BHARAT K SHETH, MUMBAI V. DCIT RG 5(3), MUMBAI

ITA 4648/MUM/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1206 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-08-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OOMMEN THORIAN LD
• Assessee Lawyers: PERCY PARDIWALALD SR
• Keywords: Notional interest; Tax effect
• Section: 143(3); 54F; 234B; 13; 22

Judgement Text

SHRI BHARAT K.SHETH 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) 1. ./ I.T.A. NO.2140/MUM/2002 ( / ASSESSMENT YEAR: 1998-99) & 2. ./ I.T.A. NO.1527/MUM/2005 ( / ASSESSMENT YEAR: 1999-2000) & 3. ./ I.T.A. NO.2822/MUM/2006 ( / ASSESSMENT YEAR: 2001-02) & 4. ./ I.T.A. NO.2747/MUM/2012 ( / ASSESSMENT YEAR: 2002-03) & 5. ./ I.T.A. NO.2748/MUM/2012 ( / ASSESSMENT YEAR: 2003-04) & 6. ./ I.T.A. NO.2749/MUM/2012 ( / ASSESSMENT YEAR: 2004-05) & 7. ./ I.T.A. NO.8547/MUM/2010 ( / ASSESSMENT YEAR: 2007-08) & 8. ./ I.T.A. NO.2746/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) & 9. ./ I.T.A. NO.2251/MUM/2018 ( / ASSESSMENT YEAR: 2010-11) & 10. ./ I.T.A. NO.4648/MUM/2015 ( / ASSESSMENT YEAR: 2011-12) & 11. ./ I.T.A. NO.2252/MUM/2018 ( / ASSESSMENT YEAR: 2012-13) & SHRI BHARAT K.SHETH 2 12. ./ I.T.A. NO.2253/MUM/2018 ( / ASSESSMENT YEAR: 2013-14) MR. BHARAT K. SHETH 19-B, MANEK, 11, L.D. RUPAREL MARG MUMBAI-400 006. / VS. DCIT - RANGE 5(3) ROOM NO.572, AAYKAR BHAVAN M.K. MARG, MUMBAI PAN/GIR NO. AAQPS - 2482 - L ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) & 13. ./ I.T.A. NO.1235/MUM/2005 ( / ASSESSMENT YEAR: 1999-2000) DCIT - RANGE 5(3) ROOM NO.572, AAYKAR BHAVAN M.K. MARG, MUMBAI / VS. MR. BHARAT K. SHETH 19-B, MANEK, 11, L.D. RUPAREL MARG MUMBAI-400 006. PAN/GIR NO. AAQPS - 2482 - L ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) ASSESSEE BY : SHRI PERCY PARDIWALA-LD.SR. COUNSEL REVENUE BY : SHRI OOMMEN THORIAN -LD. SR.DR / DATE OF HEARING : 24/11/2020 / DATE OF PRONOUNCEMENT : 17/12/2020 / O R D E R PER BENCH 1. THE ASSESSEE IS UNDER APPEAL FOR VARIOUS ASSESSM ENT YEARS AS CAPTIONED ABOVE WHEREAS THE REVENUE IS IN APPEAL FO R ASSESSMENT YEAR (AY) 1999-2000. THE ASSESSMENT HAS BEEN FRAMED ON D IFFERENT DATES WHICH HAVE BEEN ADJUDICATED BY LD. FIRST APPELLATE AUTHORITY VIDE SEPARATE ORDERS. HOWEVER, IT IS ADMITTED POSITION T HAT FACTS AND ISSUES ARE MORE OR LESS IDENTICAL IN ALL THE YEARS AND ADJ UDICATION IN ANY YEAR WOULD APPLY TO ALL THE OTHER YEARS ALSO. FOR THE PU RPOSE OF ADJUDICATION, THE ASSESSEES APPEAL FOR AY 1998-99 IS TAKEN AS TH E LEAD YEAR WHICH IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL- SHRI BHARAT K.SHETH 3 VI, MUMBAI ORDER DATED 28/02/2002. THE EFFECTIVE GR OUNDS READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REDIR ECTING THE ASSESSING OFFICER TO FIX THE QUANTUM OF RENTAL VALUE OF HOUSE PROPERTY B Y REJECTING THE CLAIM OF THE APPELLANT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDI NG THAT LETTING OUT OF HOUSE PROPERTY BY THE APPELLANT IS NOT COVERED BY THE REN T CONTROL ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF RS.17,01,000/- IN RESPECT OF TRADING LOSS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT A DJUDICATING GROUND NO.6 BEFORE HIM REGARDING LEVY OF INTEREST U/S 234A, 234B AND 2 34C OF THE I.T. ACT. 2. THE LD. SR. COUNSEL FOR ASSESSEE, SHRI PERCY PAR DIWALA, WHILE ADVANCING ARGUMENTS ON MERIT, PLACED ON RECORD THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN CROSS- APPEAL FOR AYS 1996-97 & 1997-98, ITA NOS.1480-81/M UM/2001, CO NO.164/MUM/2011 COMMON ORDER DATED 04/10/2017 TO SU BMIT THAT THE ISSUES UNDER THE APPEAL HAVE ALREADY BEEN DELVED IN TO BY THE TRIBUNAL AND THE FACTUAL MATRIX OF THIS YEAR IS COVERED IN T ERMS OF AFORESAID ORDER. 3. WE HAVE CAREFULLY HEARD THE ARGUMENTS AND PERUSE D THE RELEVANT MATERIAL ON RECORD INCLUDING THE ORDERS OF LOWER AU THORITIES AND THE CITED DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 1996-97 & 1997-98. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 4. THE MATERIAL FACTS ARE THAT THE ASSESSEE BEING R ESIDENT INDIVIDUAL WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3 ) ON 12/03/2001 WHEREIN THE RETURNED INCOME OF RS.42.70 LACS WAS AS SESSED AT RS.107 LACS AFTER CERTAIN ADDITIONS / ADJUSTMENTS. ONE OF THE DISALLOWANCE WAS DISALLOWANCE OF TRADING LOSS FOR RS.17.01 LACS AND OTHER ADJUSTMENT WAS SHRI BHARAT K.SHETH 4 UNDER THE HEAD INCOME FROM HOUSE PROPERTY FOR RS.36 LACS. BOTH THE ISSUES FORM SUBJECT MATTER OF PRESENT APPEAL BEFORE US. ISSUE NO.1: TRADING LOSS OF RS.17.01 LACS 5.1 THE ASSESSEE REFLECTED TRADING LOSS OF RS.17.01 LACS IN SHARE BUSINESS STATED TO BE CARRIED OUT IN PROPRIETORSHIP CONCERN NAMELY M/S B.K. SHETH TRADING CO. THE LOSS STEM FROM DECREASE IN MARKET VALUE OF TWO STOCKS I.E. M/S GREAT EASTERN SHIPPING CO. LTD & M/S PRIME SECURITIES LTD. HELD BY THE ASSESSEE ON THE BALANCE SHEET DATE. THESE SCRIPS WERE CONVERTED INTO STOCK-IN-TRADE OF THE PR OPRIETORSHIP CONCERN IN EARLIER AYS 1994-95 & 1995-96. THERE WAS NO TRADING IN SHARES BUT THE LOSS WAS ARISING ON ACCOUNT OF VALUATION OF CLOSING STOCK AT YEAR-END. HOWEVER, LD. AO NOTED THAT THERE WAS NO ORGANIZED O R FREQUENT TRADING ACTIVITY WHICH WAS EVIDENT THAT IN LAST 5 YEARS, TH ERE WERE ONLY TWO TRANSACTIONS OF PURCHASE AND SALE IN THE CONCERN. D URING THE YEAR, THE ASSESSEE DID NOT CARRY OUT EVEN A SINGLE TRADE IN P ROPRIETORSHIP CONCERN. THOUGH THE ASSESSEE CARRIED OUT SALE OF SHARES IN I NDIVIDUAL CAPACITY BUT THE SHARES HELD IN TRADING CONCERN WERE LEFT UNTOUC HED. THEREFORE, A CONCLUSION WAS TO BE DRAWN THAT THE ASSESSEE HAD NO INTENTION OF DEALING IN THE SHARES HELD IN PROPRIETORSHIP CONCER N. HENCE, THE TRADING LOSS OF RS.17.01 LACS WOULD NOT BE ALLOWABLE AS HEL D IN EARLIER AYS 1996-97 & 1997-98 AS WELL, 5.2 DURING APPELLATE PROCEEDINGS, ASSESSEE, INTER-A LIA, DREW ATTENTION TO THE FAVORABLE FIRST APPELLATE ORDERS FOR AYS 199 6-97 & 1997-98. HOWEVER, LD. CIT(A), TAKING A DIFFERENT VIEW, HELD THAT IT WAS NOT A CASE OF GENUINE LOSS. ALTHOUGH THE SHARES WERE CAPITAL I NVESTMENT BUT THE SAME WERE GIVEN THE TREATMENT OF STOCK-IN-TRADE WIT HOUT ANY BASIS. HENCE, THE ACTION OF LD. AO IN DISALLOWING THE TRAD ING LOSS WAS TO BE SHRI BHARAT K.SHETH 5 UPHELD. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEA L BEFORE US BY WAY OF GROUND NO.3. 6. WE FIND THAT REVENUE ASSAILED THE ORDER OF LEARN ED FIRST APPELLATE AUTHORITY IN AYS 1996-97 & 1997-98 IN ALLOWING THE TRADING LOSS. HOWEVER, THE COORDINATE BENCH OF THE TRIBUNAL, VIDE PARA-14 OF THE ORDER, UPHELD THE ORDER OF LD. CIT(A) AND DISMISSED THE GR OUNDS RAISED BY THE REVENUE. RELIANCE WAS PLACED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN KESAVDAS RANCHHOD DAS V/S CIT (1972) 83 ITR 1, THE DECISION OF HONBLE APEX COURT IN CIT V/S SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (1975) 100 ITR 706 AS WELL AS CHAINRUP SAMPATRAM V/S CIT (1953) 24 ITR 481 WHILE ARRIVING AT SUCH A CONCLUSION. THE BENCH HELD THAT AN INACTIVITY OR LULL IN THE BUSINESS OF THE ASSESSEE FOR SOME YEARS CANNOT CONCLUSIVELY DISLODGE THE CLAIM OF THE ASSESSEE THAT IT WAS CARRYING ON THE BUSINESS OF TRADING IN SHARES. FURT HER, THE VALUATION OF STOCK-IN-TRADE WAS IN CONFORMITY WITH THE METHOD OF VALUATION OF STOCK IN TRADE THAT WAS CONSISTENTLY FOLLOWED BY THE ASSESSE E. THEREFORE, THE CLAIM ON ACCOUNT OF FALL IN VALUE OF SCRIPS WAS WEL L IN ORDER. WE FIND THAT SIMILAR ARE THE FACTS IN THIS YEAR. THERE BEING NOT HING CONTRARY ON RECORD, RESPECTFULLY FOLLOWING THE EARLIER VIEW OF TRIBUNAL , WE HOLD THAT THE TRADING LOSS OF RS.17.01 LACS ON ACCOUNT OF FALL IN VALUE O F SCRIPS WAS AN ALLOWABLE TRADING LOSS. GROUND NO. 3 STANDS ALLOWED . ISSUE NO.2: INCOME FROM HOUSE PROPERTY 7.1 THE ADDITION UNDER INCOME FROM HOUSE PROPERTY STEM FROM THE FACT THE ASSESSEE PURCHASED ONE RESIDENTIAL PROPERTY SIT UATED AT 7B, MANEK, L.D. RUPAREL MARG, MUMBAI FROM ONE INDIVIDUAL NAMEL Y DR. SARAIYA VIDE AN AGREEMENT DATED 15/02/1996. HOWEVER, HE LEASED B ACK THE SAID PROPERTY ON THE SAME VERY DAY TO THE SELLER DR. SAR AIYA VIDE A LEAVE AND SHRI BHARAT K.SHETH 6 LICENSE AGREEMENT ON A MONTHLY LICENSE FEES OF RS.5 ,000/-. THE SAID INCOME WAS OFFERED TO TAX DURING THE YEAR AFTER DED UCTION OF MUNICIPAL TAXES AS WELL AS STATUTORY DEDUCTION OF 20%. HOWEVE R, AS PER THE TERMS OF LEAVE & LICENSE AGREEMENT, THE ASSESSEE RECEIVED INTEREST FREE DEPOSIT OF RS.3 CRORES AS SECURITY DEPOSITS FROM TH E LICENSEE I.E. DR. SARAIYA WHICH LED LD. AO RE-DETERMINE RENTAL INCOME IN THE HANDS OF THE ASSESSEE AGAINST THIS PROPERTY. 7.2 AS PER TERMS OF LICENSE AGREEMENT, THE MUNICIPA L TAXES WERE TO BE BORNE BY THE ASSESSOR LICENSOR. THE QUARTERLY OUTGO ING IN THE SHAPE OF MUNICIPAL TAXES AND MAINTENANCE CHARGES AMOUNTED TO RS.19,390/- AND THEREFORE, A CONCLUSION WAS DRAWN THAT THE MONTHLY LICENSE AMOUNT OF RS.5,000/- AS RECEIVED BY THE ASSESSEE WAS NOTHING BUT REIMBURSEMENT OF MUNICIPAL TAXES & MAINTENANCE CHARGES ETC. IN OT HER WORDS, THE ASSESSEE DID NOT SHOW ANY RENT IN LIEU OF THE LEASE D PROPERTY. ACCORDINGLY, IN TERMS OF SECTION 23(1)(A) OF THE AC T, THE ANNUAL VALUE OF THE PROPERTY WOULD BE THE SUM FOR WHICH THE PROPERT Y MIGHT REASONABLY BE EXPECTED TO BE LET OUT FROM YEAR TO YEAR. THE TE ST OF REASONABLENESS IN TERMS OF THE DECISION OF HONBLE APEX COURT IN CORPORATION OF CALCUTTA VS SMT. PADMADEVI AIR 1962 SC 151 WOULD BE A BARGAIN BETWEEN A WILLING LESSOR AND A WILLING LESSEE UNINF LUENCED BY ANY EXTRANEOUS CIRCUMSTANCES MAY AFFORD A GUIDING TEST OF REASONABLENESS. AN INFLATED OR DEFLATED RATE OF RENT BASED ON FRAUD , EMERGENCY, RELATIONSHIP AND SUCH OTHER CONSIDERATIONS MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS. 7.3 IN ASSESSEES CASE, SUCH OTHER CONSIDERATION EX ISTS AND THEREFORE A REASONABLE RENT OF THE PROPERTY WAS TO BE DETERMINE D. THE SAME WAS ESTIMATED AS 12% OF INTEREST FREE DEPOSIT OF RS.3 C RORES RECEIVED BY THE SHRI BHARAT K.SHETH 7 ASSESSEE. ACCORDINGLY, AN AMOUNT OF RS.36 LACS WAS TO BE ADDED TO THE INCOME OF THE ASSESSEE AS RENTAL INCOME. HOWEVER, T HE SAME WAS TO BE ADDED ON PROTECTIVE BASIS SINCE IT WAS HELD THAT TH E ASSET WAS NEVER ACQUIRED BY THE ASSESSEE. 7.4 DURING APPELLATE PROCEEDINGS, THE ASSESSEE HAS RELIED UPON THE FAVORABLE FIRST APPELLATE ORDERS FOR AYS 1996-97 & 1997-98. HOWEVER, LD. CIT(A) CHOSE TO DIFFER FROM THE SAME BY OBSERVING A S UNDER: - 6.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ORDER OF ASSESSMENT AND THE SUBMISSION OF THE LEARNED REPRESENTATIVE OF THE APP ELLANT. THE BASIC ISSUE INVOLVED IS THE COMPUTATION OF INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' IN TERMS OF SECTION 23(1) OF THE I.T. ACT. THE ASSESSING OFF ICER HAS TAKEN INTO ACCOUNT THE INTEREST ATTRIBUTABLE ON THE AMOUNT OF RS.3 CRORES FOR THE PURPOSE OF COMPUTING THE ANNUAL VALUE OF THE HOUSE PROPERTY. MY LEARNED PRED ECESSOR HAD ALLOWED RELIEF TO THE APPELLANT RELYING ON THE VARIOUS DECISIONS CITE D BY THE APPELLANT'S A/R WHICH ARE MENTIONED ABOVE. MY LEARNED PREDECESSOR HAS ALLOWED THE RELIEF MAINLY ON THE GROUNDS THAT NOTIONAL INTEREST CANNOT BE INCLUDED I N THE RENTAL VALUE OF A HOUSE, THAT WHERE THE RENT CONTROL ACT IS APPLICABLE ONLY THE S TANDARD RENT CAN BE ADOPTED AS ANNUAL RENTAL VALUE, THAT THE ASSESSING OFFICER WAS BOUND TO FIX THE ANNUAL LETTING VALUE BASED ON THE MUNICIPAL VALUATION UNLESS THE S AME WAS LOWER THAN THE ACTUAL RENT RECEIVED, THAT THE NOTIONAL INTEREST ON THE DE POSIT IS NOT AN ACTUAL RENT RECEIVED OR RECEIVABLE , THAT THERE IS NO CORRESPONDING PROV ISION IN SECTIONS 22 AND 23 OF THE I.T. ACT WITH THE SCHEDULE III OF THE W.T, ACT 1957 . MY LEARNED PREDECESSOR HAD ALSO HELD THAT THE APPELLANT IS OWNER OF THE RESIDENTIAL HOUSE. WITH DUE RESPECT TO MY LEARNED PREDECESSOR, I BEG TO DIFFER WITH HIM ON CE RTAIN ISSUES BEING RELEVANT TO COMPUTATION OF ALV OF THE PROPERTY. I AGREE WITH HI M THAT NOTIONAL INTEREST WORKED OUT ON THE DEPOSIT OF RS.3 CRORES IN ITSELF CANNOT BE ADOPTED AS THE ALV OF THE HOUSE PROPERTY. TO THIS EXTENT, I AGREE WITH THE VI EW OF MY LEARNED PREDECESSOR. HOWEVER, THE ISSUE NEEDS TO BE VIEWED IN ITS TOTAL PERSPECTIVE FOR THE PURPOSE OF COMPUTING ANNUAL VALUE OF THE HOUSE PROPERTY. IT HA S BEEN ARGUED BY THE LEARNED REPRESENTATIVE OF THE APPELLANT THAT THE PROPERTY H AS NEITHER BEEN RENTED OUT NOR BEEN LEASED OUT. IT HAS BEEN CLAIMED THAT IT IS AN ARRANGEMENT OF LEAVE AND LICENCE. IT IS CLEAR FROM THE SUBMISSION OF THE APPELLANT TH AT THE APPELLANT DENIES THE APPLICABILITY OF RENT CONTROL ACT IN ITS CASE. IT H AS BEEN EMPHATICALLY SUBMITTED THAT THE APPELLANT HAS NOT LEASED OUT THE SAID PREMISES. IT HAS BEEN SUBMITTED THAT THE APPELLANT HAS ONLY BEEN GRANTED THE LICENCE TO USE THE PREMISES TO DR. SARAIYA ON PAYMENT OF CERTAIN COMPENSATION. BY THIS SUBMISSION , IT IS CLEAR THAT THE RECEIPT OF RS.5,000/- P.M. IS NOT TREATED BY THE APPELLANT EIT HER AS RENT IN ITS SIMPLE TERM OR IN THE NATURE OF LEASE RENT. THE APPELLANT HAS TERMED IT AS LICENCE FEE. AS THE ARRANGEMENT IS NOT GOVERNED BY THE PREVALENT RENT C ONTROL ACT, THE STANDARD RENT AS PER THE MUNICIPAL VALUATION, IN MY CONSIDERED OPINI ON, CANNOT BE HELD TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. SUCH SUM, IN VIEW OF THE PECULIAR FACTS OF THE CASE, CAN BE DETERMINED CONSIDERING THE VARIOUS FACTORS WHICH GOVERN THE REASONABLENESS OF A SUM WHICH CAN BE EXPECTED IN THE OPEN MARKET. THE GOVERNING FACTORS ARE THE FOLL OWING : SHRI BHARAT K.SHETH 8 I) AREA OF THE FLAT. THE PRESENT FLAT IS ABOUT 2400 SQ.FT. IT CONSISTS OF 3 BED ROOMS WITH ATTACHED BATH AND TOILETS, A DINING HALL, A SI TTING ROOM, A KITCHEN AND A SERVANT QUARTER WITH ATTACHED TOILET. IT ALSO HAS TWO COVER ED CAR PARKING SPACE. II) LOCATION OF THE PROPERTY. THE PROPERTY IS LOC ATED IN ONE OF THE PRESTIGIOUS AREA OF THE CITY I.E. MALABAR HILL NEAR THE NEPEAN SEA ROAD. THE BUILDING IS SEA FACING. III) THE COST OF THE PROPERTY. AS CAN BE SEEN FROM THE AGREEMENT, THE COST OF THE PROPERTY AT THE TIME OF PURCHASE BY THE ASSESSEE WA S OF MORE THAN RS.6 CRORES. IV) IT CANNOT BE IGNORED THAT THE AMOUNT OF RS.3 CR ORES RECEIVED BY THE APPELLANT HAS DIRECT CONNECTION WITH LETTING OUT OF THE PROPE RTY. IN NORMAL COURSE, NOBODY WOULD GIVE SUCH HUGE AMOUNT INTEREST FREE. WHILE DE TERMINING THE ANNUAL VALUE THIS ASPECT ALSO NEEDS TO BE CONSIDERED. THE ARRANGEMENT ALSO PROVES THAT THE PROPERTY WAS LET OUT ON THE BASIS OF SIMPLE TERMS BUT A CIRC UMVENTING SCHEME WAS MADE BY WHICH THE APPELLANT THOUGH RECEIVED NOMINAL RENT, H OWEVER, ENABLED ITSELF TO ENJOY SUBSTANTIAL FUNDS WITHOUT PAYING ANY INTEREST. THE ARRANGEMENT DOES NOT CONFIRM TO THE NORMAL COMMERCIAL OR PRUDENTIAL NORMS. 6.2 IT HAS BEEN HELD BY THE PATNA HIGH COURT (101 I TR 810) THAT MUNICIPAL VALUATION AFFORDS AN INDICATION AS TO THE REASONABLE ANNUAL L ETTING VALUE OF A BUILDING BUT THE SAME CAN BE REBUTTED ON THE BASIS OF OTHER MATERIAL S ON RECORD. IN SUCH A CASE, THE ANNUAL VALUE MAY BE DETERMINED EITHER AT A REDUCED OR ENHANCED FIGURE THAN THAT OF MUNICIPAL VALUATION. SIMILARLY, DELHI HIGH COURT, IN THE CASE OF CIT VS. H.P. SHARMA 122 ITR 675 HAS HELD THAT THE MUNICIPAL VALUATION I S ONLY A PIECE OF EVIDENCE AND IT CANNOT OVERRIDE THE FIGURE OF ACTUAL RENT AS THE BA SIS FOR DETERMINATION OF ANNUAL VALUE. GUJARAT HIGH COURT (100 ITR 97) HAS HELD THA T IN ABSENCE OF ANY BETTER WAY OF ESTIMATING RENT, THE RATE OF INTEREST ON COST, O R ON CAPITAL VALUE, OF BUILDING AND LAND MAY PROVIDE A REASONABLE BASIS FOR DETERMINING THE ALV OF A PROPERLY. THE DECISIONS OF THE HON'BLE SUPREME COURT, WHILE HOLDI NG THAT STANDARD RENT MAY BE CONSIDERED AS A SUM FOR WHICH THE PROPERTY MIGHT RE ASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR, WAS NOT SEIZED WITH THE CASES OF THE NATURE IDENTICAL TO THE NATURE OF THE PRESENT CASE. IN THE PRESENT CASE A NOMINAL RENT HAS BEEN FIXED AND A BENEFIT HAS BEEN DERIVED BY WAY OF ENJOYING INTEREST FREE D EPOSITS AND THE RENT FIXED IS NOT IN CONFORMITY WITH THE AREA OF THE FLAT, ITS LOCATI ON, ITS CAPITAL VALUE ETC. THE CONCEPT OF STANDARD RENT, IN MY CONSIDERED OPINION, CANNOT BE APPLIED IN SUCH CASES. 6.3 IT IS AN UNDISPUTED FACT IN THE PRESENT CASE TH AT THE AMOUNT OF RS.5,000/- WAS NOT FIXED IN ACCORDANCE WITH THE RENT CONTROL ACT. THE AO IS THEREFORE, DIRECTED TO GET THE NECESSARY INFORMATION ABOUT THE PREVAILING RENT IN THE AREA FOR A SIMILAR BUILDING. THE ASSESSING OFFICER, FOR THIS PURPOSE, MAY ALSO C ONSIDER THE MARKET RENT FIXED BY CPWD FOR ITS PROPERTIES ALLOTTED TO THE GOVT. SERVA NTS. THE QUANTUM OF RENTAL VALUE NEEDS TO BE FIXED CONSIDERING ALL THE ABOVE FACTORS . IN MY CONSIDERED OPINION, THE ACTION OF THE AO IN DETERMINING THE ANNUAL VALUE AT RS.36 LAKHS PER ANNUM PURELY ON THE BASIS OF THE AMOUNT OF INTEREST FREE DEPOSIT IS NOT JUSTIFIED. AT THE SAME TIME, I BEG TO DIFFER WITH MY LEARNED PREDECESSOR THAT TH E AMOUNT DECLARED BY THE APPELLANT CAN BE ACCEPTED AS A SUM FOR WHICH THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. GROUND OF APPEAL NO. L OF THE APPELLANT IS THEREFORE, REJECTED. THE ASSESSING OFFICER IS DIREC TED TO FIX THE QUANTUM CONSIDERING THE ABOVE FACTORS AND THE PRINCIPLES DISCUSSED ABOV E. SHRI BHARAT K.SHETH 9 UPON PERUSAL OF THE ABOVE, IT IS EVIDENT THAT LD. C IT(A), WHILE AGREEING THAT NOTIONAL INTEREST COULD NOT BE ADOPTED AS ALV OF THE PROPERTY, CHOSE TO TAKE A CONTRARY VIEW THAN TAKEN IN EARLIER YEARS. THE REASON FOR THE SAME IS STATED TO BE THE FACT THAT THE PROPERTY WAS NEITHER RENTED OUT NOR LEASED OUT BUT IT WAS AN ARRANGEMENT IN THE NAT URE OF LEAVE & LICENSE. THUS, THE ASSESSEE DENIES THE APPLICABILIT Y OF RENT CONTROL ACT. CONSEQUENTLY, THE RECEIPTS WOULD BE NEITHER RENT NO R LEASE RENT BUT LICENSE FEES. SINCE THIS ARRANGEMENT WOULD NOT BE G OVERNED BY THE PREVALENT RENT CONTROL ACT, THE STANDARD RENT AS PE R MUNICIPAL VALUATION CANNOT BE HELD TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET OUT FROM YEAR TO YEAR. RATHER THE S AME WAS TO BE DETERMINED KEEPING IN MIND VARIOUS FACTORS. FINALLY , THE LD. AO WAS DIRECTED TO RE-FIX THE QUANTUM KEEPING IN MIND VARI OUS FACTORS AS ENUMERATED IN THE IMPUGNED ORDER. AGGRIEVED AS AFORESAID, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US BY WAY OF GROUND NOS.1 & 2. 8. UPON PERUSAL OF CITED ORDER OF THE TRIBUNAL, WE FIND THAT IN AY 1996- 97, LD. AO TREATED THE LEAVE AND LICENSE ARRANGEMEN T ENTERED INTO BY THE ASSESSEE WITH DR. SARAIYA AS TRANSFER AS CONTEM PLATED IN SEC.2(47) OF THE ACT AND THEREFORE, DENIED THE EXEMPTION U/S 54F AS CLAIMED BY THE ASSESSEE. PROCEEDING FURTHER, LD.AO ALSO FORMED AN OPINION THAT RENTAL VALUE OF THE PROPERTY WAS TO BE CONSIDERED AS 12% O F INTEREST FREE DEPOSIT OF RS.3 CRORES RECEIVED BY THE ASSESSEE FRO M DR. SARAIYA AND BROUGHT THE SAME TO TAX. UPON FURTHER APPEAL, LD. CIT(A) RELYING UPON THE DE CISION OF HONBLE BOMBAY HIGH COURT IN HAMEED JAFFERY V/S CIT (1997) 227 ITR 724 HELD THAT NO TRANSFER OF PROPERTY WAS CARRIED OUT BY THE ASSESSEE TO LICENSEE SHRI BHARAT K.SHETH 10 I.E. DR. SARAIYA AND THE LICENSE GRANTED WAS NOT FO R EXCLUSIVE USE BUT THE ASSESSEE WAS VESTED WITH THE RIGHT TO ENTER AND USE THE SAID PREMISES. THE ENTIRE TRANSACTION COULD NOT BE CHARACTERIZED A S A COLORABLE DEVICE TO AVOID PAYMENT OF TAX. HENCE, THE ASSESSEE WAS EL IGIBLE TO CLAIM EXEMPTION U/S 54F. THE ESTIMATION OF RENTAL VALUE A S MADE BY LD. AO ON THE BASIS OF NOTIONAL INTEREST WAS ALSO REJECTED BY OBSERVING THAT AO WAS BOUND TO FIX ANNUAL LETTABLE VALUE (ALV) BASED ON M UNICIPAL VALUATION UNLESS THE SAME WAS LOWER THAN THE ACTUAL RENT RECE IVED. THE LD. CIT(A) FURTHER OBSERVED THAT U/S 23(1)(B) ONLY THE ACTUAL RENT RECEIVED OR RECEIVABLE COULD BE TAKEN INTO CONSIDERATION AND NO TIONAL INTEREST COULD NOT BE INCLUDED IN ANNUAL RENTAL VALUE. 9. THE STAND OF LD. CIT(A), ON BOTH THE ISSUES WAS ASSAILED BY REVENUE IN AY1996-97 BEFORE CITED DECISION OF THIS TRIBUNAL . THE CO-ORDINATE BENCH, VIDE PARA-12 OF THE ORDER, CONFIRMED THE STA ND OF LD. CIT(A) THAT THE OWNERSHIP WAS NOT DISLODGED BY GIVING THE SAME ON LEAVE & LICENSE BASIS TO DR. SARAIYA AND THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 54F. REGARDING FIXATION OF ALV OF THE PROPERTY, RELYING UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT V/S TIP TOP TYPOGRAPHY (2014)368 ITR 330, THE BENCH HELD THAT THE ALV SO DETERMINED BY LD. AO COULD NOT BE SUSTAINED. THE LD. AO COULD NOT BRUSH ASIDE THE RENT CONTROL LEGISLATION. THEREFORE, THE ORDER OF LD. CIT(A) WAS UPHELD AND THE GROUND RAISED BY REVENUE WERE ULTIMATELY DISMISSED IN PARA -13. THE SAID DECISION WAS FOLLOWED MUTATIS-MUTANDIS IN AY1997-98. 10. THUS IN THE BACKDROP OF AFORESAID DECISION OF T HE TRIBUNAL, IT IS QUITE EVIDENT THAT LD. CIT(A) HAS RIGHTLY CONCLUDED THAT ESTIMATION OF ALV ON THE BASIS OF NOTIONAL INTEREST COULD NOT BE UPHE LD IN THE EYES OF LAW. HOWEVER, THE SAME TIME, THE FINDINGS THAT THE PROPE RTY WOULD NOT BE SHRI BHARAT K.SHETH 11 SUBJECTED TO RENT CONTROL LEGISLATION IS BEREFT OF ANY EVIDENCE ON RECORD. THE INCOME SO EARNED NOTWITHSTANDING THE NOMENCLATU RE OF RENTAL / LEASE RENTAL OR LICENSE FEES, ALL ARE ASSESSABLE UNDER TH E HEAD INCOME FROM HOUSE PROPERTY AND SUBJECTED TO SIMILAR COMPUTATION S. NO DIFFERENCE HAS BEEN CARVED OUT IN LAW IN ALL THESE DIFFERENT S TREAMS OF INCOME. THE ASSESSEE NOWHERE DENIED THE APPLICABILITY OF RENT C ONTROL ACT TO THE STATED STREAM OF INCOME. THEREFORE, THE FACTS OF TH E CASE ARE SQUARELY COVERED BY THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 1996-97 & 1997-98. THERE IS NO CHANGE IN MA TERIAL FACTS. NO CONTRARY DECISION IS ON RECORD. NOTHING HAS BEEN SH OWN THAT THE AFORESAID DECISION OF THE TRIBUNAL HAS EVER BEEN RE VERSED OR NOT APPLICABLE, IN ANY MANNER. THEREFORE, RESPECTFULLY FOLLOWING THE CONSISTENT STAND OF THE TRIBUNAL, WE ARE INCLINED T O QUASH THE DIRECTIONS GIVEN BY LD. CIT(A). THE ADDITIONS, THUS MADE BY LD .AO, STAND DELETED. GROUND NOS. 1 & 2 STANDS ALLOWED. ISSUE NO.3: LEVY OF INTEREST 11. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED BY NO N-ADJUDICATION OF GROUND RELATING TO LEVY OF INTEREST U/S 234A, 234B & 234C. THE LD.SR. COUNSEL SUBMITTED THAT THE RETURN OF INCOME WAS FIL ED WITHIN TIME AND THEREFORE, THERE WOULD BE NO QUESTION OF LEVY OF IN TEREST U/S 234A. ERRORS HAVE ALSO BEEN POINTED OUT IN THE COMPUTATION OF IN TEREST U/S 234B, 234C. IN THIS REGARD, IT WOULD SUFFICE ON OUR PART TO DIRECT LD. AO TO RE- COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER AND LEVY INTEREST ONLY IN ACCORDANCE WITH LAW. THIS GRO UND STAND ALLOWED FOR STATISTICAL PURPOSES. 12. FINALLY, THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. SHRI BHARAT K.SHETH 12 CROSS-APPEALS FOR AY 1999-2000 13.1 FACTS ARE PARI-MATERIA THE SAME IN THIS YEAR. AN ASSESSMENT WAS FRAMED U/S 143(3) ON 15/03/2002 WHEREIN SIMILAR TRA DING LOSS OF RS.0.92 LACS WAS DISALLOWED AND THE RENTAL INCOME WAS DETER MINED @12% OF INTEREST FREE DEPOSIT. UPON FURTHER APPEAL, LD. CIT (A) CONFIRMED THE DISALLOWANCE OF TRADING LOSS BY FOLLOWING APPELLATE ORDER FOR AY 1998-99. REGARDING RENTAL INCOME, THE APPELLATE ORDER FOR AY 1998-99 WAS FOLLOWED AND SIMILAR DIRECTIONS WERE GIVEN. AGGRIEV ED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH SIMILAR GROUNDS OF AP PEAL. THE REVENUE IS ALSO UNDER APPEAL CHALLENGING THE FINDINGS OF LD. C IT(A) WITH RESPECT TO RENTAL INCOME. 13.2 AT THE OUTSET, IT IS NOTED THAT THE TAX EFFECT OF QUANTUM ADDITIONS UNDER DISPUTE BY REVENUE IS LESS THAN PRESCRIBED MO NETARY LIMIT OF RS.50 LACS AND THEREFORE, THE APPEAL WOULD NOT BE MAINTAI NABLE IN TERMS OF LATEST LOW TAX EFFECT CIRCULAR NO. 17/2019 DATED 08 /08/2019 [F.NO.279/MISC. 142/2007-TTJ(PT.) ISSUED BY CBDT. T HEREFORE, THE REVENUES APPEAL STANDS DISMISSED. 13.3 THE FACTS AS WELL AS ISSUES IN ASSESSEES APPE AL ARE PARI-MATERIA THE SAME AS IN AY 1998-99. THEREFORE, OUR FINDINGS AS WELL AS ADJUDICATION THEREIN SHALL MUTATIS-MUTANDIS APPLY TO THIS YEAR ALSO. 14. RESULTANTLY, THE REVENUES APPEAL STAND DISMISS ED WHEREAS THE ASSESSEES APPEAL STAND ALLOWED IN TERMS OF OUR ABO VE ORDER. ASSESSEES APPEAL-ITA NO.2822/MUM/2006 FOR AY 2001- 02 15. IN THIS YEAR, AN ASSESSMENT WAS FRAMED U/S 143( 3) ON 16/03/2004 WHEREIN SIMILAR TRADING LOSS OF RS.20.33 LACS WAS D ISALLOWED AND THE RENTAL INCOME WAS DETERMINED @8% OF INTEREST FREE D EPOSIT. UPON FURTHER APPEAL, LD. CIT(A) CONFIRMED THE DISALLOWAN CE OF TRADING LOSS BY SHRI BHARAT K.SHETH 13 FOLLOWING APPELLATE ORDERS FOR AYS 1998-99, 1999-20 00 & 2000-01. REGARDING RENTAL INCOME, THE APPELLATE ORDERS FOR A YS 1998-99, 1999- 2000 & 2000-01 WERE FOLLOWED AND SIMILAR DIRECTIONS WERE GIVEN. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH SIMILAR GROUNDS OF APPEAL. 16. SINCE THE FACTS AS WELL AS ISSUE OF RENTAL INCO ME IN ASSESSEES APPEAL IS PARI-MATERIA THE SAME AS IN AY 1998-99. T HEREFORE, OUR FINDINGS AS WELL AS ADJUDICATION THEREIN SHALL MUTATIS-MUTANDIS APPLY TO THIS YEAR ALSO. THE LD. AO IS DIRECTED TO RE-COMPUT E CORRECT INTEREST U/S 234A, 234B & 234C IN ACCORDANCE WITH LAW. 17. RESULTANTLY, ALL THESE APPEALS STAND ALLOWED IN TERMS OF OUR ABOVE ORDER. ASSESSEES OTHER APPEALS 18. IN AY 2002-03, THE ASSESSMENT WAS FRAMED U/S 14 3(3) ON 11/01/2005 WHEREIN THE RENTAL INCOME HAS BEEN ESTIM ATED @RS.28.80 LACS WHICH WAS BASED ON COMPARATIVE RENTS OF OTHER FLATS LOCATED IN SAME BUILDING. 19. SIMILAR ASSESSMENT WAS MADE FOR AY 2003-04 ON 1 5/02/2006 WHEREIN THE RENT WAS ESTIMATED @RS.30.24 LACS CONSI DERING 5% APPRECIATION IN THE RENT. SIMILAR WAS THE ADDITION IN ASSESSMENT ORDERS FOR AYS 2004-05 & 2007-08, 2008-09, 2010-11, 2011-1 2, 2012-13 & 2013-14. 20. UPON FURTHER APPEAL, LD. CIT(A) CONFIRMED THE S TAND OF LD. AO IN ALL THESE YEARS VIDE SEPARATE ORDERS. AGGRIEVED, THE AS SESSEE IS IN FURTHER APPEAL BEFORE US ON THIS ISSUE FOR ALL THE YEARS. 21. WE FIND THAT SAME LEAVE & LICENSE AGREEMENT IS CONTINUING IN THE CASE OF THE ASSESSEE. THERE IS NO CHANGE IN MATERIA L FACTS EXCEPT THE SHRI BHARAT K.SHETH 14 BASIS OF ESTIMATION OF RENTAL INCOME. THERE IS NOTH ING ON RECORD WHICH WOULD WARRANT US TO DEVIATE FROM OUR ADJUDICATION. THEREFORE, OUR FINDINGS AS WELL AS ADJUDICATION AS IN AY 1998-99 S HALL MUTATIS-MUTANDIS APPLY TO ALL THESE APPEALS. RESULTANTLY, ALL THESE APPEALS STAND ALLOWED IN TERMS OF OUR ABOVE ORDER. CONCLUSION 22. THE REVENUES APPEAL STAND DISMISSED. THE ASSES SEES APPEAL FOR AYS 1998-99, 1999-2000 & 2001-02 STANDS ALLOWED TO THE EXTENT INDICATED IN THE ORDER WHEREAS ALL THE REMAINING AP PEALS OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 17 TH DECEMBER, 2020 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/12/2020 SR.PS:-JAISY VARGHESE !' #' / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,$- , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.