कप्तान V.K. RAICHAND, MUMBAI V. ITO 12(2)(2) (NOW ASSESSED WITH ITO-17(5)(3)), MUMBAI

ITA 4392/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1127 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2018

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 4392/MUM/2018 (ASSESSMENT YEAR: 2011-12) CAPTAIN V.K. RAICHAND 11A, DOLPHIN APARTMENTS PILOT BUNDER ROAD COLABA, MUMBAI 400005 VS. INCOME TAX OFFICER - 12(2)(2) [NOW ASSESSED WITH INCOME TAX OFFICER-17(5)(3)] MUMBAI PAN AADPR7924F APPELLANT RESPONDENT APPELLANT BY: SHRI AJAY WADHWA RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 24.09.2018 DATE OF PRONOUNCEMENT: 30.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-28, MUMBAI DAT ED 02.05.2018 AND IT RELATES TO A.Y. 2011-12. 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO TH E ADDITION OF ` 14,20,000/- AS PERQUISITE UNDER SECTION 2(24)(IV) O F THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN I NDIVIDUAL, IS ONE OF THE DIRECTORS OF A COMPANY IN THE NAME AND STYLE OF M/S. KHUKRI ENTERPRISES LTD. FOR THE ASSESSMENT YEAR UNDER DISP UTE THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.07.2011 DECLARING TOTAL INCOME OF ` 13,04,810/-. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER (AO) FOUND THAT AS PER THE MATERIAL ON RECORD THE ASSESSEE WAS LIVI NG IN A HOUSE/FLAT AT 11A, DOLPHIN, COLABA, MUMBAI ALONG WITH HIS FAMILY. WHEREAS, AS PER THE DETAILS AVAILABLE, THE SAID HOUSE PROPERTY BELONGS TO THE COMPANY M/S. KHUKRI ENTERPRISES LTD. THUS, THE AO CALLED UPON TH E ASSESSEE TO EXPLAIN ITA NO. 4392/MUM/2018 CAPTAIN V.K. RAICHAND 2 WHY THE PERQUISITE VALUE OF THE SAID PROPERTY SHOUL D NOT BE ADDED TO THE INCOME OF THE ASSESSEE. IN RESPONSE TO THE QUERY RA ISED BY THE AO THE ASSESSEE SUBMITTED THAT AS PER THE SHAREHOLDING PAT TERN OF THE COMPANY THE ASSESSEE HAD A SHAREHOLDING OF 1%, WHEREAS, HIS WIFE, SMT. JYOTI RAICHAND, IS A MAJORITY SHAREHOLDER. FURTHER, IT WA S SUBMITTED THAT THE HOUSE WAS GIVEN TOWARDS ACCOMMODATION OF HIS WIFE A ND THE ASSESSEES WIFE HAS ALSO SHOWN PERQUISITE VALUE RELATING TO TH E SAID HOUSE IN THE RETURN OF INCOME FILED BY HER. IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THE ASSESSEE WAS ALSO LIVING IN THE SAME HOUSE HE H AS SHOWN PERQUISITE VALUE OF ` 18,000/- IN THE RETURN OF INCOME FILED, WHICH IS FA IR AND REASONABLE CONSIDERING THE FACT THAT ASSESSEES WIF E HAS OFFERED THE PERQUISITE VALUE IN HER RETURN OF INCOME. THE AO, H OWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEE DED TO ESTIMATE THE PERQUISITE VALUE RELATING TO THE RENT FREE ACCOMMOD ATION AT 10% OF THE TOTAL INVESTMENT MADE BY THE COMPANY IN ACQUIRING THE PRO PERTY, WHICH WORKED OUT TO ` 13,60,000/-. FURTHER, THE AO ALSO ADDED AN AMOUNT O F ` 5,000/- PER MONTH TOWARDS ELECTRICITY AND SOCIETY CHARGES. THUS, THE TOTAL ADDITION MADE BY THE AO TOWARDS PERQUISITE VALUE UNDER SECTI ON 2(24)(IV) OF THE ACT WAS TO THE TUNE OF ` 14,20,000/-. BEING AGGRIEVED OF SUCH ADDITION THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) . IN THE COURSE OF HEARING OF THE APPEAL BEFORE THE FIRST APPELLATE AU THORITY THE ASSESSEE REITERATED THE STAND TAKEN BEFORE THE AO. IN ADDITI ON, THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE LEARNED CIT(A) THAT UN DER IDENTICAL FACTS AND CIRCUMSTANCES THE LEARNED CIT(A), IN ASSESSMENT YEA RS 2008-09 TO 2010- 11 HAS DIRECTED THE AO TO DETERMINE THE PERQUISITE VALUE FOR RENT FREE ACCOMMODATION AS PER RULE 3 OF THE INCOME TAX RULES . IT WAS SUBMITTED, IN THE SAID ORDER THE CIT(A) HAS HELD THAT AS PER R ULE 3 OF THE INCOME TAX RULES ONLY 15% OF THE SALARY CAN BE ADDED AS PERQUI SITE VALUE UNDER SECTION 2(24)(IV) OF THE ACT. THE LEARNED CIT(A), H OWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED TH E ADDITION MADE BY THE AO. WHILE DOING SO THE LEARNED CIT(A) OBSERVED, THE ASSESSEE HAVING AGREED FOR ADDITION MADE BY THE AO HE SHOULD NOT HA VE ANY GRIEVANCE. ITA NO. 4392/MUM/2018 CAPTAIN V.K. RAICHAND 3 4. THE LEARNED AUTHORISED REPRESENTATIVE (A.R.) REITE RATED THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES AND SUBMI TTED THAT NO PERQUISITE VALUE CAN BE ADDED AT THE HANDS OF THE A SSESSEE SINCE THE RENT FREE ACCOMMODATION WAS PROVIDED BY THE COMPANY TO A SSESSEES WIFE, WHO IS NOT ONLY A DIRECTOR BUT A MAJORITY SHAREHOLDER O F THE COMPANY. HE SUBMITTED, ASSESSEES WIFE HAS ALSO OFFERED THE PER QUISITE VALUE OF THE RENT FREE ACCOMMODATION PROVIDED TO HER IN THE RETURN OF INCOME FILED. TO PROVE SUCH FACT THE LEARNED A.R. DREW OUR ATTENTION TO TH E BOARD RESOLUTION DATED 3 RD AUGUST, 1993, A COPY OF WHICH IS PLACED AT PAGE 20 OF THE PAPER BOOK. THE LEARNED A.R. SUBMITTED, SINCE THE ASSESSEE STAY S IN THE RESIDENTIAL ACCOMMODATION PROVIDED TO HIS WIFE, IT CANNOT BE TR EATED AS PERQUISITE AT THE HANDS OF THE ASSESSEE. THE LEARNED A.R. SUBMITT ED, WHILE DECIDING THE ISSUE RELATING TO IDENTICAL ADDITION IN ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11 THE CIT(A), WHILE DELETING THE ADDITION MADE BY THE AO, HAS DIRECTED THE AO TO COMPUTE THE PERQUISITE VALUE AS PER RULE 3 OF THE INCOME TAX RULES. HE SUBMITTED, THE AFORESAID DECIS ION OF THE CIT(A) IN THOSE ASSESSMENT YEARS WERE ACCEPTED BY BOTH THE AS SESSEE AND THE DEPARTMENT. HE SUBMITTED, RIGHT FROM ASSESSMENT YEA RS 2001-02 TO 2007- 08 NO SUCH ADDITION WAS MADE AND THE ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE BY THE ITAT AND THE HON'BLE BOMBAY HIGH CO URT. THUS, HE SUBMITTED, THE ADDITION MADE BY THE AO SHOULD BE DE LETED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE CIT(A) AND THE ASSESSING OFFICE R. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS BEEN STAYING IN A RENT FREE ACCOMMODATION PROVIDED BY THE COMPANY WHEREIN HE IS A DIRECTOR. IT IS THE CONTENTION OF THE ASSESSEE THAT HIS WIFE IS THE MAJ ORITY SHAREHOLDER OF THE COMPANY AND THE RENT FREE ACCOMMODATION WAS PROVIDE D TO HIS WIFE. IT IS ALSO THE CLAIM OF THE ASSESSEE THAT ASSESSEES WIFE HAD BEEN OFFERING THE PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION IN THE RETURN OF INCOME FILED. AS A MATTER OF FACT THE ASSESSEE HAS ALSO OF FERED AN AMOUNT OF ` 18,000/- TOWARDS PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION IN THE ITA NO. 4392/MUM/2018 CAPTAIN V.K. RAICHAND 4 RETURN OF INCOME FILED BY HIM. THUS, TO SOME EXTENT THE ASSESSEE ACCEPTS THAT RENT FREE ACCOMMODATION PROVIDED BY THE COMPAN Y IS IN THE NATURE OF PERQUISITE. BE THAT AS IT MAY, THE AO MORE OR LESS FOLLOWING HIS EARLIER DECISION HAS ESTIMATED THE PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION AT 10% OF THE COST INCURRED BY THE COMPANY IN ACQUI RING THE HOUSE. IN ADDITION, THE AO HAS ALSO ADDED ` 5,000/- TOWARDS ELECTRICITY AND MAINTENANCE CHARGES. AS BROUGHT TO OUR NOTICE BY TH E LEARNED A.R., WHILE DECIDING THE ISSUE RELATING TO IDENTICAL ADDITION F OR ASSESSMENT YEARS 2009- 10 AND 2010-11 THE LEARNED CIT(A) HAS DIRECTED THE AO TO COMPUTE THE PERQUISITE VALUE OF THE RENT FREE ACCOMMODATION PRO VIDED TO THE ASSESSEE FOLLOWING THE METHOD PRESCRIBED UNDER RULE 3 OF THE INCOME TAX RULES. AGAINST THE AFORESAID DECISION OF THE LEARNED CIT(A ) FOR THE ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11 NEITHER THE ASSE SSEE NOR THE DEPARTMENT HAVE PREFERRED APPEAL BEFORE THE TRIBUNA L. THUS, IN EFFECT, THE AFORESAID DECISION OF THE CIT(A) HAVE BECOME FINAL AS BOTH THE PARTIES HAVE ACCEPTED IT. AS REGARDS ASSESSMENT YEARS 2001-02 TO 2007-08 THE ITAT AND THE HON'BLE HIGH COURT DECIDED THE APPEALS OF THE A SSESSEE ON LEGAL ISSUES, HENCE, THIS ISSUE NEVER CAMP UP FOR CONSIDERATION. THUS, CONSIDERING THE FACT THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES T HE CIT(A) IN ASSESSMENT YEARS 2008-09 TO 2010-11 HAS DIRECTED THE AO TO COM PUTE THE PERQUISITE VALUE FOR RENT FREE ACCOMMODATION PROVIDED TO THE A SSESSEE IN ACCORDANCE WITH RULE 3 OF THE INCOME TAX RULES, WHICH HAS BEEN ACCEPTED BY BOTH THE PARTIES, I AM OF THE OPINION THAT THE SAME METHOD S HOULD ALSO BE APPLIED IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE AFO RESAID, I DIRECT THE AO TO COMPUTE THE PERQUISITE VALUE OF RENT FREE ACCOMM ODATION PROVIDED TO THE ASSESSEE BY APPLYING THE METHOD PRESCRIBED UNDER RU LE 3 OF THE INCOME TAX RULES. ACCORDINGLY GROUNDS ARE PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI, DATED: 30 TH NOVEMBER, 2018 ITA NO. 4392/MUM/2018 CAPTAIN V.K. RAICHAND 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -28, MUMBAI 4. THE PR.CIT - 17, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.