C.S.WATWANI-HUF, MUMBAI V. INCOME TAX OFFICER-WARD 24(1)(4), MUMBAI

ITA 5736/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0737 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 5736 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) C.S.WATWANI - HUF 503, NEELAM, 14 TH B ROAD NEAR IDBI BANK, KHAR (WEST) MUMBAI MAHARASHTRA 400 052 VS. INCOME TAX OFF ICER - WARD 24(1)(4), MUMBAI PAN/GIR NO. AAAHC1144B APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DALPAT SHAH REVENUE BY SHRI RAM TIWARI DATE OF HEARING 22 / 11 /201 7 DATE OF PRONOUNCEME NT 18 / 01 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 51, MUMBAI DATED 21/06/2017 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE A SSESSEE: - 1. ADDITION OF RS.5, 05,400 / - IN THE COMPUTATION OF HOUSE PROPERTY INCOME: 1.1 THE COMMISSIONER OF INCOME TAX (APPEAL) - 36, MUMBAI (FOR BREVITY CIT(A)) ERRED IN CONFIRMING THE AD DITION OF DEEMED GROSS RENT OF RS. 7,92,000/ - ( RS. 33,000/ - P.M) AS AGAINST THE ACTUAL CASUAL GROSS RENT RECEIVED OF RS. ?0,000/ - DURING THE SHORT PERIOD WHICH HAS RESULTED INTO AN ADDITION OF RS. 5,05,400/ - AFTER STANDARD DEDUCTION U/S 24(A). 1.2 THE SAID CIT(A) ERRED IN NOT CONSIDERING THE FACT AND SUBMISSIO NS OF THE APPELLANT THAT THE SAID PREMISES WAS LEASED FOR A CASUAL SHORT PERIOD AND REMAINED VACANT DURING THE WHOLE YEAR AND ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 2 THEREFORE THE ANNUAL LETTING VALUE (ALV) HAS TO BE THE ACTUAL RENT RECEIVED OF RS. 70,000/ - AS PROVIDED U/S 1.3 THE SAID CIT(A) ERRED IN NOT CONSIDERING THE FOLLOWING JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT: (I) SMT. SMITABEN N AMBANI VS. CWT 323 ITR 104 (BOM) (II) PREMSUDHA EXPORTS (P) LTD., VS. ACIT 110 1TD 158 (MUM) 1.4 WITHOUT PREJUDICE, THE SAID CIT(A ) ERRED IN NOT CONSIDERING THE SUBMISSION OF THE APPELLANT THAT IN ANY CASE ,THE ALV OF THE SAID PROPERTY FOR THE VACANCY PERIOD CANNOT EXCEED THE MUNICIPAL RATABLE VALUE AS HELD IN VARIOUS JUDICIAL DECISIONS. 2. THE APPELLANT CRAVES LEAVE TO ADD, A MEND, ALTER, MODIFY AND/OR DELETE ALL OR ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING. 3. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO DETERMINING LETTING VALUE AS PER PROVISIONS OF SECTION 23(1) (A) IN PLACE OF PROVISIONS OF 23(1)(C). 4. FACTS IN BRIEF ARE THAT ASSESSEE HAD LET OUT ONLY PART OF OFFICE AT CRYSTAL PLAZA ON CASUAL BASIS TO A CONTRACTOR FOR THE REPAIRING AND RENOVATION OF THE NEIGHBORING OFFICE OWNER. THE SAID CONTRACTOR USED ONLY A PART OF THE SAID PREMISES AND THEREFORE , NO AGREEM ENT WAS ENTERED INTO. THE SAID CONTRACTOR PAID A SUM OF RS.70,000/ - AS A COMPENSATION FOR USE OF THE SAID PREMISES. THE ASSESSEE OFFERED THE SAID SUM OF RS.70,000/ - UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' HOWEVER, AO ASSESSED RENT INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY ' AT RS.7,92,000 / - (BEING DEEMED RENT OF RS. 33,000/ - P.M.) AS AGAINST THE ACTUAL CASUAL RENT RECEIVED OF RS.70,000/ - DURING THE SHORT PERIOD , WHICH HAS RESULTED INTO AN ADDITIONAL RENT INCOME OF RS.5,05,400/ - (AFTER DEDUCTION OF STANDARD DEDUCTION) WHILE COMPUTING THE 'INCOME FROM HOUSE PROPERTY' ON THE GROUND THAT THE RATE OF RENT IN THE SAME COMMERCIAL PROMISES RANGES ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 3 BETWEEN RS. 31,000 / - TO RS. 40,000 / - P.M. AS INQUIRED BY THE INSPECTOR OF THE SAID A.O . 5. BY THE IMPUGNED ORD ER, CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT WAS ARGUED BY LEARNED AR THAT AO HAS NOT CONSIDERED THE FACT THAT NO AGREEMENT FOR LEAVE AND LICENSE WAS ENTERED INTO SINCE IT WAS A CASUAL LEASE FOR A SHORTER PERIOD. AS PER LEARNED AR , THE SAID A.O. ALSO ERRED IN NOT CONSIDERI NG THE FACT THAT AFTER VACATION, B Y THE SAID CONTRACTOR, THE ASSESSEE HAD NOT LET OUT THE SAID OFFICE PREMISES TO ANYONE. THEREFORE, IT IS SUBMITTED THAT NO NOTIONAL RENT INCOME CA N BE ADDED U/SEC 23 WHEN THE SAID COMMERCIAL PREMISES REMAINED VACANT DURING THE YEAR UNDER APPEAL AND THEREFORE, THE ANNUAL LETTING VALUE (ALV) HAS TO BE THE ACTUAL RENT RECEIVED OF RS.70,000/ - AS PROVIDED U/SEC . 23( 1 )(C). 7. RELIANCE WAS PLACED ON THE D ECISION OF THE CO - ORDINATE BENCH IN THE CASE OF SMT. SMITABEN N. AMBANI V/S CWT 323 ITR 104 (BOM), WHEREIN IT WAS HELD AS UNDER: - ON A READING OF RULE 1BB(AS IT THEN STOOD), IT IS CLEAR THAT IN THE CASE OF SELF - OCCUPIED PROPERTY, THE VALUATION OF A HOUSE FOR THE PURPOSE OF WEALTH - TAX IS TO BE CALCULATED ON THE BASIS OF GROSS MAINTAINABLE RENT WHICH IS THE SUM FOR WHICH THE HOUSE MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. IT MAY BE THAT I N AREAS WHICH ARE GOVERNED BY THE RENT CONTROL LEGISLA TION, THE REASONABLE LETTING VALUE CANNOT EXCEED THE STANDARD ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 4 RENT, BUT ON CONSIDERING THE STATUTORY DEFINITION OF THE TERM 'STANDARD R ENT IN RENT CONTROL LEGISLATION AND THE MODE AND MANNER OF CALCULATING MUNICIPAL RATABLE VALUE, SITUATIONS CAN BE COUNTEN ANCED WHERE THE STANDARD RENT OF A GIVEN PREMISES MIGHT BE MORE OR DIFFERENT THAN THE SUM FOR WHICH A HOUSE MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR - TO - YEAR AS CALCULATED BY THE LOCAL MUNICIPAL AUTHORITY FOR THE PURPOSE OF ARRIVING AT THE MUNICIPAL RATABLE VALUE. THE BASIS ON WHICH A SELF - OCCUPIED PROPERTY IS VALUED UNDER RULE 1BB AND MUNICIPAL RATABLE VALUE ARRIVED AT UNDER THE MUNICIPAL LAW IS THE SAME, I.E., A REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FROM A HYPOTHETICAL TENAN T. WHILE ARRIVING AT SUCH REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FROM A HYPOTHETICAL TENANT, THE AMOUNT OF STATUTORY DEDUCTION, IF ANY, PERMISSIBLE UNDER THE LOCAL MUNICIPAL LAW MUST BE ADDED TO THE RATABLE VALUE. THUS, WHILE APPLYING PROVISIONS OF RULE 1BB FOX VALUING THE SELF - OCCUPIED PROPERTY, MUNICIPAL RATABLE VALUE WITH ADDITION OF STATUTORY DEDUCTIONS, IF ANY, MAY BE ADOPTED INSTEAD OF STANDARD RENT FOR ARRIVING AT THE GROSS MAINTAINABLE RENT. 8 . RELIANCE WAS ALSO PLACED ON THE D ECISION OF GMP INVESTMENT LTD., 50 SOT 180 WHEREIN FOLLOWING WAS THE OBSERVATION OF MUMBAI TRIBUNAL: - 7. WE FIND THAT SECTION 22 CATEGORICALLY PROVIDES .............. THE NEXT QUESTION THEN IS AS TO ON WHAT BASIS SHOULD THE ANNUAL LETTING VALUE BE COMPUT ED. SO FAR AS A PROPERTY WHICH IS NOT LET OUT OR VACANT IS ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 5 CONCERNED, THE PROVISIONS OF SECTION 23(1 )(A) COME INTO PLAY. THE ASSESSING OFFICER HAD BRUSHED ASIDE THE VALUATION AS PER BMC ANNUAL LETTING VALUE ON THE GROUND THAT THE BMC RATES ARE NOT SACROSA NCT BUT ONLY INDICATIVE, AND PROCEEDED TO TAKE THE ACTUAL RENTAL VALUE OF ONE OF THE GALAS AS THE STANDARD RENT. WE SEE NO SUBSTANCE IN THIS PLEA AND THE CIT(A) WAS QUITE JUSTIFIED IN REVERSING THIS ACTION OF THE ASSESSING OFFICER BY DIRECTING HIM TO THE B MC ANNUAL LETTING VALUE. HON'BLE BOMBAY HIGH COURT, IN THE CASE OF V. SONAVALA V. CIT [1989] 177 ITR 246 HAVE HELD THAT FOR THE PURPOSE OF LUTATION ON THE BASIS OF 'RENT FOR WHICH PROPERTY MIGHT BE REASONABLY LET OU T , UNDER SECTION 23(1)(A), MUNICIPAL VALU ATION IS TO BE TAKEN INTO ACCOUNT. THE ACTUAL RENT BEING REALIZED BY SIMILAR PROPERTY CANNOT HAVE, IN THIS CONTEXT, ANY BEARING. THE STAND OF THE CIT(A) IS THUS CORRECT AND DOES NOT CALL FOR ANY INTERFERENCE.' 9 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT AO HAS CORRECTLY COMPUTED RENTAL INCOME UND ER PROVISIONS OF SECTION 23(1)(A ) OF THE IT ACT. 1 0 . I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO D ELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LEARNED AR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. 11 . FOR THE PURPOSES OF SECTION 22, THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 6 (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B)............; OR * (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE B Y THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE '. 1 2 . THUS, IN CASE OF A PROPERTY WHI CH REMAINED VACANT FOR A PART OF THE YEAR, THEN ANNUAL LETTING VALUE (ALV) SHALL BE DEEMED TO BE THE ACTUAL RENT RECEIVED BY THE ASSESSEE IN CASE THE SAME IS LOWER THA N THE REASONABLE RENT RECEIVABLE. IN THE INSTANT CASE OF ASSESSEE , THE SAID OFFICE PREMISES WERE VACANT FOR THE MAJOR PART OF THE YEAR AND THE ASSESSEE WAS IN RECEIPT OF ACTUAL RENT OF RS.7 0,000/ - . ACCORDINGLY, THE ANNUAL LETTING VALUE SHOULD BE DETERMINED U /S . 23( 1 )C) OF THE IT ACT. 13 . IN VIEW OF THE ABOVE DISCUSSION, I RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AS PER LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESSE E . I DIRECT ACCORDINGLY. 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 18 / 01 /201 8 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 18 / 01 /201 8 KARUNA SR. PS ITA NO. 5736/MUM/2017 C.S.WATWANI HUF 7 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, MUMBAI 6. GUARD FILE. //TRUE COPY//