, WARD 23(1)(1), 1 ST FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI. VS. M/S.YOGESH TRADING COMPANY, KAYSONS NO.11, MEHRA ESTATE, LBS RD., VIKHROLI, MUMBAI-400 083. PAN: AAAFY0083H APPELLANT RESPONDENT APPELLANTS BY SHRI SHRAVAN KUMAR. RESPONDENT BY SHRI A PURVA R. SHAH. O R D E R PER BENCH : ITA NOS.3847-3849/M/08 S. SUDARSHAN & CO. & 2 ORS. 2 THESE THREE APPEALS BY DIFFERENT BUT CONNECTED ASS ESSEES ARISE OUT OF THE COMMON ORDER PASSED BY THE CIT(A) ON 18-03-2008 IN RELATION TO THE ASSTT. YEAR 2004-05. 2. THE ONLY SUBSTANTIVE GRIEVANCE RAISED THROUGH VA RIOUS GROUNDS RAISED BY THE REVENUE IN ITS APPEALS IS AGAINST THE DELETION OF ADDITION OF RS.9,18,600/- TOWARDS 12% NOTIONAL INTEREST ON SECURITY DEPOSIT F OR ARRIVING AT THE FAIR RENTAL VALUE OF THE PROPERTY U/S.23(1)(A) OF THE ACT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE INSTANT THREE ASSESSES HAD TAKEN ON RENT A PROPERTY FROM M/S.KALICHARAN MEHRA ESTATE AND HAD SUB-LET THE SAME TO ONE CONCERN CALLED STOCK HOLDING CORPORATIO N OF INDIA LTD. IT WAS CONTENDED ON BEHALF OF THESE ASSESSEES THAT THEY WE RE NOT THE OWNERS OF THE PROPERTY. THE AO, ON THE BASIS OF CERTAIN MATERIALS , CAME TO THE CONCLUSION THAT THE ASSESSEES WERE DEEMED OWNERS U/S.27(IIIB) OF TH E ACT. IT WAS ALSO NOTED BY HIM THAT THESE ASSESSEES HAVE RECEIVED INTEREST FRE E DEPOSIT OF RS.4.90 CRORES SHARED EQUALLY BY M/S. S. SUDARSHAN & CO. AND M/S. YOGESH TRADING COMPANY AT RS.76.55 LAKHS EACH AND M/S. AJAY ENGG. WORKS AT RS .73.50 LAKHS. INVOKING THE PROVISIONS OF SEC. 23(1)(A), THE AO HELD THAT INTER EST ON SUCH SECURITY WAS LIABLE TO BE ADDED TO THE ANNUAL LETTING VALUE U/S.23(1)(A ). BY APPLYING THE RATE OF 12% AS INTEREST ON DEPOSIT, HE ADDED THE AMOUNT OF SUCH NOTIONAL INTEREST TO THE ANNUAL LETTING VALUE OF THE PROPERTY. THE LD. CIT(A ) CAME TO THE CONCLUSION THAT SUB-LEASE INCOME WAS ASSESSABLE UNDER THE HEAD HOU SE PROPERTY BECAUSE OF THE DEEMING PROVISIONS OF SEC. 27 (IIIB) AND FURTHER TH E PRESUMPTIVE ADDITIONAL RENT IN THE SHAPE OF ALLEGED INTEREST ON DEPOSIT WAS NOT IN CLUDIBLE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE QUESTION WHETHER NOTIONAL INTEREST ON INTEREST FREE DEPOSIT IS INCLUDIBLE WHILE CALCULATING ANNUAL LETTING VALUE OF THE PROPERTY U/ S.23(1)(A), CAME UP FOR ITA NOS.3847-3849/M/08 S. SUDARSHAN & CO. & 2 ORS. 3 CONSIDERATION BEFORE THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN CIT VS. MONI KUMAR SUBBA (2011) 333 ITR 38 (DEL) (SB). THE HONBLE DELHI HIGH COURT HAS HELD THAT NO ADDITION TO THE ANNUAL LETTING VA LUE FOR NOTIONAL INTEREST U/S.23(1)(A) IS SUSTAINABLE. IN VIEW OF THIS JUDGME NT, IT IS CLEAR THAT THE ACTION OF THE AO CANNOT BE UPHELD. WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) IN THESE THREE APPEALS. 4. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THE 11TH DAY OF MAY, 2011. SD/- SD/- (V. DURGA RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11TH MAY , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXIII,,MUMBAI. 4 CIT-23,MUMBAI. 5.DR,A BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NOS.3847-3849/M/08 S. SUDARSHAN & CO. & 2 ORS. 4 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 04-05-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 04-05-2011 SR.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/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *