MINAL SUBHASH GUPTE, MUMBAI V. ACIT 19(3), MUMBAI

ITA 4268/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71851 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 05-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B
• Assessee Lawyers: SANJIV SHAH
• Keywords: Notional interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.1536/MUM/2010 1536/MUM/2010 1536/MUM/2010 1536/MUM/2010 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2006-07) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.4268/MUM/2012 4268/MUM/2012 4268/MUM/2012 4268/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2008-09) MINAL SUBHASH GUPTE, SAROJINI, 4, GOLF LINKS, PALI HILL, BANDRA, MUMBAI-400050 % % % % / VS. ACIT 19(3), PIRAMAL CHAMBERS MUMBAI #' ! ./ ( ./ PAN/GIR NO. :AEJPG3106L ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI SANJIV SHAH # # # # . / . / . / . / / REVENUE BY : SHRI B. PANDA % % % % . .. . -! -! -! -! / DATE OF HEARING : 28 TH NOVEMBER 2013 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 28 TH NOVEMBER 2013 '2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX(APPEA LS) FOR THE ASSESSMENT YEARS 2006-07 & 2008-09. 2. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THIS A PPEAL AS UNDER: (1) THE EARNED COMMISSIONER OF INCOME TAX (APPEALS ) [CIT(A)J ERRED IN APPROVING THE ADDITION OF RS.4,20 ,000/- [RS.8,40,000/-(-)RS.4,20,000/-] UNDER THE HEAD INC OME FROM HOUSE PROPERTY. ITA NO.1536/M/2010 & 4268/M/2012 MINAL SUBASH GUPTE 2 (2) THE LEARNED CIT(A) FURTHER ERRED IN THIS CONNEC TION IN HOLDING THAT THE PROVISIONS OF SECTION 23(1)(A) ARE APPLICABLE AND NOT SECTION 23(1)(B) AS CLAIMED BY THE APPELLAN T. (3) THE LEARNED CIT(A) FURTHER ERRED IN THIS CONNEC TION IN HOLDING THAT :- (A) THE FACT OF ACCEPTING INTEREST FREE DEPOSIT DOE S NOT HAVE ANY BEARING ON THE DETERMINATION OF THE ANNUAL VALUE UNDER SECTION 23(I)(A); (B) COMPARABLE INSTANCE FOR RENT IS AVAILABLE IN RE SPECT OF THE APPELLANTS OWN CASE FOR FLATS ON THE 2 AND 3 FLOORS OF THE SAME BUILDING; AND (C) THE CASE LAWS CITED BY THE APPELLANT DO NOT HEL P HER. (4) THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR AME ND AND/OR DELETE AND/OR MODIFY AND/OR ALTER THE AFORESAID GRO UNDS OF APPEAL AS AND WHEN THE OCCASION DEMANDS. 3. THE ASSESSEE OWNS A BUILDING NAMELY SAROJNI, 4, GOLF LINKS ROAD, BANDRA, MUMBAI-50 HAVING 5 FLOORS. THE ASSESSEE HAS LET OUT 1 ST , 2 ND AND 3 RD FLOORS AND 4 TH , 5 TH FLOORS ARE SELF OCCUPIED. THE ASSESSING OFFICER NOTED THAT THE RENT RECEIVED BY THE ASSESSEE IN RES PECT OF 1 ST FLOOR IS VERY LESS IN COMPARISON TO THE OTHER FLOORS. ACCORD INGLY, THE A.O ASKED THE ASSESSEE TO GIVE REASONS WHY THE FAIR MARKET RE NT OF 1 ST FLOOR SHOULD NOT BE TAKEN AT ` 70,000/- PER MONTH IN STEAD OF RE NT RECEIVED OF ` 35,000/- PER MONTH BECAUSE THE OTHER TWO FLATS IN T HE SAME BUILDING ARE LET OUT AT ` 70,000/- PER MONTH. THE A.O FURTHE R NOTED THAT THE ASSESSEE RECEIVED AN INTEREST FREE DEPOSIT OF ` 40, 00,000/- FROM THE TENANT IN RESPECT OF 1 ST FLOOR FLATS. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE A.O HELD THAT IN THIS CASE ` 70,000/- PER MONTH COMPARISON IS AVAILABLE WITH OTHER FLATS IN THE SAM E BUILDING FOR WHICH ITA NO.1536/M/2010 & 4268/M/2012 MINAL SUBASH GUPTE 3 NO DEPOSITS ARE BEING TAKEN AND ACCORDINGLY DETERMI NE THE ALV OF FLATS NO. 1 AT ` 70,000/- PER MONTH. ON APPEAL, THE CIT(A ) HAS CONFIRMED THE ACTION OF THE A.O. 4. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE VARIOUS F ACTORS RELEVANT FOR DETERMINATION OF THE ANNUAL LETTING VALUE NAMELY TH E MUNICIPAL VALUATION, STANDARD RENT AS WELL AS THE TERMS AND C ONDITIONS OF THE LEASE AGREEMENTS OF THESE FLATS. HE HAS FURTHER SUB MITTED THAT THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT IS A CR UCIAL RELEVANT FACTOR FOR FIXING THE RENT OF PROPERTY. HE HAS RELIED UPON THE VARIOUS DECISIONS OF THE HONBLE JURISDICTION HIGH COURT INCLUDING TH E DECISION OF THIS TRIBUNAL IN CASE OF TIVOLI INVESTMENT AND TRADING C O. PVT. LTD. VS ACIT 130 ITD 521 AND SUBMITTED THAT THE TRIBUNAL HAS LAI D DOWN THE VARIOUS FACTORS/CRITERIA FOR DETERMINATION OF THE FAIR RENT U/S 23(1)(A) WHICH MAY BE FOLLOWED IN THE CASE OF THE ASSESSEE. ACCORDINGL Y, THE LD. A.R HAS URGED THAT THE MATTER SHOULD BE REMANDED TO THE A.O FOR DETERMINATION OF THE ALV AFRESH IN THE LIGHT THE DECISION IN CASE OF TIVOLI INVESTMENT AND TRADING CO. PVT. LTD. (SUPRA). ON THE OTHER HAN D, THE LD. D.R HAS SUBMITTED THAT THE A.O HAS CLEARLY BROUGHT ON RECOR D THE COMPARABLES IN THE SHAPE OF THE OTHER TWO FLATS LET OUT BY THE ASSESSEE ON THE HIGHER RENT AND THE DIFFERENCE IN FIXING THE LESS RENT IN RESPECT OF FLAT NO. 1 AT 1 ST FLOOR IS ONLY BECAUSE OF INTEREST FREE DEPOSITS OF ` 40,00,000/- RECEIVED BY THE ASSESSEE. HE HAS RELIED UPON THE OR DERS OF THE ITA NO.1536/M/2010 & 4268/M/2012 MINAL SUBASH GUPTE 4 AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ALV H AS BEEN DETERMINED U/S 23(1)(A) BY THE A.O BY CONSIDERING T HE COMPARABLE CASES THEN THE A.O IS JUSTIFIED IN ADOPTING THE FAI R RENT AT ` 70,000/- PER MONTH. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT THE A.O HAS DETERMI NED THE ALV BY CONSIDERING THE RENT RECEIVED BY THE ASSESSEE IN RE SPECT OF TWO OTHER FLATS IN THE SAME BUILDING LET OUT TO OTHER PARTIES . HOWEVER, THE RENT AGREED BETWEEN THE PARTIES DEPENDS UPON VARIOUS FAC TORS AND TERMS AND CONDITIONS OF THE LEASE AGREEMENT. FURTHER THE A.O HAS ALSO NOT CONSIDERED THE VARIOUS FACTORS WHICH CAN HAVE THE I NFLUENCE IN FIXING RENT AS WELL AS DETERMINATION OF THE ALV. THE TRIBU NAL IN CASE OF TIVOLI INVESTMENT AND TRADING CO. PVT. LTD. (SUPRA) AFTER CONSIDERING THE VARIOUS DECISIONS OF HONBLE JURISDICTION HIGH COUR T AS WELL AS FULL BENCH DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS MONI KUMAR SUBBA 333 ITR 38 HAS CONSIDERED AN IDENTICAL ISSUE IN PARA 29 AS UNDER: 29. FROM THE DECISION OF THE HON. FULL BENCH OF TH E HON. DELHI HIGH COURT, IT IS CLEAR THAT FOR DETERMINATION OF T HE FAIR RENT, THE A.O HAS TO TAKE INTO ACCOUNT VARIOUS FACTORS IN CLUDING STANDARD RENT. IF THE STANDARD RENT IS NOT FIXED TH EN THE PROCEDURE PROVIDED UNDER THE RENT CONTROL ACT FOR F IXATION OF STANDARD RENT HAS TO BE TAKEN INTO CONSIDERATION. W E MAY MENTION THAT MUNICIPAL VALUE OR STANDARD RENT ITSEL F IS NOT SOLE BINDING FACTORS ON THE A.O BUT THESE ARE ONLY GUIDI NG FACTOR FOR DETERMINING THE REASONABLE EXPECTED RENT TO BE FETC HED BY HE PROPERTY AS CONTEMPLATED U/S 23 (1)(A). IF IN THE G IVEN CASE, THE A.O FINDS THAT THE MUNICIPAL VALUE IS NOT BASED ON RELEVANT MATERIAL FOR DETERMINING FAIR RENT IN THE MARKET AN D THERE IS A ITA NO.1536/M/2010 & 4268/M/2012 MINAL SUBASH GUPTE 5 SUFFICIENT MATERIAL ON RECORD FOR TAKING DIFFERENT VALUATION THEN THE A.O CAN DETERMINE THE FAIR RENT BY INFLATING OR DEFLECTING THE MUNICIPAL VALUE OR STANDARD RENT AS THE CASE MA Y BE BY TAKING INTO ACCOUNT THE RELEVANT MATERIAL IN THIS R EGARD. AS OBSERVED BY THE HON. DELHI HIGH COURT IF THE RATABL E VALUE IS CORRECTLY DETERMINED UNDER THE MUNICIPAL LAW THE SA ME CAN BE TAKEN AS ANNUAL LETTING VALUE U/S 23(1)(A) OF THE A CT. HOWEVER, THE RATABLE VALUE IS NOT A BINDING ON THE A.O IF TH E A.O CAN SHOW THAT THE RATABLE VALUE UNDER MUNICIPAL LAW DOE S NOT REPRESENT THE CORRECT FAIR RENT. IF THE AC FINDS TH AT THE ACTUAL RENT RECEIVED IS LESS THAN THE FAIR MARKET RENT/MAR KET RENT BECAUSE OF THE REASON THAT THE ASSESSEE HAS RECEIVE D ABNORMALLY HIGH INTEREST FREE SECURITY DEPOSITS AND BECAUSE OF THAT REASON ACTUAL RENT RECEIVED IS LESS THAN THE R ENT WHICH THE PROPERTY MIGHT FETCH HE CAN UNDERTAKE NECESSARY EXE RCISE IN THAT BEHALF. HOWEVER, THE NOTIONAL INTEREST ON INTE REST FREE SECURITY CANNOT BE TAKEN AS DETERMINATIVE FACTOR TO ARRIVE AT FAIR RENT. IF THE A.O FINDS THAT THE RATABLE VALUE UNDER THE MUNICIPAL LAW DOES NOT REPRESENT CORRECT FAIR RENT AND THEN HE MAY DETERMINE THE SAME ON THE BASIS OF MATERIAL/EVI DENCE PLACED ON RECORD. THE HON. FULL BENCH OF THE DELHI HIGH COURT HAS OBSERVED IN PARAGRAPHS 21 OF THE DECISION THAT TO DETERMINE THE REASONABLE/FAIR RENT EXTRANEOUS CIRCU MSTANCES MAY INFLECT OR DEFLECT THE FAIR RENT WHICH CAN BE T AKEN INTO CONSIDERATION BY THE AO. SINCE, THE REASONABLE RENT U/S 23(1)(A) HAS NOT BEEN DETERMINED. THE MUNICIPAL VAL UE OR STANDARD RENT WAS ALSO NOT BEFORE THE A.O AS WELL A S CIT(A). AND IT IS ALSO NOT CLEAR FROM THE RECORD AS UNDER W HICH CLAUSE, THE A.O HAS MADE THIS ADDITION. ACCORDINGLY WE REST ORE THE ISSUE TO RECORD OF THE A.O AND DIRECT THE A.O TO DE TERMINE THE SUM FOR WHICH THE PROPERTY MIGHTY REASONABLY EXPECT ED TO LET FROM YEAR TO YEAR U/S 23(1)(A) AFTER CONSIDERING AL L RELEVANT FACTORS AS DISCUSSED ABOVE AND THEREAFTER COMPARED THE SAME WITH THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE ASSESSEE U/S 23(1)(B) AND THEN DECIDE THE ISSUE AS PER LAW. 6. SINCE THE A.O HAS NOT TAKEN INTO ACCOUNT VARIOUS FACTORS WHICH ARE GUIDING FACTORS FOR DETERMINING THE REASONABLE EXPECTED RENT TO BE FETCHED BY THE PROPERTY IN TERMS OF SECTION 23(1)(A ). ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE SET ASIDE TH IS ISSUE TO THE ITA NO.1536/M/2010 & 4268/M/2012 MINAL SUBASH GUPTE 6 RECORD OF THE ASSESSING OFFICER TO DECIDE THE SAME AFTER CONSIDERING THE OBJECTION OF THE ASSESSEE AND AS PER LAW. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E. 28 TH DAY OF NOVEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 28 TH NOVEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI