ITO 9(2)(1), MUMBAI V. HELLION FINANCE & LEASING P.LTD, MUMBAI

ITA 48/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4193 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 21-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VACHESPATI TRIPATHI
• Keywords: Business income; Fair market value; Notional interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM ./ I.T.A. NO . 48 / MUM/ 201 4 ( / ASSESSMENT YEA R : 20 10 - 11 ) INCOME TAX OFF ICER - 9(2)(1), 2 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S HELLION FINANCE AND LEASING PVT LTD. 201/B.PARESH APTS, MANDPESHWAR ROAD, BORIVALI (W), MUMBAI - 400092 ( / APPELLANT ) .. ( / RESPONDEN T ) CROSS - OBJECTION NO.46/MUM/20 1 5 ARISING OUT OF I.T.A. NO .48/ MUM/ 2014 ( / ASSESSMENT YEA R : 2010 - 11 ) M/S HELLION FINANCE AND LEASING PVT LTD. 201/B.PARESH APTS, MANDPESHWAR ROAD, BORIVALI (W), MUMBAI - 400092 / VS. INCOME TAX OFFI CER - 9(2)(1), 2 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACH8539E / REVENUE BY SHRI VACHESPATI TRIPATHI / ASSESSEE BY NONE / DATE OF HEARING : 4.2 . 201 6 / DATE OF PRONOUNCEMENT: 4 . 2 . 201 6 I.T.A. NO. 48 / MUM/ 20 1 4 AND CO.46/M/15 2 / O R D E R P ER B R BASKARAN, AM : THE APPEAL FILED BY THE REVEN UE AND CROSS - OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 21.10.2013 PASSED BY THE LD.CIT(A) - 20, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2010 - 11. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH THE NOTICE WAS SERVED UPON THE ASSESSEE THROUGH DEPARTMENT. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL AND CROSS - OBJECTION EX - PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF LEAS ING OUT ITS PROPERTY . THE R ENTAL INCOME DERIVED BY IT WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. T HE AO NOTICED THAT ASSESSEE HAD RECEIVED RENTAL INCOME OF RS.67,50,000/ - FOR TEN MONTHS AND HAD ALSO COLLECTED AN INTEREST FREE SECURITY DEPOSIT OF RS.13,50,000/ - FROM THE TENANTS. THE AO, HOWE VER, TOOK THE VIEW THAT THE NOTIONAL INTEREST ON INTEREST FREE DEPOSITS SHOULD ALSO BE TAKEN AS PART OF ANNUAL LETTING VALUE (ALV). ACCORDINGLY, THE AO ESTIMATED RENTAL INCOME OF RS.6,88,500/ - PER MONTH AND ACCORDINGLY, HE DETERMINED THE ALV AT RS.82, 62,000/ - . IT IS PERTINENT TO NOTE THAT THE AO COMPUTED ALV FOR THE VACANT PERIOD OF TWO MONTHS ALSO . 4. BESIDES THE ABOVE, THE ASSESSEE HAD ALSO CLAIMED VARIOUS EXPENSES AND DECLARED BUSINESS LOSS THERE FROM. THE AO, HOWEVER, DETERMINED THE BUSINESS INCOME OF THE ASSESSEE AT NIL, SINCE THE ASSESSEE DID NOT CARRY ON ANY OTHER BUSINESS ACTIVITY. 5. THE AO HAD ALSO NOTICED THAT THE ASSESSEE HAS RECEIVED DEPOSITS TO THE TUNE OF RS.48,50,000/ - FROM THREE OF ITS TENANTS. DUE TO DISPUTES AND FINANCIAL PR OBLEMS, THE ASSESSEE DID NOT REFUND THE DEPOSITS AND ASSESSEE I.T.A. NO. 48 / MUM/ 20 1 4 AND CO.46/M/15 3 CONTINUED TO BE SHOWN IT AS LIABILITY. THE AO TOOK THE VIEW THAT THESE DEPOSITS ARE ASSESSABLE U/S 41(1) OF THE ACT AND ASSESSED THE SAME. 6 . IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) DID N OT AGREE WITH THE AO ON THE INCOME HOUSE PROPERTY COMPUTED BY HIM AND ACCORDINGLY DIRECTED THE AO TO ACCEPT THE COMPUTATION OF THE ASSESSEE. THE LD.CIT(A) ALSO HELD THAT THE AO WAS PATENTLY WRONG IN APPL YING THE PROVISIONS OF SECTION 41(1) OF THE ACT S INCE THE PERSONS WHO GAVE THE DEPOSITS HAD INITIATED LEGAL ACTION AGAINST THE ASSESSEE. WITH REGARD TO THE DETERMIN ATION OF BUSINESS INCOME AT NIL, T HE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. 7 . AGGRIEVED BY THE ORDER OF LD.CIT (A), THE REVENUE HAS FI LED THIS APPEAL IN RESPECT OF DETERMINATION OF HOUSE PROPERTY INCOME AND INCOME ASSESSED U/S 41(1) OF THE ACT. T HE ASSESSEE HAS ALSO FILED CROSS - OBJECTION IN RESPECT OF DETERMINATION OF BUSINESS INCOME AT NIL . 8 . WE HEARD THE LD.DR AND PERUSED THE RECORD . WE NOTICE THAT THE PROPERTY WAS LET OUT FOR A PERIOD OF TEN MONTHS AND IT REMAINED VACANT FOR A PERIOD OF TWO MONTHS. WE FUTHER NOTICE THAT THERE IS NO FINDING BY THE AO THAT THE RENT RECEIVED BY THE ASSESSEE WAS LESS THAN THE FAIR MARKET VALUE AS PER T HE REQUIREMENT OF SEC. 23(1)(B) OF THE ACT. IT IS ALSO PERTINENT TO NOTE THAT THE AO HAS DETERMINED THE RENTAL INCOME IN RESPECT OF VACANT PERIOD ALSO AND THE SAME IS AGAINST THE PROVISIONS OF SECTION 23(1)(C) OF THE ACT. WITH REGARD TO THE NOTIONAL INT EREST ESTIMATED BY THE AO ON THE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE , WE NOTICE THAT THE AO HAS NOT MADE ANY ENQUIRY TO FIND OUT THAT THE RENT RECEIVED BY THE ASSESSEE COMPELS INCLUSION OF THE SUCH NOTIONAL INCOME, WHICH IN TURN COULD BE DETERMINED ONLY IF IT IS SHOWN THAT THE RENT RECEIVED BY THE ASSESSEE TOGETHER WITH THE NOTIONAL INTEREST ON THE SECURITY DEPOSIT WAS LESS THAN THE FAIR MARKET VALUE DETERMINED U/S 23(1)(A) OF THE ACT. WE FIND SUPPORT FOR OUR VIEW FROM THE DECISION RENDERED BY THE H ONBLE I.T.A. NO. 48 / MUM/ 20 1 4 AND CO.46/M/15 4 JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY (ITA NO.1213 OF 2011 DATED 08 - 08 - 2014). IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION RENDERED BY LD CIT(A) ON THIS ISSUE. 9 . WITH REGARD TO THE ADDIT ION MADE U/S 41(1) OF THE ACT, THE LD.CIT(A) HAS GIVEN CATEGORICAL FINDING THAT LIABILITY OF THE ASSESSEE TOWARDS THE DEPOSITS DID NOT CEASE . THE LD CIT(A) HAS NOTICED THAT ONE OF THE PARTIES, VIZ., ICICI BANK HAS INITIATED LEGAL PROCEEDINGS AGAINST THE A SSESSEE. HENCE, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN CANCELLING THE ADDITION MADE U/S 41(1) OF THE ACT. 10. WITH REGARD TO THE DETERMINATION OF THE BUSINESS INCOME, THE LD. CIT(A) HAS HELD THAT THE ASSESSEE DID NOT CARRY ON ANY BUSINESS AND HENCE THE QUESTION OF SETTING OFF OF CURRENT YEAR AS WELL AS BROUGHT FORWARD LOSSES OF THE ASSESSEE DOES NOT ARISE. WE NOTICE THAT THE SAID DECISION OF THE LD. CIT(A) IS IN ACCORDANCE WITH LAW. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. 11 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND CROSS - OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . PRONOUNCED ACCORDINGLY ON 4TH FEB , 2 01 6 . 4 TH FEB 2 01 6 S D SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 4 TH FEB , 2 01 6 . . . ./ SRL , SR. PS I.T.A. NO. 48 / MUM/ 20 1 4 AND CO.46/M/15 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBA I