KAIRA CAN COMPANY LTD, MUMBAI V. DCIT 6(2), MUMBAI

ITA 4469/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0943 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: MI LAN THAKORE
• Keywords: Notional interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI RAJENDRA , ACCOUNTANT MEMBER ITA NO.4469/MUM/2013(A.Y. 2008-09) KAIRA CAN COMPANY LTD., TIECICON HOUSE, DR.E.MOSES ROAD, MUMBAI 400011 PAN:AAACK 4319B (APPELLANT ) VS. THE DCIT 6(2), 5 TH FLOOR, ROOM NO.504, AAYKAR BHAVAN, MK ROAD, MUMBAI (RESPONDENT) APPELLANT BY : SHRI MI LAN THAKORE RESPONDENT BY : SHRI ASGH AR ZAIN DATE OF HEARING 30/03/2015 DATE OF PRONOUNCEMENT 08/04/2015 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-12, MUMBAI DATED 22/03/2013 FOR ASSE SSMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: THE APPELLANT OBJECTS TO THE ORDER DATED 22 MARCH 2013 PASSED BY THE COMMISSIONER OF INCOME- TAX (APPEALS)-12, MUMBAI, ['CIT(A)'] FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING AMONG OTHER GROUNDS: - INCOME FROM HOUSE PROPERTY 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER ('AO') IN ASSESSING THE INCOME FROM HOUSE PROPERTY AT RS.31,0 9,310 INSTEAD OF RS. 1,69,301 AS RETURNED BY THE APPELLANT IN THE RETURN OF INCOME. ITA NO.4469/MUM/2013(A.Y. 2008-09) 2 2. THE LEARNED CIT(A) ERRED IN RELYING UPON THE ORD ER PASSED BY THE PREDECESSOR CIT(A) FOR THE ASSESSMENT YEAR 2007-08, WHEREIN THE CIT(A) FOLLOWING THE ORDER EARLIER YEARS, HAS OBSERVED THAT IN CASES WHERE THE RENT CONTROL A CT IS NOT APPLICABLE, THE FAIR RENT CAN BE DETERMINED TAKING INTO ACCOUNT THE REFUNDABLE DE POSITS SINCE THE MONTHLY RENT RECEIVED IS MUCH LESS COMPARED TO THE NEIGHBORING FLAT. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE AO IN INCLUDING THE NOTIONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT RECE IVED FROM THE LICENCEE OF THE HOUSE PROPERTY IN COMPUTING THE ANNUAL VALUE OF THE PROPE RTY AND THEREBY DETERMINING THE INCOME FROM HOUSE PROPERTY AT RS. 31,09,310. 4. EACH ONE OF THE ABOVE GROUND OF APPEAL IS WITHOU T PREJUDICE TO THE OTHER. 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT IS SUED RAISED BY THE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL RENDERED IN RESPECT OF A.Y 2004-05 TO 2007-08 VIDE ORDER DATED 30/1/20 15 IN ITA NOS. 2733/MUM/2008, ITA NO.6962/MUM/2011, ITA NO.6225/M UM/2008, ITA NO.2332/MUM/2010, ITA NO. 6963/MUM/2011. COPY OF ORDER WAS PLACED ON OUR RECORD AND WAS ALSO GIVEN TO LD. DR. 2.1 HE SUBMITTED THAT LD. CIT(A) HAS FOLLOWED HIS O RDER FOR A.Y 2007-08, WHICH HAS BEEN REVERSED BY TRIBUNAL VIDE AFOREMENTI ONED ORDER. THUS, IT WAS SUBMITTED BY LD. AR THAT APPEAL FILED BY THE ASSES SEE SHOULD BE ALLOWED. 3. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY AO AND LD. CIT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WHILE DETERMINING THE ALV THE AO HAS I NCLUDED NOTIONAL INTEREST ON INTEREST FREE SECURITY DEPOSIT. THIS ISSUE WAS DEC IDED BY LD. CIT(A) IN EARLIER YEARS AGAINST THE ASSESSEE AND THE ORDER OF LD. CIT (A) WAS AGITATED IN FURTHER ITA NO.4469/MUM/2013(A.Y. 2008-09) 3 APPEAL. THE TRIBUNAL HAS DECIDED THIS ISSUE IN EAR LIER YEARS VIDE AFOREMENTIONED ORDERS WITH FOLLOWING OBSERVATIONS: 3. THE FIRST ISSUE RELATES TO THE INCLUSION OF NOT IONAL INTEREST ON THE INTEREST FREE SECURITY DEPOSIT RECEIVED FROM THE LI CENCEE OF THE HOUSE PROPERTY, FOR THE PURPOSE OF COMPUTING THE ALV OF T HE SAID PROPERTY. RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE OWNS A PROPERTY AT FLAT NO.72, APSARA COOPERATIVE HSG. SOCIETY, NARIMAN POI NT, MUMBAI AND RENTED OUT FOR MONTHLY RENT OF RS. 45,000/-. ASSES SEE RECEIVED THE SECURITY DEPOSIT OF RS. 1.8 CRS AND AND LICENSE AGREEMENT DA TED 27.9.2001 IS RELEVANT. ASSESSEE OFFERED THE GROSS RENT OF RS. 5 .4 LAKHS LESS MAINTENANCE CHARGES PAID OF RS. 2,30,320/- AND CLAIMED STANDARD DEDUCTION @ 30% WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY. IN THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ENQUIRED INTO THE MA TTER RELATING TO ALV OF THE PROPERTY AND GATHERED SOME INFORMATION RELATING TO ANOTHER FLAT OWNER WHO LET OUT THE FLAT TO M/S. GUJRAT AMBUJA CEMENT L TD FOR MONTHLY RENT OF RS. 2,75,000/- AND CONCLUDED THAT THE ALV OF THE PR OPERTY IS UNDER STATED. ON SEEING THE LESSER RENT CONSIDERED BY THE ASSESSE E, WHILE DETERMINING THE ALV IN RESPECT OF THE PROPERTY, ASSESSING OFFICER R EVISED THE ALV UPWARDS AND FOR THIS HE INCLUDED THE NOTIONAL INTEREST @ 12 % ON THE DEPOSIT OF 1.8 CRS (RS. 21.6 LAKHS). THUS, THE ALV WAS COMPUTED A T RS. 27 LAKHS. ON THIS ISSUE, DURING THE PROCEEDINGS BEFORE THE FIRST APPE LLATE AUTHORITY, CIT (A) CONSIDERED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. J.K. INVESTORS (BOMBAY) LTD (248 IT R 723) AND DISTINGUISHED THE SAME BEFORE CONFIRMING THE ORDER OF THE ASSESS ING OFFICER. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MADE ELABORATE DISCUSSION ON THE APPLICABILITY OF THE SA ID JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS (SUPRA). FURTHER, HE SUBMITTED THE ACTUAL RENT RECEIVABLE ON THE PROPERTY CONSTITUTES THE REASONABLE RENT. THERE IS NO INCRIMINATING EVIDENCE BEFORE THE ASSESSING O FFICER THAT THE ASSESSEE HAS DEFLATED THE RENT BY INVOKING THE EXTRANEOUS CO NSIDERATION. FOR THIS PROPOSITION HE RELIED ON ANOTHER JUDGMENT OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (48 TAXMA NN.COM 191) (BOM.) AS WELL AS THE DECISION OF THE ITAT, DELHI BENCH IN TH E CASE OF CIT VS. MONI KUMAR SUBBA (10 TAXMANN.COM 195) (DELHI) (FB). FUR THER, HE MENTIONED THAT THE RENT RECEIVED @ RS. 45,000/- PER MONTH IS MUCH HIGHER THAN THE MUNICIPAL RATEABLE VALUE. HE ALSO REASONED THAT TH E SECURITY DEPOSIT OF RS. ITA NO.4469/MUM/2013(A.Y. 2008-09) 4 1.8 CRS RECEIVED BY THE ASSESSEE IS KEPT IN THE BAN KS AND THE INTEREST SO EARNED FROM THE BANKS WAS OFFERED TO TAX AS INCOME OF THE ASSESSEE. BY THE ASSESSING OFFICERS PROPOSAL TO CONSIDER THE SAME A S RENT, THE SAID INTEREST INCOME IS AGAIN SUBJECT TO TAX WHICH AMOUNTS TO DOU BLE TAXATION. SUCH EFFORTS OF THE ASSESSING OFFICER ARE DISCOURAGED BY THE COURTS AS WELL AS THE TRIBUNAL. IN THIS REGARD, HE RELIED ON THE JUDGMEN T OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. HEMARAJ MAHABIR P RASAD LTD (279 ITR 522) (CAL) AS WELL AS ANOTHER JUDGMENT IN THE CASE OF CIT VS. SATYA CO. LTD (75 TAXMANN.COM 193) (CAL.) AND THE ORDERS OF THE T RIBUNAL INCLUDING THE DECISION IN THE CASE OF ACIT VS. MALINI V. SHETH (4 8 TAXMANN.COM 32) (ITAT) (MUM.) AND JAIDEEP M TANDON V. ITO (ITA NOS. 7990-7992/M/2010) (ITAT) (MUM). HE ALSO DEMONSTRATED THAT ASSESSEE H AS NOT DERIVED ANY TAX ADVANTAGE BY ACCEPTING THE INTEREST FREE SECURITY D EPOSIT IN THAT CASE. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL TO SUPPORT TH E ASSESSING OFFICERS ALLEGATION TO DEFLATION OF RENT, ALV COMPUTATION OF FERED BY THE ASSESSEE SHOULD BE ACCEPTED. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT (A) AND MENTIONED THAT THE RENT AL INCOME SHOWN BY M/S. GUJRAT AMBUJA CEMENT LTD IS MUCH HIGHER AND THEREFO RE THE ALV OF THE IMPUGNED PROPERTY IS NOT JUSTIFIED. 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE OF INCLUSION OF NOTIONAL INTEREST INCOME ON THE INTEREST FREE SECURITY DEPOS IT. IT IS A SETTLED PROPOSITION OF LAW BY VIRTUE OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF J.K. INVESTORS (BOMBAY) L TD (SUPRA) AND TIP TOP TYPOGRAPHY (SUPRA) THAT THE NOTIONAL INTEREST SHOUL D NOT BE INCLUDED WHILE COMPUTING THE INCOME FROM HOUSE PROPERTY UNDER SECT ION 23(1)(A) AND (B) OF THE ACT. IT IS ALSO A SETTLED PROPOSITION THAT ACT UAL RENT RECEIVED OR RECEIVABLE BY THE LAND LORD CONSTITUTES A RELIABLE EVIDENCE TO ASCERTAIN THE PROPERTIES CAPACITY TO EARN THE RENT IN OPEN MARKE T. THE FORMS SHOULD BE ACCEPTED UNLESS THE ASSESSING OFFICER HAS CONTRARY EVIDENCE TO SUGGEST THE DEFLATION OF RENTAL INCOME BY EXTRANEOUS CONSIDERAT ION. THIS IS ALSO AN ADMITTED FACT IN THIS CASE THAT THE RENT RECEIVED I S MUCH HIGHER THAN THE MUNICIPAL RATEABLE VALUE OF THE PROPERTY. IT IS AL SO DISCOURAGED AND UNAPPROVED BY VARIOUS BENCHES OF THE TRIBUNAL THAT WHEN THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE SAID SECURITY DEPOSITS DEPOSITED WITH THE BANKS THE SAME IS OFFERED TO TAX, THE INCLUSION OF SUCH INTEREST ON THE SAID DEPOSITS FOR THE PURPOSE OF ALV AMOUNTS TO DOUBLE T AXATION. CONSIDERING THE FACTUAL MATRIX OF THE PRESENT CASE, WE ARE OF T HE CONSIDERED OPINION THAT ITA NO.4469/MUM/2013(A.Y. 2008-09) 5 THE ISSUE RAISED BY THE ASSESSEE HAS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. WE ORDER ACCORDINGLY. 4.1 IN THIS VIEW OF THE SITUATION, RESPECTFULLY FOL LOWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RENDERED ON THE SAME FACTS, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE APPEAL FILE D BY THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/04/2015 08/04/2015 SD/ SD/- ( , /RAJENDRA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; $% DATED 08/04/2015 / COPY OF THE ORDER FORWARDED TO : 1. & '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. +, ( & ) / THE CIT(A)- 4. +, / CIT 5. -. ),%/0 , &1 &/0 , / DR, ITAT, MUMBAI 6. 2 / GUARD FILE. / BY ORDER, * -, ), //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . ./ VM , SR. PS