ITO 12(1)(1), MUMBAI V. TRANSMARINE CORPORATION, MUMBAI

ITA 5500/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7669 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 02-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Keywords: Notional interest
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI VIJAY PAL RAO (JM) I.T.A. NO.5500/MUM/2010 (A.Y. 2006-07) INCOME-TAX OFFICER-12(1)(1), R.NO.115, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. TRANSMARINE CORPORATION, DUBASH HOUSE, 15, J.N. HEREDIA MARG, BALLARD ESTATE, MUMBAI-400 038, PAN: AAAFT5274H APPELLANT RESPONDENT APPELLANT BY SHRI O.A. MAO. RESPONDENT BY NONE. DATE OF HEARING 02-01-2012 DATE OF PRONOUNCEMENT 06 -01-2012 O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 19-04-2010 IN RELATION TO ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DIRECTION OF THE LD. CIT(A) TO DELETE THE ADDITION IN THE ANNUAL LETTING VALUE MADE BY THE AO U/S. 23(1)(A) OF THE ACT ON ACCOUNT OF NOTIONAL INTEREST OF RS.30 LAKHS ON INTEREST FREE D EPOSIT OF RS.3 CRORES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE OWNED A BUILDING KNOWN AS DUBHASH HOUSE SITUATED AT BALLARD PIER, MUMBAI, W HICH WAS PURCHASED FROM MAHINDRA & MAHINDRA LTD FOR A CONSIDERATION OF RS.3 CRORES ON 30-01-1991. THE ASSESSEE IS THE LESSEE OF THE TRUSTEES OF BOMBAY PORT TRUST. THE SAID BUILDING WA S LET OUT TO VARIOUS PARTIES FROM TIME TO TIME AND RENTAL INCOME WAS RECEIVED. THE AO HAS RECORDED THAT THE ASSESSEE LET OUT THIRD FLOOR AND ITA NO.5500/MUM/2010 M/S.TRANSMARINE CORPORATION 2 HALF OF THE SECOND FLOOR OF THE BUILDING TO TATA FI NANCE LTD. ON A MONTHLY RENT OF RS.50,000/- EACH WITH SECURITY DEPOSIT OF RS.95.00 LAC. TATA FINANCE LTD. ENTERED INTO ANOTHER AGREEMENT WITH BEHRAM B. DUBHASH AND DARAB D. DUBHASH WHO BECAME G UARANTORS TO THE ASSESSEE FIRM. THEY TOOK RS.5.80 CRORES FROM TATA FINANCE LTD. THE AO N OTED THAT BOTH THE GUARANTORS SONS ARE THE MAIN BENEFICIARIES OF THE TRUST AND THAT THE GUARAN TORS ARE THE PERSONS WHO CREATED THE TRUST FOR THE BENEFIT OF THEIR CHILDREN. IT WAS, THEREFORE, O BSERVED THAT A SUM OF RS.5.80 CRORES WAS TAKEN BY THE NATURAL GUARDIANS OF THE BENEFICIARIES OF THE T RUST WHO ARE THE ONLY TWO PERSONS OF THE ASSESSEE FIRM. IT WAS ALSO NOTICED THAT THE ASSESSE E FIRM RETURNED BACK RS.3 CRORES TO TATA FINANCE LTD. WHICH WAS TAKEN AS DEPOSIT. IN THE BAC KGROUND OF THESE FACTS, THE AO HELD THAT THE AMOUNT OF RS.2.80 CRORES WAS INDIRECTLY TAKEN BY TH E ASSESSEE FIRM TOWARDS THE PROPERTY GIVEN ON RENTAL BASIS. INTEREST ON SUCH AMOUNT @ 10% WAS ADDED AS INCOME FROM HOUSE PROPERTY. OUT OF RS.95 LAKHS RECEIVED BY THE ASSESSEE FROM TATA FINANCE LTD., A SUM OF RS.75 LAKHS WAS RETURNED, THEREBY LEAVING SECURITY DEPOSIT OF RS.20 LAKHS WITH THE ASSESSEE. INVOKING THE PROVISIONS OF SEC. 23(1)(A), THE AO ADDED 10% ON A TOTAL OF RS.3 CRORES AS NOTIONAL INTEREST TO THE ANNUAL LETTING VALUE AS INCOME FROM HOUSE PROPERTY. THE LD. CIT(A), RELYING ON SOME TRIBUNAL ORDER IN ASSESSEES FAVOUR, AS APPROVED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. J.K.INVESTORS (238 ITR 273), OVERTURNED THE ASSES SMENT ORDER ON THIS POINT. 4. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF ADDITION OF RS.30 LAKHS. 5. WE HAVE HEARD THE LD. D.R. AND PERUSED THE RELEV ANT MATERIAL ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF THE ASSESSEE DESPITE NO TICE. THE ONLY ISSUE FOR CONSIDERATION IS AS TO WHETHER OR NOT THE NOTIONAL INTEREST @ 10% ON TOTAL SECURITY DEPOSIT OF RS.3 CRORES SHOULD BE ADDED TO THE ANNUAL VALUE OF THE PROPERTY U/S.23(1) (A). IN OUR CONSIDERED OPINION, THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DIRECT FULL BENCH JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA (2011) 333 ITR 38 (DEL) (FB) IN WHICH IT HAS BEEN HELD THAT NO ADDITION TO THE ANNUAL LETTING VALUE CAN BE MADE ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE DEPOSIT WITH THE LANDLORD U/S.23(1)(A ) OF THE ACT. IN THE LIGHT OF THIS DIRECT JUDGMENT, ITA NO.5500/MUM/2010 M/S.TRANSMARINE CORPORATION 3 WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A ) WAS JUSTIFIED IN DELETING THE ADDITION. WE, THEREFORE, UPHOLD THE SAME. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 06 TH DAY OF JANUARY, 2012. SD/- SD/- ( VIJAY PAL RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 06 TH JANUARY , 2012. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-23,MUMBAI. 4 CIT-XII,MUMBAI. 5.DR,E BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, I TAT, MUMBAI.