Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 4231 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2010-2011
Appeal Filed On
21-06-2016
Judgement Text
P A G E | 1 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX IN THE INCOME TAX APPELLATE TRIBUNAL ' C ' BENCH, MUMBAI BEFORE SHRI G.MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 4264/MUM/2016 (ASSESSMENT YEAR: 2010 - 11 ) BLUEBERRY TRADING COMPANY PVT. LTD., C/62, VIBGYOR TOWERS, 9 TH FLOOR, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI - 400 051 VS. THE DEPUTY COMMISSIONER OF INCOME TAX - 3(1) AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 PAN AABCB5512E APPELLANT RESPONDENT APPELLANT BY: SHRI NITESH JOSHI , A.R RESPONDENT BY: S/S H. ABI RAMA KARTIKIYEN , ABDUL HAKEEM , & MS. ANITA HARDASANI , DATE OF HEARING: 03.05 .201 9 DATE OF PRONOUNCEMENT: 1 0 . 05 .2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 8, MUMBAI, DATED 16.02.2016, WHICH IN TURNS ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 28.03.2013. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A ) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : 1.(A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX - 3(1), (HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER) IN ADD ING A SUM OF RS.3,60,53.444/ - (BEING NET RENT AFTER CONSIDERING DEDUCTION @ 30% UNDER SECTION 24 OF THE ACT) TO THE ANNUAL RATABLE VALUE OF THE CERTAIN OFFICE PREMISES GIVEN ON LEASE AS AGAINST THE VALUE AT RS. 1,98,92,448/ - AS DETERMINED BY THE APPELLANT. P A G E | 2 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX (B) THE APPELLANT FURTHER SUBMITS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN U PHOLDING THE ACTION OF ASSESSING OFFICER IN NOT APPRECIATING THE FACT THAT THE AGREEMENT WITH THE LESSEE WAS ENTERED IN OR ABOUT MARCH. 2004 FOR A FAIRLY LONG PERIOD AND LEASE RENT WAS BASED ON MARKET RATES PREVAILING AT THE TIME OF AGREEMENT. (C) THE APPELLANT FURTHER SUBMITS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN ARRIVING AT THE CONCLUSION THAT ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1)( A) PROVIDES FOR DETERMINA TION OF F AIR MARKET RENT ON YEAR TO YEAR BASIS IRRESPECTIVE OF THE FACT WHEN AN AGREEMENT IS ENTERED INTO. 2. THE APPELLANT SUBM ITS THAT THE ASSESSING OFFICER B E DIRECTED: (A) TO DELETE THE ADDITION MADE IN ANNUAL RATABLE VALUE OF PROPERTY LEASED OUT AMOUNTING TO RS.3,60,53,444/ - . AND TO MODIFY THE ASSESSMENT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 3. THE APPELLANT CRAVES LIBERTY TO AD D, TO ALTER AND /OR AMEND THE GROUNDS OF APPEAL AS AND WHEN GIVEN. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT & LEASING OF CONSTRUCTED PREMISES AND INVESTMENT AND TRADING IN SHARES & SECURITIES HAD FILED ITS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 30. 09.2010, DECLARING TOTAL INCOME AT RS. 5,77,88,851/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE I.T. ACT. 3. THE A.O WHILE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSESSE E WAS THE OWNER OF THE OFFICE PREMISES IN A BUILDING KNOWN AS SPECTRUM TOWERS SITUATED AT LINK ROAD, MALAD, MUMBAI. DURING THE YEAR, THE ASSESSEE HAD GIVEN ON LEAVE AND LICENSE BASIS THE OFFICE PREMISES ON GROUND, FIRST, FOURTH AND FIFTH FLOORS ALONG WITH ADDITIONAL AREA ON GROUND AND FIRST FLOOR COLLECTIVELY ADMEASURING BUILT UP AREA OF 79, 895 SQ. FT. TO M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. (FOR SHORT LICENCEE - 1) FOR A MONT HLY RENT OF RS. 16,57,704/ - , VIDE AGREEMENT DATED 29.04.2008. APART THERE FR OM, THE ASSESSEE HAD ALSO RECEIVED A SUM OF RS. 3,14,04,240/ - AS INTEREST FREE REFUNDABLE SECURITY DEPOSIT FROM LICENCEE - 1 . IT WAS FURTHER OBSERVED BY THE A.O THAT THE ASSESSEE HAD ALSO ENTERED INTO A SERVICE AGREEMENT WITH THE LICENCEE - 1 FOR PROVIDING VAR IOUS SERVICES TO THE LATTER AT A COST OF RS. 16,57,704/ - PER P A G E | 3 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX MONTH. FURTHER, THE ASSESSEE HAD ALSO GIVEN ON LEAVE AND LICENCE BASIS THE OFFICE PREMISES ON SIXTH AND SEVEN FLOOR COLLECTIVELY ADMEA SURING BUILT UP AREA OF 46, 280 SQ. FT. OF SPECTRUM TOWERS TO M/S OCWEN FINANCIAL SOLUTION PVT. LTD. (HEREINAFTER REFERRED TO AS LICENCEE - 2) FOR A MONTHLY RENT OF RS. 37,02,400/ - , VIDE AGREEMENT DATED 27.06.2008. IN THE BACKDROP OF THE AFORESAID FACTS , IT WAS NOTICED BY THE A.O THAT WHILE FOR LICENCEE - 1 WAS CHARGED RENT OF RS. 20.74 PER SQ. FT., THE LICENCEE - 2 WAS CHARGED RENT OF RS. 80 / - PER SQ. FT. THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE ANNUAL VALUE OF THE PROPERTY LET OUT TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. MAY NOT BE DETERMINED AS PER SEC. 23(1)(A) OF THE I.T. ACT AND THE FAIR MARKET VALUE (FOR SHORT FMV) OF THE SAME MAY NOT BE DETERMINED AFTER CONSIDERING THE INTEREST AT MARKET RATE ON THE IN TEREST FREE SECURITY DEPOSIT RECEIVED FROM THE SAID L ICENCEE . THE ASSESSEE IN ITS REPLY SUBMITTED THAT THOUGH THE ANNUAL VALUE OF THE PROPERTY AS PER THE MUNICIPAL AUTHORITY WAS RS. 42,46,735/ - , HOWEVER, AS THE RENT RECEIVED WAS MORE THAN THE SUM FOR WHI CH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR , THUS THE ACTUAL RENT RECEIVED WAS ADOPTED AS THE ANNUAL VALUE . APART THERE FROM, IT WAS SUBMITTED BY THE ASSESSEE THAT THE FAIR RENT FIXED UNDER THE RENT CONTROL LAWS WOULD BE REAS ONABLY EXPECTED RENT PROVIDED THE SAME WAS LESS THAN THAT FIXED FOR THE PURPOSE OF RATEABLE VALUE UNDER THE MUNICIPAL LAW FOR LEVY OF PROPERTY TAX. IT WAS ALSO THE CLAIM OF THE ASSESSEE THAT ANNUAL VALUE UNDER SEC. 23(1)(A) HAD BEEN TAKEN FROM SEC. 23(1) OF THE BMC ACT. THE A.O AFTER DELIBERATING ON THE AFORESAID EXPLANATION OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME FOR MULTIPLE REASONS VIZ. (I) THAT THE ASSESSEE HAD TRIED TO HIDE THE BENEFIT OF HIGH VALUE INTEREST FREE SECURITY DEPOSIT TAKEN BY IT FROM THE AFORESAID LICENCEE - 1; (II) THAT THE ASSESSEE HAD FAILED TO JUSTIFY THE HUGE DIFFERENCE IN THE RENT OF RS. 80/ - PER SQ. FT. CHARGED P A G E | 4 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX FROM LICENCEE - 2 AND THE MEAGRE RENT OF RS. 20.74 PER SQ. FT. CHARGED FROM THE LICENCEE - 1 ; (III) THAT THE RENT CHARGED BY THE ASSESSEE FROM LICENCEE - 2 I.E. @ RS. 80/ - PER SQ. FT. PER MONTH JUSTIFIED THE DETERMINATION OF THE FMV OF THE PROPERTY LET OUT TO LICENSEE - 1 AT THE SAID VALUE ; (IV) THAT THE CLAIM OF THE ASSESSEE THAT IT HAD ENTERED INTO THE AGREEMENT WITH LICENCEE - 1 ON 01.03.2004 AT THE RATE PREVAILING AT THAT TIME FOR A PERIOD OF 7 TO 9 YEARS WAS MERELY AN ATTEMPT TO EVADE TAXES ; (V) THAT NOWHERE IN THE INCOME TAX ACT IT WAS MENTIONED THAT SEC. 23(1)(A) WAS COPIED FROM SEC. 23(1) OF BMC ACT; (VI) THAT THE FMV WAS NOT TO BE CONSTRUED AS A REPLACEMENT BY A HYPOTHETICAL RATE; (VII) THAT AS THE PROPERTY UNDER CONSIDERATION WAS SITUAT ED IN THE I.T. PARK, THEREFORE, AS ITS MUNICIPAL VALUE WAS QUITE LESS THAN THAT OF OTHER PROPERTY IN THE VICINITY , THUS THE MUNICIPAL VALUE COULD NOT BE TAKEN AS THE FMV OF THE PROPERTY ; (VIII) THAT THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF TH E HONBLE HIGH COURT OF BOMBAY IN THE CASE OF JK INVESTORS (BOM) LTD. WAS MISPLACED; (IX) THAT AS THE CHARGING OF RENT AT MEAGRE RATES BY THE ASSESSEE WAS SOLELY INFLUENCED BY THE SUBSTANTIAL AMOUNTS TAKEN BY IT AS INTEREST FREE SECURITY DEPOSITS , THEREFOR E, AS PER THE SPIRIT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIT VS. TRANSMARINE CORP. WHILE DISPOSING OFF SLP(C) NO. 8999/2010, DATED 15.07.2011 IT COULD SAFELY BE HELD THAT THE ASSESSEE HAD REDUCED THE AMOUNT OF RENT RECEIVED /RECEIVAB LE BY TAKING A HUGE SUM OF INTEREST FREE SECURITY DEPOSIT; (X) THAT THE ASSESSEE HAD NOT FAIRLY TAKEN THE FMV OF THE PROPERTY UNDER SEC. 23(1)(A); AND (XI) THAT AS PER THE DETAILS EXTRACTED FROM WWW.99ACRES.COM THE AVERAGE RENT TO ARRIVE AT THE FAIR MARKET RENT OF THE ASSESSES PROPERTY LOCATED AT MIND SPACE, GOREGAON (W), MUMBAI AFTER TAKING COGNIZANCE OF THE COST INFLATION INDEX AND THUS RELATING BACK THE RENTAL VALUE TO THE YEAR UNDER CONSIDERATION VIZ. A.Y. 2010 - 11 WORKED OUT AT RS. 74.47 PER SQ. FT. PER MONTH . ON THE BASIS P A G E | 5 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX OF THE AFORESAID DELIBERATIONS THE A.O BY TAKING THE RENTAL RATE OF RS. 74.47 PER SQ. FT. PER MONTH WORKED OUT THE FAIR MARKET RENT OF THE PROPERTY UNDER CONSIDERATION AT RS. 7,13,97,368/ - . HOWEVER, CONSIDERING THE FACT THAT THE ASS ESSEE HAD GIVEN CERTAIN OTHER FLOORS/OFFICE PREMISES TO LICENCEE - 2 ON RENT @ RS. 80/ - SQ. FT. PER MONTH , THE A.O APPLIED THE SAME RATE AND WORKED OUT THE FAIR MARKET RENT FOR THE PROPERTY GIVEN ON RENT TO LICENCEE - 1 AT RS. 7,66,99,200/ - [RS. 79895 SQ. FT X RS. 80/ - X 12 MONTHS]. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O AFTER ALLOWING THE STATUTORY DEDUCTION OF 30% UNDER SEC. 24 (A) MADE A CONSEQUENTIAL ADDITION OF RS. 3,60,53,444/ - . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE T HE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTION S ADVANCED BY THE ASSESSEE WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME AND UPHELD THE ORDER PASSED BY THE A.O. IN CONTEXT OF THE ISSUE UNDER CONSIDERATION. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL TOOK US THROUGH THE FACTS OF THE CASE . IT WAS SUBMIT TED BY THE LD. A.R THAT AS THE ACTUAL RENT RECEIVED BY THE ASSESSEE FROM LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. AMOUNTING TO RS. 3,97,84,896/ - PER ANNUM WAS HIGHER THAN THE MUNICIPAL RATEABLE VALUE OF THE SAID PREMISES WHICH AMOUNTED TO RS. 42,46,735/ - , THEREFORE, THE ASSESSEE HAD COMPUTED THE ANNUAL LETABLE VALUE ON THE BASIS OF THE ACTUAL RENT RECEIVED. IT WAS SUBMITTED BY THE LD. A.R THAT THE REVENUE HAD ERRED IN ASSESSING THE ANNUAL VALUE OF THE PROPERTY BY TAKING SUPPORT OF THE INF ORMATION AVAILABLE ON THE P A G E | 6 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX WEBSITE OF WWW.99ACRES.COM AND IN THE BACKDROP OF THE SAME ERRED IN JUSTIFYING ADOPTION OF T HE RENT REALIZED BY THE ASSESSEE FROM LICENCEE - 2 VIZ. M/S OCWEN FINANCIAL SERVICES PVT. LTD AS A BASIS FOR DETERMINING THE ANNUAL VALUE OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD LET OUT THE OFFICE PREMISES TO M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. FOR A PERIOD OF 7 YEAR AND 8 MONTHS VIZ. 01.03.2004 TO 31.10.2011 , VIDE LICENCE AGREEMENT DATED DECEMBER, 2004 (AS AMENDED BY AGREEMENT DATED APRIL, 2008) . IT WAS SUBMITTED BY HIM THAT IN THE AGREEMENT WHICH WAS MODIFIED IN APRIL, 2008 THE ASSESSEE HAD GIVEN ADDITIONA L AREA TO THE LICENCEE - 1 ON THE GROUND AND THE FIRST FLOOR AND THE RENT TO BE PAID BY THEM WAS ALSO PROPORTIONATELY INCREASED. IT WAS FURTHER AVERRED BY THE LD. A.R THAT THE ASSESSEE HAD ENTERED INTO TWO SEPARATE AGREEMENTS WITH THE LICENCEE - 1 FOR LETTING OUT OF THE PROPERTY , AS WELL AS FOR RENDERING OF SERVICES RELATING TO MAINTENANCE OF PROPERTY VIZ. PROVISION OF CAR PARKING SPACE AND OTHER SERVICES FOR PROPER ENJOYMENT OF THE PROPERTY. AS PER THE AFORESAID AGREEMENT, THE ASSESSEE WAS IN RECEIPT OF A MONT HLY RENT OF RS. 33,15,408/ - WHICH COMPRISED OF RS. 16,57,704/ - IN RESPECT OF LICENCE AGREEMENT AND A SIMILAR AMOUNT FOR THE SERVICE AGREEMENT. IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O ON THE BASIS OF MISCONCEIVED FACTS HAD WRONGLY INFERRED THAT THE AN NUAL VALUE OFFERED TO TAX BY THE ASSESSEE IN RESPECT OF THE OFFICE PREMISES LET OUT TO LICENCEE - 1 WAS ONLY RS. 16,57,704/ - I.E. RS. 20.74 PER SQ. FT. PER MONTH. IT WAS THE CONTENTION OF THE LD. A.R THAT IF AT ALL A COMPARISON WAS TO BE MADE, IT HAD TO BE BETWEEN THE AMOUNT OF RS. 41.50 PER SQ. FT. PER MONTH REALIZED FROM LICENCEE - 1 AND RS. 80/ - PER SQ. FT. PER MONTH REALIZED FROM LICENCEE - 2 . IT WAS SUBMITTED BY T HE LD. A.R THAT THE ASSESSEE HAD ALSO LET OUT OFFICE PREMISES ON THE SIXTH AND SEVENTH FLOOR OF THE SAME BUILDING TO M/S OCWEN FINANCIAL SOLUTIONS PVT. LTD. INITIALLY FOR P A G E | 7 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX A PERIOD OF 36 MONTHS I.E. FROM 18.06.2008 TO 17.06.2011. HOWEVER, THE SAID AGREEMENT WAS TERMINATED W.E.F. 08.10.2009 AND FRESH AGREEMENT S W ERE ENTERED INTO WITH VIZ. (I) M/S OCWEN FINANCIAL SOLUTIONS PVT. LTD. EFFECTIVE FROM 16.10.2009 FOR LETTING OUT THE SIXTH FLOOR ; AND (II) ALTISOURCE BUSINESS SOLUTIONS PVT. LTD. EFFECT IVE FROM 16.10. 2009 FOR LETTING OUT THE SEVENTH FLOOR . INSOFAR RENDERING OF MAINTENANCE RELATED SERVICES IN RESPECT OF THE PROPERTY LET OUT TO THE AFOREMENTIONED LICENCEE - 2 WAS CONCERNED, THE SAME FORM ED PART OF THE LICENCE AGREEMENT ITSELF AND NO SEPARATE AGREEMENT FOR RENDERING OF SUCH SERVICES WAS ENTERED INTO WITH THEM. THE LD. A.R SUBMITTED THAT THE ASSESSEE HAVE CHARGED CONSOLIDATE RENT OF RS. 80/ - SQ. FT. PER MONTH FROM THE AFOREMENTIONED LICENCEE - 2 . IN ORDER TO IMPRESS UPON US THAT NO FEASIBLE COMPARISON BETWEEN T HE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 AND LICENCEE - 2 COULD BE CARRIED OUT, IT WAS SUBMITTED BY HIM THAT THERE WAS A TIME GAP OF ALMOST 4 YEARS AND 2 MONTHS IN THE RESPECTIVE DATES ON WHICH THE RENT AGREEMENTS WITH THE SAID PARTIES HAD BEEN ENTERED . IT WAS THE CLAIM OF THE LD. A.R THAT THE ASSESSEE IN ORDER TO BIND THE LICENCEE - 1 AS A TENANT FOR A LONGER PERIOD VIZ. 7 YEARS AND 8 MONTHS , HAD THUS KEEPING IN VIEW THE SAID FACT LET OUT THE PROPERTY AT THE RATES AS WERE THEN SO PREVAILING. APART THERE FROM, IT WAS THE CLAIM OF THE LD. A.R THAT THE RENT WHICH WAS BEING CHARGED BY THE ASSESSEE FROM LICENCEE - 1 WAS FOUND TO BE AT ARMS LENGTH BY THE REVENUE FOR ALL THE YEAR S I.E. A.Y. 2004 - 05 UPTO A.Y. 2012 - 13 . I T WAS SUBMITTED BY HIM THAT THE SAID RE NT HAD BEEN ACCEPTED BY THE REVENUE IN THE RESPECTIVE ASSESSMENT S FRAMED U/S 143(3) IN THE CASE OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDING AND SUCCEEDING YEAR S VIZ. A.Y. 2009 - 10 AND A.Y. 2011 - 12 . THE LD. A.R ASSAILING THE RELIANCE PLACED BY THE A.O ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIT VS. TRANSMARINE CORP. [SLP(C) NO. 8999/2010] SUBMITTED THAT AS THE SAID JUDGMENT WAS IN P A G E | 8 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX CONTEXT OF ADDITION OF NOTIONAL INTEREST IN RESPECT OF INTEREST FREE SECURITY DEPOSIT, THEREFORE, IT WAS NOT APPLICABLE TO THE CASE OF THE ASSESSEE . IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT ANNUAL VALUE FOR SEC. 23(1)(A) HAS TO BE THE MUNICIPAL RATEABLE VALUE OR STANDARD RENT, WHICHEVER IS LOWER. THE LD. A.R TAK ING SUPPORT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA IN CIT VS. PRABHABATI BANSALI ( 1983) 141 ITR 419 (CAL) SUBMITTED THAT THE HONBLE HIGH COURT HAD OBSERVED THAT THERE WAS A SIMILARITY BETWEEN THE DEFINITION OF ANNUAL VALUE AS PER SEC. 23( 1) OF THE I.T. ACT AND THE DEFINITION OF THE SAME IN THE RELEVANT MUNICIPAL CORPORATION ACT. THE LD. A.R TAKING SUPPORT OF THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (2014) 368 ITR 330 (BOM) SUBMITTED THAT TH E HONBLE HIGH COURT HAD APPROVED THAT MUNICIPAL RATEABLE VALUE IS A SAFE GUIDE FOR COMPUTATION OF ANNUAL VALUE AS PER SEC. 23(1)(A) OF THE I.T. ACT , AND HAVE ALSO ACCEPTED THAT NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT CANNOT FORM PART OF THE ANNUAL VALUE WHETHER AS PER SEC. 23(1)(A) OR SEC. 23(1)(B) OF THE I.T. ACT. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THOUGH THE HONBLE HIGH COURT HAD OBSERVED THAT MUNICIPAL RATEABLE VALUE CANNOT BE TAKEN AS A BASIS FOR DETERMINATION OF ANNUAL VALU E IN CERTAIN SPECIFIED CIRCUMSTANCES, HOWEVER , IN THE PRESENT CASE IT WAS NOT THE CASE OF THE A.O THAT ANY SUCH SPECIFIED CIRCUMSTANCES DID EXIST. THE LD. A.R ASSAILED THE OBSERVATIONS OF THE A.O THAT MUNICIPAL RATEABLE VALUE WOULD HAVE NO RELEVANCE FOR D ETERMINING THE ANNUAL VALUE OF THE PROPERTY UNDER SEC. 23(1)(A) OF THE I.T. ACT. APART THERE FROM, IT WAS SUBMITTED BY HIM THAT IN CASE THE A.O DESIRED TO MAKE A COMPARISON BETWEEN THE PROPERTY UNDER CONSIDE RATION AND OTHER PROPERTIES IN THE IMMEDIATE VI CINITY, THEN SUCH COMPARISON OUGHT TO HAVE BEEN BETWEEN THE MUNICIPAL RATEABLE VALUE S OF THE AFORESAID PROPERTIES. IN SUM AND SUBSTANCE, IT WAS AVERRED BY THE LD. A.R THAT THE A.O HAD ERRED IN DETERMINING THE P A G E | 9 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX ANNUAL VALUE OF THE OFFICE PREMISES LET OUT B Y THE ASSESSEE TO LICENCEE - 1 BY COMPARING THE MUNICIPAL RATEABLE VALUE OF THE SAME WITH THE RENT ACTUAL LY FETCHED BY OTHER PROPERTIES . IT WAS FURTHER AVERRED BY THE LD. A.R THAT THE HONBLE HIGH COURT OF BOMBAY IN CIT - 1 VS. M/ S SURGE ENTERPRISES LTD. (ITA NO . 1316 OF 2011, DATED 14.08.2014) WHILE UPHOLDING THE ORDER OF THE TRIBUNAL HAD OBSERVED THAT WHERE THERE IS NOTHING ON RECORD TO DISPUTE THE MUNICIPAL VALUATION AND THE REVENUE IS MERELY AGGRIEVED AND AGITATED BY THE FACT THAT IT WILL HAVE TO ABIDE BY THE MUNICIPAL VALUATION, THEN, THE REVENUES APPEAL CANNOT BE ENTERTAINED. THE LD. A.R ALSO ASSAILED THE SUPPORT DRAWN BY THE A.O ON THE WEBSITE OF WWW .99ACRES.COM FOR DETERMINING THE ANNUAL VALUE OF THE PROPERTY. IT WAS SUBMITTED BY THE LD. A.R THAT AS T HE INFORMATION AVAILABLE ON THE SAID WEBSITE REVEALED PROPOSALS FROM THE LANDLORD S WHO INTEND ED TO LEASE THEIR PROPERTY AND DID NOT REFLECT THE ACTUAL VALUE AT WHICH THE TRANSACTION WOULD HAVE HAPPENED, THEREFORE, THE SAME COULD NOT HAVE BEEN ADOPTED AS A BASIS FOR ARRIVING AT THE ANNUAL VALUE OF THE OFFICE PREMISES LEASED BY THE ASSESSEE TO LICENCEE - 1. ALTERNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE HAD LET OUT THE PROPERTY TO LICENCEE - 1 WAY BACK IN THE YEAR 2004 FOR A LONG TERM OF 7 YEARS AND 8 MONTHS AT A RENT OF RS. 41.50 PER SQ. FT. PER MONTH, WHICH WAS NOT INFLUENCED BY CONSIDERATION LIKE FRAUDS, EMERGENCY OR RELATIONSHIP, THEREFORE, KEEPING IN VIEW THE FACT THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO CHANGE THE LEASE RENT DURING THE CONTINUANCE OF THE AFORESAID LEASE PERIOD , THAT THE ANNUAL VALUE OF THE PREMISES DURING THE YEAR UNDER CONSIDERATION WAS TO BE DETERMINED . 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER S PASSED BY THE LOWER AUTHORITIES . I T WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD LET OUT OFFICE P A G E | 10 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX PREMISES IN THE SAME BUILDING VIZ. SPECTRUM TOWERS SITUATED AT LINK ROAD, MALAD, MUMBAI TO LICENCEE - 2 @ RS. 80/ - PER SQ. FT. PER MONTH, THEREFORE , THE LOWER AUTHORITIES HAD RIGHTLY DETERMINED THE ANNUAL VALUE UNDER SEC. 23(1)(A) OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 BY ADOPTING THE SAME RATE OF RENT. IT WAS FURTHER SUBMITTED BY THE LD. D.R THAT THE ADOPTION OF AFORESAID RENT OF RS. 80/ - PER SQ. FT. PER MONTH WAS DULY SUPPORTED BY THE A.O ON THE BASIS OF THE INFORMATION GATHERED BY HIM FROM THE WEBSITE OF WWW.99ACRES.COM AS REGARDS THE FMV OF SIMILAR PROPERT IES IN THE SAME COMPLEX. IN THE BACKDROP OF HIS AFORESAID CONTENTIONS , IT WAS AVERRED BY THE LD. D.R THAT AS THE APPEAL OF THE ASSESSEE WAS DEVOID OF ANY MERIT, THUS THE SAME WAS LIABLE TO BE DISMISSED. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATE RIAL AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THEM. WE FIND THAT OUR INDULGENCE IN THE PRESENT CASE HAS BEEN SOUGHT BY THE ASSESSEE FOR ADJUDICATING AS TO WHETHER THE CIT(A) IS RIGHT IN LAW AND FACTS OF THE CASE IN DETERMINING THE ANNUAL VALUE OF THE PREMISES LET OUT TO LICENCEE - 1 VIZ. HUTCHISON 3 GLOBAL SERVICES PVT. LTD. @ RS. 80/ - PER SQ. FT. PER MONTH . IT IS THE CASE OF THE ASSESSEE BEFORE US THAT AS THE MUNICIPAL RATEABLE VALUE OF THE OFFICE PREMISES LET OUT TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. I.E. RS. 42,46,735/ - WAS LOWER THAN THE ACTUAL YEARLY RENT OF RS. 3,97,84,896/ - RECEIVED BY THE ASSESSEE FROM THE AFORESAID LICENCEE, THEREFORE, IT HAD RIGHTLY DETERMINED THE ANNUAL VALUE OF THE SAID PREMISES UNDER SEC. 23(1)(B) AND OFFERED THE AMOUNT OF ACTUAL RENT RECEIVED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HOWEVER, THE A.O OBSERV ING THAT THE ASSESSEE BY RECEIVING AN INTEREST FREE SECURITY DEPOSIT OF RS. 3,14,04,240/ - FROM THE AFORESAID LICENCEE - 1 HAD GIVEN THE OFFICE PREMISES AT A RENT OF RS. P A G E | 11 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX 20.74 PER SQ. FT. PER MONTH , WHILE FOR ON THE OTHER HAND IT HAD GIVEN OFFICE PREMISES IN THE SAME BUILDING TO LICENCEE - 2 @ RS. 80/ - PER SQ. FT. PER MONTH , THUS HELD A CONVICTION THAT IN THE GARB OF THE AFORESAID ARRANGEMENT THERE WAS UNDERSTATEMENT OF RENT RECEIVED BY THE ASSESSEE FROM THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O DECLINED TO ACCEPT THE ANNUAL VALUE OF THE PROPERTY UNDER CONSIDERATION SHOWN BY THE ASSESSEE AT RS. 3,97,84,896/ - UNDER SEC. 23(1)(B) . FURTHER, THE A.O ACTING ON THE INFORMATION THAT WAS GATHERED BY HIM FROM INTERNET AS REGARDS THE RENTAL VALUE OF SIMILAR PROPERTIES LOCATED IN THE SAME COMPLEX VIZ. MIND SPACE, GOREGAON (W), MUMBAI , DETERMINED THE ANNUAL VALUE OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 U/S. 23(1)(A) BY ADOPTING THE RENT OF RS. 80/ - PER SQ. FT. PER MONTH AT WHICH IT HAD LET OUT OFFICE PREMISES IN THE SAME BUILDING TO LICENCEE - 2. 8. INSOFAR THE DETERMINATION OF THE ANNUAL VALUE OF A PROPERTY ON THE BASIS OF ITS MUNICIPAL RATEABLE VALUE IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THOUGH THE A.O WHILE DETERMINING THE ANNUAL VALUE IS NOT BOUND BY THE SAME , HOWEVER, THE SAME ALSO CANNOT BE DISCARDED STRAIGHTWAY IN ALL CASES. IN FACT, IN A CASE WHERE THE A.O IS OF THE VIEW THAT THE RENTAL INCOME DERIVED BY THE ASSESSEE IS NOT IN TUNE OR PAR WITH THE PREVAILING MARKET RATE, IN SUCH CASES IT IS OPEN FOR HIM TO DETERMINE THE ANNUAL VALUE UNDER SEC. 23(1)(A) OF THE I.T. ACT. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT - 12 VS. TIP TOP TYPOGRAPHY (2014) 48 TAXMANN.COM 191 (BOM). A SIMILAR VIEW HAD ALSO BEEN TAKEN BY THE HONBLE HIGH COURT O F BOMBAY IN THE CASE OF CIT - 1 VS. M/S SURGE ENTERPRISES LTD., WHEREIN THE HONBLE HIGH COURT WHILE DISMISSING THE APPEAL OF THE REVENUE HAD OBSERVED THAT WHERE THERE IS NOTHING ON P A G E | 12 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX RECORD TO DISPUTE THE MUNICIPAL VALUATION AND THE REVENUE IS MERELY AGGRIEVED AND AGITATED BY THE FACT THAT IT WILL HAVE TO ABIDE BY THE MUNICIPAL VALUATION, THEN, THE REVENUES APPEAL CANNOT BE ENTERTAINED. IN THE CASE BEFORE US, IT IS THE CLAIM OF THE ASSESSEE THAT AS THE RENT OF RS. 3,97,84,896/ - PER ANNUM RECEIVED BY IT FROM LETTING OUT THE OFFICE PREMISES TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. AND SHOWN AS THE ANNUAL VALUE OF THE PROPERTY UNDER CONSIDERATION WAS MORE THAN THE MUNICIPAL RATEABLE VALUE OF RS. 42,46,735/ - OF THE SAID PROPERTY , THERE FORE, NO ADVERSE INFERENCES IN RESPECT OF THE ANNUAL VALUE THAT WAS DETERMINED UNDER SEC. 23(1)(B) WAS LIABLE TO BE DRAWN. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID CLAIM OF THE ASSESSEE. A PERUSAL OF THE DOCUMENTS PLACED ON RECORD BY THE ASSESSEE ( PAGE 159 ) OF THE ASSESSES PAPER BOOK (FOR SHORT APB) REVEALS THAT THE MUNICIPAL RATEABLE VALUE OF RS. 42,46,735/ - RELIED UPON BY THE LD. A.R WAS DETERMINED WAY BACK IN THE YEAR 2002, WHICH THUS KEEPING IN VIEW THE WIDE TIME GAP OF 7 YEARS (APPROX.) IN CONTEXT OF THE YEAR UNDER CONSIDERATION VIZ. F.Y. 2009 - 10 UNDER CONSIDERATION CANNOT BE RELIED AND ACTED UPON . OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. TIP TOP TYPOGR APHY (2014) 368 ITR 330 (BOM) . THE HONBLE HIGH COURT IN THE AFORESAID CASE HAD AFTER REFERRING TO THE VIEW TAKEN BY THE HONBLE HIGH COURT OF CALCUTTA IN CIT VS. SATYA CO. LTD. (1997) 140 CTR 569 (CAL) HAD OBSERVED THAT ANNUAL VALUE FIXED BY THE MUNICIPAL AUTHORITIES CAN BE ADOPTED AS A RATIONAL YARDSTICK, SUBJECT TO THE CONDITION THAT THE ANNUAL VALUE FIXED BEARS A CLOSE PROXIMITY WITH THE ASSESSMENT YEAR IN QUESTION IN RESPECT OF WHICH THE ASSESSMENT IS TO BE MADE UND ER THE INCOME TAX LAWS. IT WAS FURTHER OBSERVED THAT IF THERE IS A CHANGE IN CIRCUMSTANCES BECAUSE OF PASSAGE OF TIME VIZ. THE ANNUAL VALUE WAS FIXED BY THE MUNICIPAL AUTHORITIES MUCH EARLIER IN POINT OF TIME ON THE BASIS OF RENT THAN RECEIVED, THE P A G E | 13 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX SAME MAY NOT PROVIDE A SAFE YARDSTICK FOR DETERMINING THE ANNUAL VALUE UNDER THE INCOME TAX ACT FOR THE SAID YEAR. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE ARE OF A STRONG CONVICTION THAT THE CLAIM OF THE ASSESSEE THAT THE RENT RECEIVED FROM THE LICE NCEE - 1 IN RESPECT OF THE PROPERTY UNDER CONSIDERATION WAS SUBSTANTIALLY HIGHER THAN THE MUNICIPAL RATEABLE VALUE CANNOT BE ACCEPTED KEEPING IN VIEW THE SUBSTANTIAL TIME GAP OF 7 YEARS (APPROX.) BETWEEN THE AFORESAID DATE OF DETERMINATION OF THE MUNICIPAL V ALUE AND THE YEAR UNDER CONSIDERATION VIZ. F.Y. 2009 - 10. 9. AS REGARDS THE SUPPORT DRAWN BY THE A.O ON THE INFORMATION GATHERED FROM THE WEBSITE OF WWW.99ACRES.COM FOR CONCLUDING THAT THE RENTAL VALUE OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. WAS FOUND TO BE SUBSTANTIALLY SUPPRESSED, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE SAID OBS ERVATIONS. IN OUR CONSIDERED VIEW THERE IS SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT AS THE INFORMATION AVAILABLE ON THE AFORESAID WEBSITE ONLY REVEALED THE PROPOSALS FROM THE LANDLORDS ABOUT THE RENTAL RATE AT WHICH THE Y INTENDED TO LEASE THEIR PROPERTIES , THUS THE SAME CANNOT BE ADOPTED AS A BASIS FOR DETERMINING THE ACTUAL VALUE AT WHICH THE PROPERTIES IN THE SAID LOCALITY HAD ACTUALLY BEEN LET OUT BY THEM. IN SUM AND SUBSTANCE, THE RENT WHICH A LANDLORD EXPECTS FROM A PROSPECTIVE TENANT CANNOT BE CONSTRUED AS THE ACTUAL RENT RECEIVED FROM LETTING OUT OF THE PROPERTY UNDER CONSIDERATION. APART THERE FROM, WE ARE ALSO NOT IMPRESSED WITH THE ESTIMATION OF THE ANNUAL VALUE ON THE BASIS OF DISCOUNTING/REVERSE INDEXING OF THE AVERAGE F AIR MARKET RENT OF RS. 100.4 PER SQ. FT. PER MONTH WORKED OUT BY THE A.O ON THE BASIS OF INFORMATION AVAILABLE ON THE INTERNET , THEREIN LEADING TO DETERMINATION OF THE FAIR MARKET RENT OF RS. 74.47 PER SQ. FT. PER MONTH IN RESPECT OF P A G E | 14 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX THE PROPERTY UNDER CONSIDERATION . IN OUR CONSIDERED VIEW THE AFORESAID METHODOLOGY OF DISCOUNTING/REVERSE INDEXING OF THE AVERAGE FAIR MARKET RENT ADOPTED BY THE A.O WOULD GIVE DISTORTED RESULTS . IN FACT , THE FALLACY IN THE AFORESAID METHOD CAN SAFELY BE GATHERED FROM THE FA CT THAT IF THE ANNUAL VALUE OF THE PROPERTY AS DETERMINED BY THE A.O IN A.Y. 2012 - 13 OF RS. 100.4 PER SQ. FT. PER MONTH IS ON THE AFORESAID BASIS OF DISCOUNTING/REVERSE INDEXING RELATED BACK TO THE YEAR 2004 I.E. THE YEAR IN WHICH THE ASSESSEE HAD LET OU T THE PROPERTY TO THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD., THEN THE ANNUAL VALUE AS PER THE SAID METHODOLOGY WOULD WORK OUT AT RS. 54.56 SQ. FT. PER MONTH IN THE YEAR 2004 AS AGAINST RS. 41.50 PER SQ. FT. PER MONTH AT WHICH THE SAME WAS LET OUT BY THE ASSESSEE. BE THAT AS IT MAY, IN OUR CONSIDERED VIEW THE DETERMINATION OF THE SUM FOR WHICH A PROPERTY AS PER SEC. 23(1)(A) MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR CANNOT BE SAFELY ARRIVE D AT ON THE BASIS OF THE DISCOUNTING/REVERSE INDEXING METHOD ADOPTED BY THE A.O. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS REJECT THE VERY BASIS AS PER WHICH THE A.O HAD WORKED OUT THE AVERAGE FAIR MARKET RENT IN RESPECT OF THE PROPERTY UNDER CONSIDER ATION AT RS. 74.47 PER SQ. FT. PER MONTH. 10. WE SHALL NOW ADVERT TO THE FEASIBILITY OF THE COMPARISON OF THE RENTAL RATE OF RS. 41.50 PER SQ. FT. PER MONTH FOR WHICH THE OFFICE PREMISES HAD BEEN LET OUT BY THE ASSESSEE TO THE LICENCEE - 1 VIZ. M/S HUTCHIS ON 3 GLOBAL SERVICES PVT. LTD. AS AGAINST THE RENTAL RATE OF RS. 80/ - PER SQ. FT. PER MONTH FOR WHICH THE OFFICE PREMISES IN THE SAME BUILDING HAD BEEN LET OUT BY THE ASSESSEE TO THE LICENCEE - 2. WE MAY HEREIN OBSERVE THAT THE ASSESSEE HAD VIDE AGREEMENT DA TED DECEMBER, 2004 (AS AMENDED BY APRIL, 2008) LET OUT THE OFFICE PREMISES TO THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. FOR A LONG PERIOD OF 7 YEARS AND 8 MONTHS I.E. FROM 01.03.2004 TO 31.10.2011. IN P A G E | 15 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX OUR CONSIDERED VIEW THERE IS SUBSTANTIAL FORCE IN THE CONTENTION ADVANCED BY THE LD. A.R THAT KEEPING IN VIEW THE SUBSTANTIAL PERIOD OF LEASE OF 7 YEARS AND 8 MONTHS, IT WAS NOT POSSIBLE FROM EITHER SIDE TO CHANGE THE LEASE RENT DURING THE CONTINUANCE OF THE LEASE PERIOD. IN FACT, WE ARE IN AGREEMENT WITH THE CONTENTION ADVANCED BY THE LD. A.R THAT THE ASSESSEE IN ORDER TO PROTECT ITSELF FROM A MISERABLE SITUATION IN THE FORTHCOMING PERIOD WHEREIN THE PROPERTY WOULD HAD REMAINED VACANT OR WITNESSE D A DOWNWARD FALL IN THE RENT , WOULD H AVE LET OUT THE PROPERTY AT THE THEN PREVAILING RENTS , THEREIN BINDING IT SELF AS WELL AS THE TENANT FOR THE LEASE PERIOD . IN NUTSHELL, AS THE PROPERTY UNDER CONSIDERATION WAS LET OUT BY THE ASSESSEE AS PER THE TERMS OF THE LICENCE AGREEMENT DATED DECEMBER , 2004 FOR A PERIOD OF 7 YEARS AND 8 MONTHS I.E. FROM 01.03.2004 TO 31.10.2011 , THUS DURING THE SAID PERIOD THE PROPERTY UNDER CONSIDERATION COULD NOT REASONABLY BE EXPECTED TO HAVE BEEN LET OUT AT AN AMOUNT HIGHER THAN THAT AGREED UPON AS PER THE LICENCE AGREEMENT. INSOFAR THE OBSERVATION OF THE A.O THAT WHILE FOR THE ASSESSEE HAD LET OUT THE OFFICE PREMISES TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. @ OF 20.74 PER SQ. FT. PER MONTH , THE OFFICE PREMISES IN THE SAME BUILDING WAS LET OUT TO LICENCEE - 2 @ RS. 80/ - PER SQ. FT. PER MONTH IS CONCERNED, WE ARE UNABLE TO ACCEPT THE SAME. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R THAT AS THE ASSESSEE HAD ENTERED INTO TWO SEPARATE AGREEMENTS WITH LICENCEE - 1 FOR LETTING OUT OF PROPERTY AS WELL AS RENDERING OF SERVICES RELATING TO MAINTENANCE OF PROPERTY VIZ. PROVISION OF CAR PARKING SPACE AND OTHER SERVICES FOR PROPER ENJOYMENT OF THE SAID PROPERTY FOR AN AMOUNT AGGREGATING TO RS. 41.50 PER SQ. FT. PER MONTH , THEREFORE, IF AT ALL A COMPARI SON WAS TO BE MADE WITH THE PROPERTY LET OUT BY THE ASSESSEE TO LICENCEE - 2 @ RS. 80 PER SQ. FT. PER MONTH, IT HAD TO BE BETWEEN THE ABOUT OF RS. 41.50 PER SQ. FT. PER P A G E | 16 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX MONTH REALIZED FROM LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. AND RS. 80/ - PER SQ. FT. PER MONTH FROM LICENCEE - 2. 11. WE ARE ALSO NOT IMPRESSED WITH THE STRAIGHTWAY ADOPTION OF THE RATE AT WHICH THE ASSESSEE HAD LET OUT OFFICE PREMISES TO LICENCEE - 2 I.E. @ R S. 80/ - PER SQ. FT. PER MONTH FOR DETERMINING THE FAIR RENTAL VALUE OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. IN FACT, AS OBSERVED BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT - 12 V S. TIP TOP TYPOGRAPHY (2014) 48 TAXMANN.COM 191 (BOM) THAT IN A CASE WHERE THE A.O I S OF THE VIEW THAT THE ASSESSEE HAD SUPPRESSED THE PREVAILING RATE OF RENT, THEN FOR ASCERTAINING THE GOING RATE THE A.O SHALL MAKE A COMPARATIVE STUDY AND CARRY OUT AN ANA LYSIS OF TRANSACTIONS OF IDENTICAL AND SIMILAR NATURE BY OBTAINING THE REQUISITE DETAILS. AS A WORD OF CAUTION , IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT THE A.O MUST SAFEGUARD AGAINST ADOPTING THE RATE STATED THEREIN STRAIGHTWAY. IN FACT, HE MUST FIND OUT AS TO WHETHER THE PROPERTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE AND LICENCE BASIS IS OF SIMILAR NATURE, NAMELY COMMERCIAL AND RESIDE NTIAL . APART THERE FROM, HE SHOULD ALSO SATISFY HIMSELF AS TO WHETHER THE RATE OBTAINED BY HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS IN RELATION THERETO CAN BE APPLIED OR WHETHER A DEPARTURE THEREFROM CAN BE MADE ON ACCOUNT OF VARIOUS FACTORS VIZ. AREA OF THE PROPERTY, MEASUREMENT, LOCATION, USE TO WHICH THE PROPERTY HAS BEEN PUT, THE ACCESS THERETO AND THE SPECIAL ADVANTAGES AND BENEFITS WHICH THE SAID PROPERTIES ENJOYED . THE HONBLE HIGH COURT IN ITS AFORESAID JUDGMENT HAD OBSERVED THAT IN CASE OF A HIGH RISE BUILDING BECAUSE OF SPECIAL ADVANTAGES AND BENEFITS AN OFFICE AND A BLOCK ON THE UPPER FLOOR MAY FETCH HIGHER RETURNS OR VICE VERSA. IN THE CASE BEFORE US, WE FIND THAT THE A.O WITHOUT RESORTING TO THE NEEDFUL EXERCISE AS REGARDS THE FEASIBILI TY OF THE P A G E | 17 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX COMPARISON BETWEEN THE PROPERTY LET OUT BY THE ASSESSEE TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. AS AGAINST THAT LET OUT TO THE LICENCEE - 2, HAD STRAIGHTWAY SUBSTITUTED THE RENT PAID BY THE LATTER FOR DETERMINING THE ANNUAL VA LUE OF THE PROPERTY THAT WAS LET OUT BY THE ASSESSEE TO THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. IN THE BACKDROP OF THE AFORESAID SETTLED POSITION OF LAW, WE ARE OF THE CONSIDERED VIEW THAT THE FAILURE ON THE PART OF THE A.O IN NOT CA RRYING OUT A COMPARATIVE STUDY BETWEEN THE AFOREMENTIONED PROPERTIES WOULD IN NO WAY JUSTIFY STRAIGHTWAY ADOPTION OF THE RENT PAID BY THE LICENCEE - 2 I.E. @ RS. 80/ - PER SQ. FT. PER MONTH FOR DETERMINING THE ANNUAL VALUE OF THE PROPERTY LET OUT BY THE ASSESSEE TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. ON THE BASIS OF OUR AFORESAID OBSERVATIONS, WE VACATE THE DETERMINATION OF THE ANNUAL VALUE OF THE OFFICE PREMISES LE T OUT BY THE ASSESSEE TO THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. I.E. @ RS. 80/ - PER SQ. FT. PER MONTH . 12. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE BASIS ADOPTED BY THE A.O FOR WORKING OUT /J USTIFYING THE ADOPTION OF THE ANNUAL VALUE OF THE OFFICE PREMISES LET OUT BY THE ASSESSEE TO LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. @ RS. 80/ - PER SQ. FT. PER MONTH VIZ. (I) ON THE BASIS OF INFORMATION GATHERED FROM INTERNET; AND (II) STRAIGHTWAY ADOPTION OF THE RENT RATE OF THE PROPERTY LET OUT BY THE ASSESSEE TO THE LICENCEE - 2, CANNOT BE ACCEPTED FOR THE AFORESAID REASONS. HOWEVER, WE ARE ALSO NOT OBLIVIOUS OF THE FACT THAT THE ASSESSEE HAD ALSO FAILED TO SUBSTANTIATE ON THE BASIS OF COGENT MATERIAL THAT THE ANNUAL RENT OF RS. 3, 97,84,896/ - RECEIVED BY THE ASSESSEE DURING THE YEAR FROM THE LICENCEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. WAS HIGHER THAN THE MUNICIPAL RATEABLE VALUE OF THE PROPERTY WHICH COULD SAFELY P A G E | 18 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX BE RELATED TO THE YEAR UNDER CONSIDERATION . IN TERMS OF OUR AFORESAID OBSERVATIONS, WE RESTORE THE MATTER TO THE FILE OF THE A.O. IN CASE THE ASSESSEE IS ABLE TO SUBSTANTIATE ON THE BASIS OF COGENT MATERIAL THAT THE RENT RECEIVED BY IT DURING THE YEAR FROM THE LICEN CEE - 1 VIZ. M/S HUTCHISON 3 GLOBAL SERVICES PVT. LTD. WAS HIGHER THAN THE AFORESAID MUNICIPAL RATEABLE VALUE OF THE OFFICE PREMISES THAT WAS LET OUT TO THE LATTER , THEN THE A.O SHALL ACCEPT THE ANNUAL VALUE DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOM E. HOWEVER, IN CASE THE ASSESSEE IS UNABLE TO SUBSTANTIATE ITS CLAIM THAT THE RENT RECEIVED DURING THE YEAR WAS HIGHER THAN THE MUNICIPAL RATEABLE VALUE OF THE PROPERTY FOR THE YEAR UNDER CONSIDERATION, THEN THE A.O SHALL REWORK OUT THE ANNUAL VALUE OF T HE PROPERTY , ON THE BASIS A COMPARATIVE STUDY AND ANALYSIS OF PROPERTIES OF SIMILAR NATURE IN THE IMMEDIATE VICINITY. ON THE BASIS OF OUR AFORESAID OBSERVATIONS , WE RESTORE THE MATTER TO THE FILE OF THE A.O FOR THE LIMITED PURPOSE OF ADJUDICATING THE ISSUE UNDER CONSIDERATION IN TERMS OF OUR AFORESAID DIRECTIONS. THE GROUNDS OF APPEAL NO. 1 AND 2 ARE ALLOWED FOR STATISTICAL PURPOSES. THE GROUND OF APPEAL NO. 3 BEI NG GENERAL IS DISMISSED AS NOT PRESSED. 13. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED IN THE OPEN COURT ON 1 0 /05/2019 S D / - S D / - ( G. MANJUNATHA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 10 . 05 .201 9 PS. ROHIT P A G E | 19 ITA NO.4264/MUM/2016 A.Y. 2010 - 11 BLUEBERRY TRADING COMPANY PVT. LTD. VS. THE DEPUTY COMMISSIONER OF INCOME TAX / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
