SURYASHANKAR PROPERTIES LTD, MUMBAI V. ASST CIT 1(3), MUMBAI

ITA 5318/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92815 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 03-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-07-2013
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: S VENKATRAMA N

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & MS. SUSHMA CHOWLA , J M ./ I TA NO. 5 258 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 7 - 08 ) A CIT - 1(3), MUMBAI VS. SURYASHANKAR PROPERTIES LIMITED, THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR. D.N.ROAD, MUMBAI - 400001 ./ ./ PAN/GIR NO. : A A JCS 7873 H ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 5318/ MUM/20 13 ( / ASSESSMENT YEAR :2007 - 08 ) SURYASHANKAR PROPERTIES LIMITED, THE TIMES OF INDIA BUILDING, 2 ND FLOOR, DR. D.N.ROAD, MUMBAI - 400001 VS. ACIT - 1(3), MUMBAI ./ ./ PAN/GIR NO. : A AJCS 7873 H ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI S.VENKATRAMAN /REVENUE BY : S HRI M.RAJAN / DATE OF HEARING : 0 3 /0 6 / 2015 / DATE OF PRONOUNCEMENT 10/06 /2015 / O R D E R PER R.C.SHARMA (A.M) : ITA NO. 5258/MUM/2013 (BY DEPARTMENT ) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - FOR THE ASSESSMENT YEAR 200 7 - 08 , WHEREIN THE REVENUE IS AGGRIEVED BY THE ACTION OF CIT(A) IN ALLOWING CARRY FORWARD LOSSES U/S.71B OF THE ACT ITA NO S . 5258&5318 /1 3 2 WITHOUT APPRECIATING THE FACT THAT THE LD. CIT(A) HIMSELF HAS CONFIRMED THE EXPENSES AS PRE - OPERATIVE EXPENSES AND SUCH EXPENSES CAN BE CLAIMED U/S.35D OF T HE I.T.ACT. 2. FACTS IN BRIEF ARE THAT THE AO IN HIS ASSESSMENT ORDER, WAS OF THE OPINION THAT SINCE THE ASSESSEE COMPANY WAS FORMED WITH THE OBJECT OF ACQUIRING IMMOVABLE PROPERTY TO BE LET OUT, AND THE SAID PROPERTY HAD NOT BEEN LET OUT, THE ASSESSEE HA D NOT COMMENCED BUSINESS AND CONSEQUENTLY ALL THE EXPENDITURE, INCLUDING THE INTEREST, IS TO BE TREATED AS PRE - OPERATIVE EXPENDITURE. HE, THEREFORE, DID NOT ACCEPT THE ASSESSEES CONTENTION THAT THE INCOME IS TO BE COMPUTED UNDER THE HEAD INCOME FROM H OUSE PROPERTY AND CONSEQUENTLY DISALLOWED THE INTEREST AS A PRE - OPERATIVE EXPENDITURE AND THEREBY ALSO DISALLOWED THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF LOSS UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS PROVIDED FOR IN SECTION 71B OF THE INCOME T AX ACT, 1961. 3 . LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN THE CASE OF M/S ARYABHATA PROPERTIES LIMITED, ITA NO.6928/MUM/2011, ORDER DATED 31 - 7 - 2013, WHEREIN EXACTLY SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 4 . WE HAVE CAREFULLY GONE THR OUGH THE ORDER OF THE TRIBUNAL, WHEREIN ASSESSEE CONSTRUCTED A BUILDING IN THE YEAR 2006. IN THE ASSESSMENT YEAR 2007 - 08, ASSESSEE CLAIMED NIL ANNUAL LETTING VALUE AS THE PROPERTY WAS VACANT AND FURTHER CLAIMED LOSS BY WAY OF INTEREST. THE AO ADOPTED 10% O F COST AS ALV AND DETERMINED THE ALV FOR THE THREE MONTHS , THEREBY CLAIM OF INTEREST WAS REDUCED BY THE AMOUNT OF ALV TAKEN FOR THREE ITA NO S . 5258&5318 /1 3 3 MONTHS. THE TRIBUNAL IN ARYABHAT PROPERTIES LTD. (SUPRA) HAS DELETED THE ADDITION MADE BY THE AO AND HELD THAT THE ASSESSE E IS ENTITLED TO VALUE PROPERTY AT NIL DURING THE YEAR U/S.23(1)(C). THE PRECISE OBSERVATION OF THE TRIBUNAL WAS AS UNDER : - 4. WE HAVE HEARD THE LD. COUNSEL AND THE LD. DR AND PERUSED THE PAPER BOOK PLACED ON RECORD ALONG WITH THE COPIES OF RELEVANT CASE LAW RELIED ON BY PARTIES. THE ACTION OF ASSESSING OFFICER IN DETERMINING THE ALV AT 10% OF THE COST OF PROPERTY CANNOT BE APPROVED AS THERE ARE CATENA OF DECISIONS THAT THE ALV HAS TO BE DETERMINED BASED ON THE ANNUAL RATABLE VALUE DETERMINED BY MUNICIPAL AUTHORITIES. THE PRINCIPLE WAS HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M.V. SONAVALAE VS. CIT (177 ITR 246) LONG BACK, WHICH WAS BEING FOLLOWED IN NUMBER OF LATER DECISIONS. EVEN FOR WEALTH TAX PURPOSES THE SAME DECISION WAS RELIED UPON IN THE CAS E OF SMT. SMITABEN N. AMBANI VS. CWT (323 ITR 104) (BOM.). THEREFORE, ACTION OF ASSESSING OFFICER IN DETERMINING THE ALV ON THE BASIS OF COST OF THE PROPERTY CAN NOT BE UPHELD. 5. LD. CIT(A) DISMISSED THE CONTENTIONS OF THE ASSESSEE ON THE REASON THAT ASS ESSEE HAS NOT FURNISHED THE MUNICIPAL RATABLE VALUE TO AO IN THE PROCEEDINGS. THIS OBSERVATION OF CIT(A) IS FACTUALLY NOT CORRECT AS THE ASSESSEE VIDE LETTER DATED 07.12.2009 TO AO (AT PAGE - 4 OF THE LETTER) CLEARLY STATED THE MUNICIPAL RATABLE VALUE AT RS. 10 PER SQ.FT. AND ENCLOSED THE WORKING AS ANNEXURE - 5 AND 6 TO THE LETTER. THESE CONTENTIONS WERE HOWEVER, IGNORED BY ASSESSING OFFICER. 6. IT WAS THE CONTENTION THAT PROVISIONS OF SECTION 23(1)(C) WILL APPLY AS THE PROPERTY IS HELD WITH AN INTENTION TO LE T OUT WHICH WAS IN FACT LET OUT IN LATER YEAR AND EFFORTS ARE MADE TO LET OUT DURING THE YEAR. IN ORDER TO SUPPORT THAT ASSESSEE MADE EFFORTS, IT RELIED ON LETTER ADDRESSED TO A REAL ESTATE BROKER OFFERING PROPERTY FOR LEASE, PLACED IN PAPER BOOK. ASSESSEE RELIED ON THE DECISION OF CO - ORDINATE BENCH AT MUMBAI IN THE CASE OF PREMSUDHA EXPORTS P. LTD. VS. ACIT (110 ITD 158)(MUM). IN THAT CASE IT WAS HELD : - 'IT WAS THE CASE OF THE REVENUE THAT CLAUSE (C) OF SECTION 23(1) CAN ONLY BE INVOKED IN THOSE CASES WHERE THE PROPERTY WAS LET OUT IN EARLIER YEARS OR IN THE PRESENT YEAR. THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT THE INTENTION OF LETTING OUT THE PROPERTY WAS TO BE SEEN FOR INVOKING CLAUSE (C) OF SE CTION 23(1) FOR COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY AND IT WAS IRRELEVANT WHETHER THE PROPERTY IS/WAS LET OUT. [PARA 11] THEREFORE, THE SOLE DISPUTE, IN THE INSTANT CASE, WAS REGARDING THE INTERPRETATION OF THE WORDS 'PROPERTY IS LET' IN CL AUSE (C) OF SECTION 23(1). ONE INTERPRETATION SUGGESTED BY THE REVENUE WAS THAT THE PROPERTY SHOULD BE ACTUALLY LET OUT IN THE RELEVANT ITA NO S . 5258&5318 /1 3 4 PREVIOUS YEAR. THIS INTERPRETATION WAS NOT CORRECT, BECAUSE AS PER CLAUSE (C) OF SECTION 23(1), THE PROPERTY CAN BE VACA NT DURING WHOLE OF THE RELEVANT PREVIOUS YEAR. HENCE, BOTH THESE SITUATIONS CANNOT COEXIST THAT THE PROPERTY IS ACTUALLY LET OUT ALSO IN THE RELEVANT PREVIOUS YEAR, AND THAT THE PROPERTY IN THE SAME YEAR IS VACANT ALSO DURING WHOLE OF THE SAME YEAR. [PARA 12] THE SECOND INTERPRETATION SUGGESTED BY THE REVENUE WAS THAT THE PROPERTY SHOULD BE ACTUALLY LET OUT DURING ANY TIME PRIOR TO THE RELEVANT PREVIOUS YEAR AND THEN ONLY, IT COULD BE SAID THAT THE PROPERTY IS LET OUT AND CLAUSE (C) WOULD BE APPLICABLE. TH E TENSE OF THE VERB USED PRIOR TO THE WORD 'LET' IS PRESENT TENSE AND NOT PAST TENSE. IT MEANS THAT THE PROVISIONS OF CLAUSE (C) TALK REGARDING THE RELEVANT PREVIOUS YEAR AND NOT OF ANY EARLIER PERIOD AND IF THAT BE SO, THE CONTENTION OF THE REVENUE WAS NO T ACCEPTABLE. [PARA 13] NOW THE QUESTION AROSE AS TO WHAT WOULD BE THE CORRECT AND WORKABLE INTERPRETATION OF THE WORDS 'PROPERTY IS LET' IN CLAUSE (C) OF SECTION 23(1). FOR THIS, IT IS TO BE DETERMINED AS TO WHETHER ACTUAL LETTING OUT IS A MUST FOR A PRO PERTY TO FALL WITHIN THE PURVIEW OF CLAUSE (C) OF SECTION 23(1). [PARA 15] FROM A READING OF THE PROVISIONS OF SUB - SECTION (3) OF SECTION 23, IT APPEARS THAT THE LEGISLATURES IN THEIR WISDOM HAVE USED THE WORDS 'HOUSE IS ACTUALLY LET'. THIS SHOWS THAT THE WORDS 'PROPERTY IS LET' CANNOT MEAN ACTUAL LETTING OUT OF THE PROPERTY BECAUSE HAD IT BEEN SO, THERE WAS BE NO NEED TO USE THE WORD 'ACTUALLY' IN SUBSECTION (3) OF SECTION 23. REGARDING THE SCOPE OF REFERRING TO ACTUAL LETTING OUT IN PRECEDING PERIOD, TH ERE WAS NO FORCE IN THE CONTENTION OF THE REVENUE, AS THE LEGISLATURE HAS USED THE PRESENT TENSE. EVEN IF IT IS INTERPRETED SO, IT MAY LEAD TO UNDESIRABLE RESULT BECAUSE IN SOME CASES, IF THE OWNER HAS LET OUT A PROPERTY FOR ONE MONTH OR FOR EVEN ONE DAY, THAT PROPERTY WOULD ACQUIRE THE STATUS OF 'LET OUT PROPERTY' FOR THE PURPOSE OF CLAUSE (C) OF SECTION 23(1) FOR THE ENTIRE LIFE OF THE PROPERTY, EVEN WITHOUT ANY INTENTION TO LET IT OUT IN THE RELEVANT YEAR. NOT ONLY THAT, EVEN IF THE PROPERTY WAS LET OUT AT ANY POINT OF TIME EVEN BY ANY PREVIOUS OWNER, IT COULD BE CLAIMED THAT THE PROPERTY IS LET OUT PROPERTY BECAUSE THE CLAUSE TALKS ABOUT THE PROPERTY AND NOT ABOUT THE PRESENT OWNER AND SINCE THE PROPERTY WAS LET OUT IN PAST, IT IS A LET OUT PROPERTY, ALT HOUGH THE PRESENT OWNER NEVER INTENDED TO LET OUT THE SAME. THEREFORE, IT IS NOT AT ALL RELEVANT AS TO WHETHER THE PROPERTY WAS LET OUT IN PAST OR NOT. THESE WORDS DO NOT TALK OF ACTUAL LET OUT ALSO BUT TALK ABOUT THE INTENTION TO LET OUT. IF THE PROPERTY IS HELD BY THE OWNER FOR LETTING OUT AND EFFORTS ARE MADE TO LET IT OUT, THAT PROPERTY IS COVERED BY CLAUSE (C) AND THIS REQUIREMENT HAS TO BE SATISFIED IN EACH YEAR THAT THE PROPERTY WAS BEING HELD TO LET OUT BUT REMAINED VACANT FOR WHOLE OR PART OF THE Y EAR. ABOVE DISCUSSION SHOWS THAT MEANING AND INTERPRETATION OF THE WORDS 'PROPERTY IS LET' CANNOT BE 'PROPERTY ACTUALLY LET OUT'. THUS, IF A ITA NO S . 5258&5318 /1 3 5 PROPERTY IS HELD WITH AN INTENTION TO LET OUT IN THE RELEVANT YEAR COUPLED WITH EFFORTS MADE FOR LETTING IT OUT, IT COULD BE SAID THAT SUCH A PROPERTY IS A LET OUT PROPERTY AND THE SAME WOULD FALL WITHIN THE PURVIEW OF CLAUSE (C) OF SECTION 23(1). PARA 16] IN THE INSTANT CASE, THE ASSESSEE - COMPANY WAS ENTITLED TO PURCHASE THE PROPERTY FOR ITS LET OUT AND TO EARN RENTA L INCOME. COPY RESOLUTION OF BOARD OF DIRECTORS WAS ALSO PLACED ON RECORD, WHERE FROM IT WAS EVIDENT THAT ONE OF THE DIRECTORS WAS AUTHORIZED TAKE NECESSARY STEPS TO LET OUT THE PROPERTY IN QUESTION. THE ASSESSEE HAD ALSO FIXED THE MONTHLY RENT AND THE SEC URITY DEPOSITS OF THE PROPERTY. CONSEQUENT TO THE RESOLUTION, THE ASSESSEE HAD APPROACHED VARIOUS ESTATE AND FINANCE CONSULTANTS FOR LETTING OUT THE PROPERTY AND THE REQUEST WAS ALSO DULY ACKNOWLEDGED BY THE ESTATE AND FINANCE CONSULTANTS. UNFORTUNATELY, D URING THE YEAR UNDER APPEAL THE ASSESSEE COULD NOT GET THE SUITABLE TENANT ACCOUNT OF HEFTY RENT AND SECURITY DEPOSITS. THUS, DURING THE WHOLE YEAR, THE ASSESSEE MADE CONTINUOUS EFFORTS TO LET OUT THE PROPERTY AND UNDER THESE CIRCUMSTANCES, THIS PROPERTY C OULD BE CALLED TO BE LET OUT PROPERTY IN TERMS OF OBSERVATIONS MADE IN FOREGOING PARAS. SINCE THE PROPERTY HAD BEEN HELD TO BE LET OUT PROPERTY, ITS ANNUAL LETTING VALUE COULD ONLY BE WORKED OUT AS PER CLAUSE (C) OF SECTION 23(1) AND SINCE THE RENT RECEIVE D OR RECEIVABLE FROM THE SAID PROPERTY DURING THE YEAR WAS NIL THE SAME WAS TO BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY IN ORDER TO COMPUTE THE INCOME FROM HOUSE PROPERTY. [PARA 18]' 7. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS ENTI TLED TO VALUE PROPERTY AT NIL DURING THE YEAR U/S. 23(1)(C). THEREFORE, ASSESSING OFFICER IS DIRECTED TO ACCEPT THE ALV AT NIL AND WORK OUT THE LOSS UNDER THE HEAD 'HOUSE PROPERTY' ACCORDINGLY. IN THE INSTANT CASE ALSO THE CIT(A) HAS DIRECTED THE AO TO AL LOW CARRY FORWARD LOSSES UNDER THE HEAD INCOME FROM HOUSE PROPERTY U/S.71B OF THE INCOME TAX ACT TO BE SET OFF AGAINST THE INCOME UNDER THE SAME HEAD. 5. AS THE FACTS DURING THE YEAR UNDER CONSIDERATION ARE PARI MATERIA WITH THE CASE LAW RELIED ON BY THE LD. AR IN CASE OF ARYABHATA PROPERTIES LIMITED (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR COMPUTING LOSSES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ITA NO S . 5258&5318 /1 3 6 ALLOWING THE SAID LOSS TO BE CARRIED FORWARD U/S.71B OF THE I.T.ACT, SO FAR AS IT PERTAINS TO THE INTEREST EXPENDITURE. WE DIRECT ACCORDINGLY. ITA NO.5318/MUM/2013 (BY ASSESSEE) 6 . IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ACTION OF CIT(A) FOR HOLDING THAT INCOME IS NOT TO BE ASSESSED AS INCOME FROM BUSINESS AND PROFESSION INSTEA D OF INCOME FROM HOUSE PROPERTY. SINCE WE HAVE UPHELD THE VIEW OF CIT(A) THAT SUCH INCOME WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY, THE GROUND TAKEN BY THE ASSESSEE HAS BECOME INFRUCTUOUS, THEREFORE, LIABLE TO BE DISMISSED. 7 . IN THE RESULT, BOTH APPE AL S OF REVENUE AS WELL AS ASSESSEE ARE DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 10/06 / 201 5 . SD/ - SD/ - ( ) ( SUSHMA CHOWLA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/06 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUM BAI 6. / GUARD FILE. //TRUE COPY/