THE ACIT RG 9(1), MUMBAI V. M/S. BADASAAB PROPERTIES P. LTD, MUMBAI

ITA 4230/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4308 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 13-10-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 16-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABANI K NAYAK
• Assessee Lawyers: V C SHAH
• Keywords: Business income; Notional interest; TDS; Set aside

Judgement Text

ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI A.L. GE HLOT, A.M. ITA NO. 3150/M/2008 ASSESSMENT YEAR: 2004-05 BADA SAAB PROPERTIES PVT. LTD., APPELLAN T 5 TH FLOOR, KRYSTAL, WATERFIELD ROAD, BANDRA (W), MUMBAI 400 050. AAAACB1642A) VS. ASSTT. COMMISSIONER OF INCOME-TAX, RESPONDEN T AAYAKAR BHAVAN, MUMBAI 400 020. ITA NO. 4230/M/2008 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLANT AAYAKAR BHAVAN, MUMBAI 400 020. BADA SAAB PROPERTIES PVT. LTD., R ESPONDENT 5 TH FLOOR, KRYSTAL, WATERFIELD ROAD, BANDRA (W), MUMBAI 400 050. AAAACB1642A) ASSESSEE BY : MR. V.C. SHAH REVENUE BY : MR. ABANI K. NAYAK ORDER PER A.L. GEHLOT, A.M.: THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE O RDER OF CIT(A) IX, MUMBAI, DATED 03/03/2008 FOR THE ASSESSMENT YEAR 2004-05. ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 2 ITA NO. 3150/M/08 APPEAL BY THE ASSESSEE 2. THE ASSESSEE IN THIS APPEAL RAISED ONLY ONE GROU ND READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS. 24,98,205/- CLAIMED AS DEDUCTION I N COMPUTING ASSESSABLE INCOME FROM PROPERTY THOUGH IT WAS EXPLA INED THAT BORROWINGS IN RESPECT OF WHICH INTEREST WAS PAID AN D CLAIMED AS DEDUCTION WERE UTILIZED FOR PAYING OFF THE AMOUNT B ORROWED FOR THE PURPOSE OF CONSTRUCTION. IT WAS EXPLAINED THAT INTEREST ON AMOUNTS BORROWED UTILIZED FOR PAYING, BORROWING MAD E FOR ACQUIRING OR CONSTRUCTING THE PROPERTY WAS ALLOWABL E AS DEDUCTION. THIS CLASSIFICATION WAS OVERLOOKED BY CI T(A) WHILE DECIDING THE APPEAL. 3. THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST A T RS. 24,98,205/- AGAINST THE PROPERTY INCOME DECLARED. O N BEING ASKED THE DETAILS BY THE AO, THE ASSESSEE FURNISHED LOAN SANC TION LETTER FROM KOTAK MAHINDRA BANK, WHO HAD SANCTIONED A CREDIT FA CILITY OF RS. 877 LAKHS, THE AO WAS OF THE VIEW THAT IF THE ASSESSEE HAS ESTABLISHED THAT THE IMPUGNED PROPERTY IS ACQUIRED OR CONSTRUCT ED WITH THE BORROWED CAPITAL, THEN, ONLY IT COULD MAKE ANY CLAI M OF INTEREST U/S 24(1)(B) OF THE ACT. SINCE THE ASSESSEES REPRESENT ATIVE DID NOT MAKE OUT ANY CASE TO HOLD OTHERWISE, THE AO DISALLOWED T HE INTEREST CLAIM AMOUNTING TO RS. 24,98,205/-. BEFORE THE CIT (A) IT WAS SUBMITTED THAT THE AMOUNT WAS BORROWED AS SECURED WORKING CAP ITAL LOAN FROM CORPORATION BANK FOR CONSTRUCTION OF THE PREMISES A ND INTEREST ON THE AMOUNT BORROWED FOR WHICH DEDUCTION WAS CLAIMED IS IN RESPECT OF LOAN AMOUNT UTILISED FOR REPAYMENT BORROWING FROM K OTAK MAHINDRA BANK LTD. BEING A LOAN FACILITY IN RESPECT OF PREMI SES GIVEN ON LEASE TO ICICI BANK LTD. IN OTHER WORDS, THE BORROWING FROM KOTAK MAHINDRA BANK WAS PARTLY UTILIZED TO PAY OFF THE BORROWINGS FROM THE CORPORATION BANK AND THE BALANCE AMOUNT WAS UTILIZE D IN MEETING LIABILITIES DUE TO VARIOUS SUPPLIERS AND IN PAYING OF UNSECURED LOAN ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 3 TAKEN FOR THE PURPOSE OF CONSTRUCTION. IT WAS CONTE NDED THAT THE AO HAD DISALLOWED THE INTEREST AS THE ASSESSEE FAILED TO ESTABLISH THAT THE PROPERTY WHICH WAS ACTUALLY LEASED TO ICICI BANK ON 28/02/2003 WAS ACQUIRED FOR CONSTRUCTED WITH THE BORROWED CAPITAL, SINCE THE LEASE PROPERTY WAS READY PRIOR TO THE SANCTION OF THE CRE DIT BY KOTAK MAHINDRA BANK IN MAY, 2003. THE CREDIT FACILITY SAN CTIONED BY THE KOTAK MAHINDRA BANK WAS AGAINST THE RENT RECEIVABLE FROM THE ICICI BANK, THE GROSS RENT WAS TAKEN INCLUDING THE INTERE ST AMOUNT OF RS. 24,98,205/-. AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE, THE CIT(A) HELD AS UNDER:- 3.3 I HAVE CONSIDERED THE CONTENTION OF THE APPELLA NT AND DO NOT FIND ANY MERIT IN ITS CASE. IT IS NOT IN DISPUT E THAT THE APPELLANT HAD SECURED THE ADVANCES NOT FOR THE PURP OSE OF ACQUIRING AN ASSET BUT WAS TAKEN AGAINST THE PROPER TY GIVEN ON MORTGAGE AND THEREFORE IT COULD NOT BE SAID THAT TH E AMOUNT BORROWED FROM THE SAID M/S KOTAK MAHINDRA BANK WAS USED FOR THE PURPOSE OF ACQUISITION OF PROPERTY AND ACCORDIN GLY THE SAME COULD NOT BE ALLOWED AS DEDUCTION U/S 24(1), WHICH READS AS UNDER, 24. DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY. INCOME CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCT IONS, NAMELY:- A) A SUM EQUAL TO THIRTY PER CENT OF THE ANNUAL VALUE; B) WHERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RECONSTRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF MY INTEREST PAYABLE ON SUCH CAPITAL: SINCE IN THE INSTANT CASE THE PROPERTY HAS NOT BEEN ACQUIRED OUT OF THE BORROWED CAPITAL THE INTEREST THEREON CANNOT BE ALLOWED AS DEDUCTION AND AS SUCH ADDITION MADE IN THIS REGARD IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 4. THE LD. A.R. SUBMITTED THAT INTEREST ON THE AMOU NT BORROWED, FOR WHICH DEDUCTION IS CLAIMED, IS IN RESPECT OF BO RROWING FROM KOTAK MAHINDRA BANK LTD., BEING A LOAN FACILITY IN RESPEC T OF PREMISES GIVEN ON LEASE TO ICICI BANK LTD. HE FURTHER SUBMITTED TH AT THE ORIGINAL LOAN TAKEN FROM CORPORATION BANK WAS UTILIZED FOR C ONSTRUCTION OF THE PREMISES. THE LD. A.R. SUBMITTED THAT THIS FACT IS NOT IN DISPUTE. SUBSEQUENTLY, THE ASSESSEE SUBSTITUTED IT WITH THE ORIGINAL LOAN OF ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 4 CORPORATION BANK BY LOAN TAKEN FROM KOTAK MAHINDRA BANK LTD. KOTAK MAHINDRA BANK, VIDE THEIR SANCTION LETTER DAT ED 30-05-2003, DISBURSED PART OF THE LOAN DIRECTLY TO CORPORATION BANK TO RELEASE THEIR CHARGE AND OBTAIN THE TITLE DEED. THE LD. A.R . SUBMITTED THAT THE BORROWING FROM KOTAK MAHINDRA BANK WAS PARTLY UTILI ZED TO PAY OFF THE BORROWING FROM THE CORPORATION BANK. THE BALANC E AMOUNT BORROWED FROM THE BANK WAS UTILIZED IN MEETING THE LIABILITIES DUE TO VARIOUS SUPPLIERS ETC. AND IN PAYING OF UNSECURED L OANS. THE LD. A.R. FURTHER SUBMITTED THAT INTEREST ON SUCH SUBSTITUTIO N OF LOAN IS ALLOWABLE IN ACCORDANCE WITH CIRCULAR NO.28 DATED 2 0-08-1969 ISSUED BY THE CBDT. 5. THE LD. D.R. RELIED UPON THE ORDER OF CIT (A) AN D SUBMITTED THAT THE ASSESSEE CLAIMED THE INTEREST IN RESPECT OF COR PORATION BANK WHICH WAS NOT UTILIZED FOR THE PURPOSE OF CONSTRUCT ION. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORD PERUSED. IN BRIEF, THE ADMITTED FACTS OF THE CASE A RE THAT THE ASSESSEE HAS TAKEN ORIGINAL LOAN FROM CORPORATION BANK WHICH WAS UTILIZED FOR CONSTRUCTION OF THE PREMISES. SUBSEQUENTLY, THE ASS ESSEE SUBSTITUTED IT BY TAKING A FRESH LOAN FROM KOTAK MAHINDRA BANK LTD. AND PART OF THAT LOAN WAS UTILIZED FOR REPAYMENT OF LOAN TAKEN FROM CORPORATION BANK. SECTION 24(B) PROVIDES THAT WHERE THE PROPERT Y HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RE-CONS TRUCTED WITH BORROWED CAPITAL, THE AMOUNT OF ANY INTEREST PAYABL E ON SUCH CAPITAL IS AN ALLOWABLE DEDUCTION WHILE CALCULATING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ISSUE TO BE EXAMI NED IN THIS GROUND OF APPEAL IS WHETHER THE ORIGINAL LOAN TAKEN FOR CONSTRUCTION OF PREMISES AND SUBSEQUENTLY SUBSTITUTED BY ANOTHER LO AN, UNDER THE CIRCUMSTANCES, IS ENTITLED FOR INTEREST DEDUCTION I N RESPECT OF THE FRESH LOAN FOR SUBSTITUTION OF THE ORIGINAL LOAN. W E FIND THAT THIS ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 5 CONTROVERSY HAS BEEN RESOLVED BY THE CBDT BY ISSUIN G A CIRCULAR NO.28 DATED 20-08-1969, WHICH READS AS UNDER: CIRCULAR NO.28 DATED 20.8.196 9 SEC. 24(1) OF THE IT ACT, 1961 INSTRUCTIONS REG ARDING INCOME FROM HOUSE PROPERTY SECTIONS 24, SEC. 24(1)(VI) OF THE IT ACT, 1961 PROVIDES THAT WH ERE THE PROPERTY HAS BEEN ACQUIRED, CONSTRUCTED, REPAIRED, RENEWED OR RE-CONSTRUCTED WITH BORROWED CAPITAL, TH E AMOUNT OF ANY INTEREST PAYABLE ON SUCH CAPITAL SHAL L BE ALLOWED AS AN ADMISSIBLE DEDUCTION IN THE COMPUTATI ON OF THE INCOME FROM THE SAID PROPERTY. 2. A QUESTION HAS BEEN RAISED WHETHER IN A CASE WHE RE A FRESH LOAN HAS BEEN RAISED TO REPAY THE ORIGINAL LO AN TAKEN FOR THE ABOVE PURPOSE, THE INTEREST PAYABLE IN RESP ECT OF THE SECOND LOAN WOULD ALSO BE ADMISSIBLE AS A DEDUC TION UNDER S. 24(1)(VI) OF THE IT ACT. 3. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT IF THE SECOND BORROWING HAS R EALLY BEEN USED MERELY TO REPAY THE ORIGINAL LOAN AND THI S FACT IS PROVED TO THE SATISFACTION OF THE ITO, THE INTER EST PAID ON THE SECOND LOAN WOULD ALSO BE ALLOWED AS A DEDUC TION UNDER S. 24(1)(VI). 7. AS STATED ABOVE, THAT THE CLAIM OF THE ASSESSEE IS ONLY IN RESPECT OF A PORTION OF THE FRESH LOAN WHICH HAS BEEN SUBST ITUTED TO THE ORIGINAL LOAN UTILISED FOR THE PURPOSE OF CONSTRUCT ION OF THE PREMISES IS IN DISPUTE. FROM THE ABOVE CBDT CIRCULAR WE FIND THAT THE CBDT HAS CLEARLY INSTRUCTED THE OFFICERS THAT IF THE SEC OND BORROWED AMOUNT HAS REALLY BEEN USED MERELY TO REPAY THE ORIGINAL L OAN, THE INTEREST PAID TO THAT EXTENT IS AN ALLOWABLE DEDUCTION. THE AO IS BOUND TO FOLLOW THE CBDT CIRCULAR. WE, THEREFORE, FIND THAT THE INTEREST CLAIM OF THE ASSESSEE IS ALLOWABLE, WE ACCORDINGLY ALLOW IT. ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 6 ITA NO. 4230/M/08 APPEAL BY REVENUE 8. GROUND NO. 1 RAISED BY THE REVENUE READS AS UNDE R:- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE TDS CERTIFICAT E DID NOT REFLECT THAT ADDITIONAL INCOME BY WAY OF RENT HAS BEEN EARN ED FOR THE RELEVANT ASSESSMENT YEAR BY THE ASSESSEE & THEREBY DELETING THE ADDITION MADE IN THIS REGARD OF RS. 18,55,886/-, WH EN THE TDS CERTIFICATE FILED BY THE ASSESSEE CLEARLY SHOWS THA T RENT FOR 13 MONTHS HAVE BEEN RECEIVED BY THE ASSESSEE. 9. ON COMPARATIVE SCRUTINY OF THE P&L A/C WITH TDS CERTIFICATES, THE AO NOTICED THAT THE ASSESSEE HAD CREDITED RENT INCOME OF RS. 2,22,70,632/- WHEREAS AS PER THE TOTAL OF THE AMOUN T CREDITED IN THE TDS CERTIFICATES THE SAME WAS WORKED OUT TO RS. 2,4 1,26,518/-. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD NOT RECONC ILED THIS DIFFERENCE WITH ANY MATERIAL OR FACTUAL CONTENTIONS , THEREFORE, THE DIFFERENCE OF RS. 18,55,886/- WAS ADDED TO THE GROS S RENTAL RECEIPT SUBJECT TO STATUTORY DEDUCTION U/S 24. BEFORE THE C IT(A), THE LEARNED AR OF THE ASSESSEE HAD SUBMITTED THAT THE LEASE WAS ENTERED INTO WITH ICICI BANK LTD ON 28/03/2003 AND THE MONTHLY AMOUNT PAYABLE IS RS. 18,55,880/- AND THE RENT FOR 12 MONTHS AT THIS RATE WORKS OUT TO RS. 2,22,70,632/-. THE RENTAL INCOME FOR 12 MONTHS WAS OFFERED IN COMPUTING TOTAL INCOME AS SAME AMOUNT ONLY ACCRUED TO THE ASSESSEE, WHEREAS THE ICICI BANK HAD DEDUCTED TAX ON RENT FOR 13 MONTHS DURING 1/4/2003 TO 31/03/2001. ACCORDINGLY, THEY HA D ISSUED THE TDS CERTIFICATE IN RESPECT OF RENT FOR 13 MONTHS, W HEREAS THE ASSESSEE HAD OFFERED RENTAL INCOME WHICH ACCRUED TO THE ASSE SSEE FOR 12 MONTHS ONLY AND THE ASSESSEE CLAIMED THE DEDUCTION FOR TDS ALSO FOR THE PERIOD OF 12 MONTHS. IN THE SUBSEQUENT YEAR I.E . AY 2005-06, THE CREDIT FOR TDS FOR ONE MONTH WAS CLAIMED. THUS, THE ASSESSEE CONTENDED THAT THE ACTION OF THE AO IN INCLUDING ON E MONTHS RENT IN TOTAL INCOME WHICH DID NOT ACCRUE TO THE ASSESSEE I N THE YEAR UNDER CONSIDERATION AND WHICH HAD ACCRUED IN THE SUBSEQUE NT YEAR, WHICH HAS ALSO BEEN OFFERED FOR TAXATION IN THE SUBSEQUEN T IS WRONG. AFTER ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 7 CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER:- 2.2 I HAVE CONSIDERED THE CONTENTION OF THE APPELLA NT AND FIND MERIT IN ITS CASE. IT IS NOT IN DISPUTE THAT THE AP PELLANT HAS BEEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AND T HAT THE SAME HAS BEEN FOLLOWED CONSISTENTLY. IT IS ALSO NOT DISP UTED BY THE AO THAT THE MONTHLY RENT IN THE INSTANT CASE AS PER TH E AGREEMENT WAS RS. 18,55,886/- WHICH ON YEARLY BASIS WORKS OUT TO RS. 2,22,70,632/-, THE AMOUNT WHICH THE APPELLANT HAS O FFERED FOR TAX AND THEREFORE MERELY BECAUSE THE PAYER HAS ISSU ED CERTIFICATE FOR HIGHER AMOUNT WHICH RELATES TO THE OTHER FINANC IAL YEAR THE SAME COULD NOT BE BROUGHT TO TAX IN THE HANDS OF TH E APPELLANT COMPANY WHO IS REQUIRED TO OFFER FOR TAX AN AMOUNT WHICH IT HAS EARNED IN THE PREVIOUS YEAR RELATING TO THE ASSESSM ENT YEAR UNDER CONSIDERATION AND THEREFORE IN ABSENCE OF ANY MATERIAL BROUGHT ON RECORD TO SHOW THAT THE INCOME AS PER TH E CERTIFICATE DID REFLECT THE ADDITIONAL INCOME EARNED FOR THE YE AR UNDER CONSIDERATION THE AO SHOULD NOT HAVE MADE ANY ADDIT ION AS SUCH AND THEREFORE ADDITION MADE BY THE AO IS DELETED. F URTHER IN CONSEQUENCE TO THE SAME THE AO IS ALSO DIRECTED TO ALLOW CREDIT FOR TDS FOR DIFFERENCE IN SUCH AMOUNT ONLY IN THE Y EAR IN WHICH THE APPELLANT HAS SHOWN SUCH INCOME. 10. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD. WE FIND THAT THERE IS NO INFIRM ITY IN THE ORDER OF CIT(A) AS RENTAL INCOME RELATED TO THE PREVIOUS YE AR WHICH SHOULD NOT BE MORE THAN TWELVE MONTHS, THEREFORE, THE ORDER O F CIT(A) IS HEREBY CONFIRMED ON THIS ISSUE. 11. GROUND NO. 2 IS THAT THE CIT(A) ERRED IN DELETING T HE ADDITION TO RENTAL INCOME OF RS. 8,90,925/- ON ACCOUNT OF NOTIO NAL INTEREST ON THE INTEREST FREE DEPOSIT WITHOUT CONSIDERING THE PROVI SIONS TO SECTION 23(1)(A) OF THE ACT. 12. THE BRIEF FACTS OF GROUND NO. 2 ARE THAT DURI NG THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ICICI BANK HAS GIVE N AN INTEREST FREE DEPOSIT OF RS 1,11,35,315/- WHILE TAKING GROUND & F IRST FLOOR OF THE BUILDING CRYSTAL. THE RENT WAS FIXED AT RS 18,55, 886/- FOR THE GROUND FLOOR AND FIRST FLOOR. THE AO ASKED THE ASSE SSEE TO EXPLAIN WHY AN ACCEPTABLE TERM DEPOSIT RATE OF INTEREST SHOULD NOT BE ADDED AS TO ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 8 CONSTITUTE THE ANNUAL VALUE AS ENVISAGED IN SEC. 23 (1)(A) OF THE ACT. BEFORE THE AO, THE ASSESSEE RELIED UPON A JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. J.K. INVES TOR (BOMBAY) LTD. 248 ITR 742. THE AO, WHILE CONSIDERING THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. J.K. INVESTOR (BOMBAY) LTD. 248 ITR 742 OBSERVED AS UNDER : REGARDING THE BOMBAY HIGH COURT DECISION IN J.K. INVESTORS, 248 ITR 723 (BOM) THE SAME HAS MAINLY FO UND FAULT WITH THE REVENUE IN APPLYING THE PROVISIONS O F SEC. 23(1)(B) WITH REGARD TO THE RELEVANT CIRCUMSTANCES OF FACTS AND THE LAW. I DO NOT VENTURE TO APPLY THE PROVISIO NS OF SEC. 23(1)(B) IN THE CASE OF THE PRESENT ASSESSEE FOR TH E REASON THAT THE ACTUAL RENT RECEIVED IS PRIMARILY BEING CO NSIDERED AS A NEGOTIATED AMOUNT, IN SPITE OF THE FACT THAT D EEMED RENT COULD BE FAR HIGHER THAN THAT. FOR THIS VIEW I TAKE SUPPORT OF THE OBSERVATIONS MADE IN THE JUDGEMENT OF SUPREME COURT IN GODHRA ELECTRIC CO. THE PRACTICAL AND COMMERCIAL ASPECT WHILE DETERMINING THE RENT WHICH IS SCALED DOWN BY TAKING INTEREST-FREE DEPOSIT OF HUGE MAGNITUDE HAS, IT IS SUBMITTED, TO BE CONSIDERED. T HIS PROPOSITION IS IN FACT EMBEDDED IN THE WORDS CONTAI NED IN SECTION 23(1)(A) VIZ., SHALL BE DEEMED TO BE THE S UM FOR WHICH THE PROPERTY MIGHT REASONABLE BE LET OUT FRO M YEAR TO YEAR. THE MUNICIPAL VALUATION, RENT CONTROL ACT ETC. ARE ONLY FOR PROVIDING A MECHANISM IN CASES WHERE THERE COULD BE UNDERSTATEMENT OR WHERE THE PROPERTY OTHER THAN SELF- OCCUPIED ONE IS NOT LET OUT, BUT KEPT ;IDLE. SUCH A MECHANISM CANNOT TOTALLY OBVIATE THE DEEMING EFFECT OF SECTION 23(1)(A). 12.1 AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE AO HELD AS UNDER : 10. IN THIS VIEW OF THE MATTER, THE ASSESSEES CON TENTION IS NOT FOUND ACCEPTABLE AND THE INTEREST AT 8% P.A. AS IS AVAILABLE IN THE SANCTION LETTER OF KOTAK MAHINDRA BANK IS APPLIED AND IS DEEMED TO BE EMBEDDED IN THE RENT NEGOTIATED BY THE ASSESSEE WITH THE LESSEES, ICICI BANK. THUS, 8% OF `1,11,35,315/- BEING `8,90,825/- IS ADD ED TO THE INCOME OF `2,41,26,518/- DECLARED BY THE ASSESS EE. THEREFORE, THE GROSS RENT OF `2,50,17,343/- IS ADOP TED FOR COMPUTATION OF PROPERTY INCOME AND SUBJECT TO DEDUC TION U/S.24 OF THE ACT. ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 9 13. THE CIT(A) ALLOWED THE GROUND OF APPEAL OF ASS ESSEE HOLDING AS UNDER : 4.3 I HAVE CONSIDERED THE APPELLANTS SUBMISSION, THE AOS CONTENTION AS WELL AS THE JUDICIAL PRONOUNCEME NTS CITED ABOVE. ACCORDING TO THE AO, THE APPELLANT HAD RECEIVED HUGE DEPOSITS AGAINST THE LEASED PROPERTY WHICH HAD AN EFFECT OF REDUCING THE MONTHLY RENT. THEREFO RE, CONSIDERING THE PROVISIONS OF SECTION 23(1)(A), THE RENTAL INCOME HAS BEEN INCREASED BY ADDING THE NOTIONAL IN TEREST ON SUCH DEPOSITS WHICH WORKS OUT TO `8,90,825/- I.E . 8% OF DEPOSITS, WHEREAS, ACCORDING TO THE APPELLANT AS HA S BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CAS E OF J.K. INVESTORS LTD. REPORTED IN 248 ITR 742, NOTIONAL IN TEREST CANNOT FORM PART OF THE ACTUAL RENT AS CONTEMPLATED BY SECTION 23(1)(B) OF THE I.T. ACT. IN ANY CASE ANNUA L VALUE CANNOT BE MORE THAN THE MUNICIPAL RATEABLE VALUE AN D THE STANDARD RENT. IF THE ANNUAL ;VALUE IS TAXABLE U/S. 22 THEN IT SHOULD BE TAKEN ON THE BASIS OF MUNICIPAL VALUE AND STANDARD RENT. IN THE APPELLANTS CASE, IT IS `60,1 3,071/- WHICH IS MUCH MORE THAN THE ACTUAL RENT RECEIVED. THEREFORE, THE MUNICIPAL VALUE CAN BE TAKEN AS THE BASIS OF ALV, UNDER THE PROVISIONS OF SECTION 23(1)(A), B UT IN THE APPELLANTS CASE, SINCE THE RENTAL INCOME IS MORE THAN THE MUNICIPAL VALUE, THEREFORE, THE FAIR RENT SHOWN BY THE APPELLANT COMPANY SHOULD BE ACCEPTED. THE APPELLANT S CONTENTION CANNOT BE DISCARDED UNLESS THERE ARE COG ENT REASONS TO THE CONTRARY THAT THE AGREED RENT IS NOT FAIR AND REASONABLE. THEREFORE, THE INCOME FROM THE PROPERTY SHOULD BE ASSED ON THE BASIS OF RENT ACTUALLY RECEIVED OR RECEIVABLE AND NOT ANY NOTIONAL VALUE. THE APPELLAN TS CONTENTION IS ALSO SUPPORTED BY THE HONBLE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF J.K. INVESTORS SUPRA, WHEREIN, IT IS CLEARLY HELD THAT NOTIONAL INTEREST CANNOT FORM PART OF THE ACTUAL RENT AS CONTEMPLATED BY SECTION 23(1)(B) OF THE I.T. ACT. RESPECTFULLY, FOLLOWING THE HONBL E BOMBAY HIGH COURT JUDGMENT, THE ADDITION MADE BY THE AO IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 14. THE LD. D.R. RELIED UPON THE ORDER OF AO AND SU BMITTED THAT THE AO MADE OUT A CASE U/S.23 (1)(A) OF THE ACT. HE FUR THER SUBMITTED THAT WHILE CALCULATING ANNUAL VALUE U/S. 23(1) (A), THE AO CAN DETERMINE SUCH ANNUAL VALUE BY ADDING NOTIONAL INTEREST ON DE POSIT TAKEN BY THE ASSESSEE WHILE GIVING PREMISES ON RENT. THE LD. D.R . SUBMITTED THAT THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. J.K. INVESTORS (BOMBAY) LTD. (248 ITR 742) IS DISTINGUIS HABLE ON FACTS AS ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 10 THE HONBLE HIGH COURT HAS LEFT THE ISSUE OPEN WHET HER NOTIONAL INTEREST COULD FORM PART OF THE FAIR RENT U/S,.23( 1)(A). THE JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE ONL Y IN RESPECT OF SEC. 23(1)(B) OF THE ACT. THE LD. D.R. IN SUPPORT OF THE CASE OF THE AO RELIED UPON A DECISION OF ITAT (THIRD MEMBER) IN THE CASE OF ITO VS. BECKER TECHNICAL SERVICES P. LTD. IN ITA NOS.5262 TO 5264/ MUM/06 DATED 06-07-2009. THE LD. D.R. HAS ALSO RELIED UPON ANOTH ER DECISION OF ITAT IN THE CASE OF RITA A. PARIKH 10 SOT 779. THE LD. D.R. SUBMITTED THAT THE IMPUGNED PROPERTY IS NOT COVERED BY THE MA HARASHTRA RENT CONTROL ACT. 15. THE LD. A.R., ON THE OTHER HAND, RELIED UPON TH E ORDER OF CIT (A). 16. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORD PERUSED. WE HAVE ALSO GONE THROUGH THE DECISIONS CI TED. THE BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE RECEIVED D EPOSIT WITHOUT INTEREST AGAINST THE PROPERTY LET OUT. THE AO CALCU LATED ANNUAL VALUE OF THE PROPERTY BY ADDING NOTATIONAL INTEREST, CALC ULATED @ 8% P.A. ON THE AMOUNT OF DEPOSIT IN ACTUAL AMOUNT OF RENT RECE IVED. UNDER THE FACTS AND CIRCUMSTANCES, THE ISSUE TO BE EXAMINED I N THIS GROUND OF APPEAL IS WHETHER THE AO IS CORRECT IN CALCULATING THE ANNUAL VALUE OF THE PROPERTY WHICH MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR AS PROVIDED UNDER SEC. 23(1)(A) OF THE ACT. B EFORE COMING TO THE ISSUE, WE WOULD LIKE TO STATE THAT THE DECISIONS CI TED ON BEHALF OF THE REVENUE ARE DISTINGUISHABLE ON FACTS WHICH ARE NOT SIMILAR TO THE FACTS UNDER CONSIDERATION. NOW WE EXAMINE THE ISSUE FOR WHICH WE HAVE TO SEE THE RELEVANT PROVISIONS OF TAXATION OF INCOME FROM HOUSE PROPERTY UNDER THE INCOME TAX ACT. SECTION 22 SAYS THAT THE MEASURE OF INCOME FROM HOUSE PROPERTY IS ITS ANNUAL VALUE. THE ANNUAL VALUE IS TO BE DECIDED IN ACCORDANCE WITH SECTION 23. SUB -SECTION (1) OF SECTION 23, BY VIRTUE OF THE AMENDMENT WITH EFFECT FROM THE ASSESSMENT YEAR 1976-77, HAS TWO LIMBS, NAMELY, CLA USES (A) AND (B). CLAUSE (A) STATES THAT THE ANNUAL VALUE IS THE SUM, FOR WHICH THE ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 11 PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FRO M YEAR TO YEAR. CLAUSE (B) COVERS A CASE WHERE THE PROPERTY IS LET AND THE ACTUAL RENT IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGH T REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. IN OTHER WORD S, INSERTION OF CLAUSE (B) BY THE TAXATION LAWS (AMENDMENT) ACT, 19 75, COVERS A CASE WHERE THE RENT FOR A YEAR ACTUALLY RECEIVED BY THE OWNER IS IN EXCESS OF THE LAWFUL RENT WHICH IS KNOWN AS THE FAIR RENT OR STANDARD RENT UNDER THE RENT CONTROL LEGISLATION. THE PROVISIONS OF SEC TION 23(1)(A) OF THE INCOME-TAX ACT APPLY BOTH TO OWNER-OCCUPIED PROPERT Y AS ALSO TO PROPERTY WHICH IS LET OUT AND THE MEASURE OF VALUAT ION TO DECIDE THE ANNUAL VALUE IS THE STANDARD RENT OR THE FAIR RENT. HOWEVER, SECTION 23(1)(B) ONLY APPLIES TO CASES WHERE THE ACTUAL REN T RECEIVED IS MORE THAN THE REASONABLE RENT UNDER SECTION 23(1)(A) OF THE ACT AND IT IS FOR THIS REASON THAT SECTION 23(1)(B) CONTEMPLATES THAT IN SUCH CASES THE ANNUAL VALUE SHOULD BE DECIDED ON THE BASIS OF THE ACTUAL RENT RECEIVED. GENERALLY, THE FAIR RENT IS FIXED AFTER CONSIDERING VARIOUS ASPECTS/PRINCIPLES OF VALUATION, VIZ., THE CONTRACT ORS' METHOD, THE RENT METHOD, RENT AS PER BOMBAY MUNICIPAL CORPN. ACT, R ENT CONTROL ACT, LOCATION OF THE PROPERTY ETC. THE ASSESSEE MAY HAVE LET OUT THE PROPERTY AT LOWER/HIGHER RENT BECAUSE OF EXISTENCE OF PERSONAL OR BUSINESS RELATIONSHIP WITH THE TENANT. HOWEVER, THA T EXERCISE IS UNDERTAKEN AFTER CONSIDERING ALL THESE ASPECTS AND PRINCIPLES TO DECIDE THE FAIR RENT OF THE PROPERTY. IN THAT CONNE CTION, THE ACTUAL RENT RECEIVED ALSO PROVIDES ONE OF THE PIECES OF EVIDENC E TO DECIDE THE FAIR RENT OF THE PROPERTY. HOWEVER, UNDER THE INCOME-TAX ACT, SECTION 23(1)(B) PROVIDES THAT WHERE THE ACTUAL RENT IS MOR E THAN THE FAIR RENT, THE ACTUAL RENT WOULD BE THE ANNUAL VALUE OF THE PR OPERTY. IN THE CIRCUMSTANCES, THE VALUE OF THE NOTIONAL ADVANTAGE, LIKE NOTIONAL INTEREST IN THIS CASE, WILL NOT FORM PART OF THE AC TUAL RENT RECEIVED AS CONTEMPLATED BY SECTION 23(1)(B) OF THE ACT. AT THE COST OF REPETITION IT MAY BE MENTIONED THAT UNDER SECTION 23(1)(A), THE A SSESSING OFFICER HAS TO DECIDE THE FAIR RENT/ANNUAL VALUE OF THE PR OPERTY. WHILE DECIDING THE FAIR RENT, VARIOUS FACTORS AS DISCUSSE D ABOVE ARE REQUIRED ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 12 TO BE TAKEN INTO ACCOUNT. IF ON COMPARISON OF THE F AIR RENT WITH THE ACTUAL RENT RECEIVED, THE ASSESSING OFFICER FINDS T HAT THE ACTUAL RENT RECEIVED IS MORE THAN THE FAIR RENT DETERMINABLE AS ABOVE, THEN THE ACTUAL RENT SHALL CONSTITUTE THE ANNUAL VALUE UNDER SECTION 23(1)(B) OF THE ACT. IF FAIR RENT CALCULATED UNDER SECTION 23(1 )(A) IS MORE THAN THE ACTUAL RENT RECEIVED, IN THAT CASE ANNUAL VALUE WIL L BE FAIR RENT CALCULATED IN ACCORDANCE WITH SECTION 23(1)(A) OF T HE ACT. 17. HERE WE WOULD LIKE TO REFER A JUDGMENT OF JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT V.J.K. INVESTORS (BOM.) LT D. 248 ITR 723 (BOM.), AGAINST WHICH SLP FILED BY THE DEPARTMENT H AS BEEN REJECTED BY THE APEX COURT VIDE PETITION(S) FOR SPECIAL LEAV E TO APPEAL (CIVIL) CC 5480/2001 DATED 01.11.2002 WHEREIN THE COURT HAS CONSIDERED SIMILAR ISSUE. THE QUESTION FOR CONSIDERATION BEFOR E JURISDICTIONAL HIGH COURT WAS WHETHER NOTIONAL INTEREST WOULD FORM PART OF THE ACTUAL RENT RECEIVED OR RECEIVABLE U/S 23(1)(B). TH E FACTS GIVING RISE TO THAT CASE, BRIEFLY, ARE THAT THE ASSESSEE, DURING T HE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR 1992-93, PURCHASED PREMISES IN THE BUILDING KNOWN AS 'MAHENDRA TOWERS' VIDE SALE, DEED DATED JUNE 28, 1991. THE SAID PREMISES WERE LET OUT TO RAYMOND WOO LLEN MILLS LIMITED FROM OCTOBER 1, 1991. THE LESSEE AGREED TO DEPOSIT AN AMOUNT AS A SECURITY DEPOSIT FOR THE DUE PERFORMANCE OF TH E LEASE. THE ASSESSEE WAS NOT TO PAY ANY INTEREST ON THE SECURIT Y DEPOSIT TO THE LESSEES. THE PREMISES ARE COVERED BY THE PROVISIONS OF THE BOMBAY RENT ACT, 1947. THE ASSESSING OFFICER CONCLUDED THA T THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1)(B) WAS TH E SUM TOTAL OF THE RENT ACTUALLY RECEIVED BY THE ASSESSEE AS LESSOR PL US NOTIONAL INTEREST FOR THE INTEREST-FREE DEPOSIT MADE BY THE LESSEE. T HE ASSESSING OFFICER CALCULATED THE NOTIONAL INTEREST AT THE RATE OF 21. 5 PERCENT PER ANNUM, I.E., AT THE RATE AT WHICH THE ASSESSEE BORROWED FU NDS. THE JURISDICTIONAL HIGH COURT HELD THAT WHEN ACTUAL REN T RECEIVED BY ASSESSEE WAS MORE THAN THE FAIR RENT OF THE HOUSE P ROPERTY SECTION ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 13 23(1)(B) IS INVOKED, NOTIONAL INTEREST ON DEPOSIT C OULD NOT BE TAKEN INTO ACCOUNT FOR DETERMINING ANNUAL VALUE. 18. NOW, APPLYING THE ABOVE TEST TO THE FACTS OF TH IS CASE, THOUGH THE ASSESSING OFFICER HAS MENTIONED SECTION 23(1 )( A) IN HIS ORDER BUT HIS WORKING OF ANNUAL VALUE IS ON THE BASIS OF SECT ION 23(1)(B) WHEREAS IN THE CASE UNDER CONSIDERATION THE ASSESSEE RECEIV ED ACTUAL RENT. SECTION 23(1)(B) CLEARLY PROVIDES THAT WHERE THE PR OPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RECEIVED OR R ECEIVABLE IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A). SECTION 23(1 )(B) GIVES LIMITED POWER TO THE ASSESSING OFFICER TO EXAMINE WHETHER RENT RECEIVED IS MORE THAN THE REASONABLE RENT UNDER SECTION 23(1)(A ). THE ASSESSING OFFICER IS TO FIND OUT ANNUAL RENT U/S 23(1)(A) AND THEN SIMPLY COMPARE WHETHER THE ACTUAL RENT RECEIVED IS MORE TH AN THE AMOUNT CALCULATED BY THE ASSESSING OFFICER U/S 23(1 )(A), THEN ONLY ACTUAL RECEIVED IS TO BE TAKEN. BUT IN THE CASE UNDER CONS IDERATION THE ASSESSING OFFICER HAS ENHANCED THE ACTUAL RENT RECE IVED BY MAKING ADDITION OF RS.8,90,825/-, CALCULATED ON THE BASIS OF NOTIONAL INTEREST CALCULATED @ 8% ON THE AMOUNT OF DEPOSIT WITHOUT CO NSIDERING OTHER ASPECTS OF THE MATTER FOR CALCULATION OF ANNUAL VAL UE AS PER SECTION 23(1)(A) OF THE ACT AS DISCUSSED ABOVE. THUS WE FIN D THAT MERELY BY MENTIONING SECTION 23(1)(A) BY THE ASSESSING OFFICE R, IT CANNOT BE HELD THAT SECTION 23(1)(A) HAS BEEN INVOKED. IN FACT THE ASSESSING OFFICER HAS INVOKED SECTION 23(1)(B) OF THE ACT. MERELY MA KING ADDITION OF NOTIONAL INTEREST IN ACTUAL RENT RECEIVED IS NOT CA LCULATION OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE ACTION OF THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH SECTION 23(1)(A) AND ALSO CONTRARY TO THE JUDGMENT OF JURISDICTIONAL HIGH COURT, THEREFORE, THE SAME IS LIABLE TO BE Q UASHED. WE ACCORDINGLY SET ASIDE THE ORDER OF AO AND CONFIRM T HE ORDER OF CIT(A) ON THIS ISSUE. ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 14 19. GROUND OF APPEAL NO.3 IS AS UNDER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS 8,07,231/- TO BUSINESS INCOME BY WAY OF ESTIMATION OF PROFIT @ 8% ON THE CONTEMPLATED PORTION OF CONSTRUC TION. 20. THE FACTS OF THIS GROUND ARE THAT DURING THE AS SESSMENT PROCEEDINGS THE AO NOTICED THAT DURING THE YEAR CON STRUCTION OF SECOND FLOOR OF THE PREMISES WAS COMPLETED. AN AMOU NT OF RS 1,08,97,619/- WAS RECOVERABLE FROM MR. KISHORE BAJ AJ ON ACCOUNT OF ALLOTMENT OF PREMISES BEARING NOS.201, 202 AND 203 IN CRYSTAL BUILDING. THESE PREMISES WERE GIVEN TO HIM IN LIEU OF OLD PREMISES OWNED BY HIM FOR MORE THAN 20 YEARS IN THE OLD PROP ERTIES WHICH WERE HANDED OVER TO THE ASSESSEE COMPANY. MR. BAJAJ IS A DIRECTOR OF THE COMPANY WITH 50% HOLDING. THE ASSESSEE DID NOT FURN ISH THE EXACT COST OF CONSTRUCTION OF THE SECOND FLOOR. IN ABSENC E OF THE DETAILS, THE AO ESTIMATED 8% AMOUNT OF RS 1,08,97,619/- AS INCOM E ACCRUED TO THE ASSESSEE ON THE COMPLETED PORTION OF THE CONSTR UCTION AND ADDED TO ITS BUSINESS INCOME. THE CALCULATION OF THE AMOU NT COMES TO RS. 8,07,231/-. THE CIT(A) DELETED THE ADDITION OBSERVI NG AS UNDER : 5.3 I HAVE GONE THROUGH THE CONTENTION OF THE APPE LLANT AND FIND MERIT IN ITS CASE. MERELY BECAUSE THE APPELLAN T COMPANY HAD MADE ADVANCES TO THE SAID MR. KISHOR BAJAJ WOUL D NOT AUTOMATICALLY ALLOW THE AO TO MAKE ANY ADDITION ON NOTIONAL BASIS UNLESS SUCH NOTIONAL INCOME IS CHARGEABLE UND ER THE PROVISIONS OF INCOME-TAX ACT. THERE IS NOTHING IN T HE ACT TO CHARGE THE INCOME ON NOTIONAL BASIS IN SO FAR AS TH E SAME RELATES TO ADVANCES MADE BY THE APPELLANT COMPANY. FURTHER, IT IS NOT A CASE OF THE AO THAT THE SAID KISHOR BAJAJ HAD EVER PAID SUCH INTEREST TO THE APPELLANT COMPANY AND THEREFOR E, UNLESS SUCH INTEREST IS RECEIVED BY THE APPELLANT COMPANY NO ADDITION; COULD BE MADE ON ACCOUNT OF ACCRUED INTEREST, AS HA S BEEN DONE BY THE AO, SINCE THERE IS NO SUCH PROVISION IN THE ACT AND AS SUCH ADDITION MADE BY THE AO IN THIS REGARD ON NOTI ONAL BASIS IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 21. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND THE RECORD PERUSED. WE NOTICE THAT MR. KISHOR BAJAJ WAS ALLOTTED PREMISES ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 15 BEARING NOS.201, 202 AND 203. THESE PREMISES WERE G IVEN TO HIM IN LIEU OF ALL PREMISES OWNED FOR MORE THAN 20 YEARS B Y HIM IN THE OLD PROPERTIES WHICH WERE HANDED OVER TO THE ASSESSEE C OMPANY. THE SUBMISSION OF THE ASSESSEE ARE THAT IN SUCH A SITU ATION THERE IS PREVAILING PRACTICE IN THIS TRADE NOT TO CHARGE ANY PROFIT FORM OLD OWNER OF THE PROPERTY. THE CASE OF REVENUE IS THAT THE ASSESSEE DID NOT FURNISH DETAILS OF THE CONSTRUCTION COST OF SECOND FLOOR THEREFORE HE ESTIMATED PROFIT BY APPLYING 8% NET PROFIT RATE O N THE AMOUNT RECEIVABLE FROM MR. BAJA ON ACCOUNT OF PREMISES BE ARING NOS.201, 202 AND 203 ALLOTTED. THE CIT (A) HAS TAKEN SOME DI FFERENT CASE AND WITHOUT APPRECIATING FACTS OF THE CASE DELETED THE ADDITION. THE CONTENTION OF THE ASSESSEE THAT THE PREMISES ALLOTT ED TO MR. BAJA WAS ON COST TO COST BASIS, THIS FACT IS SUBJECT TO VERI FICATION. IN THE LIGHT OF DISCUSSIONS WE THINK IT PROPER TO REMIT THIS ISSUE BACK TO THE FILE OF CIT(A) TO DECIDE THE ISSUE AFRESH AFTER NOTING THE COMPLETE FACTS OF THE CASE IN ACCORDANCE WITH LAW AND AFTER PROVIDING OP PORTUNITY OF HEARING TO BOTH SIDES. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF OCTOBER, 2010. SD/- SD/- (R.V. EASWAR) (A.L. GE HLOT) PRESIDENT ACCO UNTANT MEMBER DATED: 22 ND OCTOBER, 2010 ITA NOS. 3150 & 4230/M/08 BADA SAAB PROPERTIES PVT. LTD. 16 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV