HITEN BAGMAL PARIKH, MUMBAI V. ITO 16(3)(1), MUMBAI

ITA 5742/MUM/2009

• Counselvise Citation: 574219914 RSA 2009
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 17-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Deemed to accrue or arise in india; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHIRI D.K. AGARWAL, JM AND SHRI R.K. PANDA, AM ITA NO. : 5742/MUM/2009 ASSESSMENT YEAR : 2006-07 SHRI HITEN BAGMAL PARIKH 611, PANCHRATNA, OPERA HOUSE, MUMBAI-400 004. PAN NO: AABPP 5876 A VS. INCOME TAX OFFICER 16(3)(1), MATRU MANDIR, TARDEO, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : MISS ARATI VISSANJI RESPONDENT BY : SHRI V. V. SHASTRI DATE OF HEARING : 17.11.2011 DATE OF PRONOUNCEMENT : 25.11.2011 ORDER PER R. K. PANDA (AM) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 14.08.2009 PASSED BY THE LD. CIT(A)-XVII, MUMBAI RE LATING TO ASSESSMENT YEAR 2006-07. 2. THIS APPEAL WAS EARLIER DISMISSED BY THE TRIBUN AL FOR NON APPEARANCE. SUBSEQUENTLY, THE TRIBUNAL VIDE ORDER D ATED 05.08.2011 RECALLED ITS EARLIER ORDER. HENCE THIS IS A RECALLE D ORDER. ITA NO : 5742/MUM/2009 SHRI HIT EN BAGMAL PARIKH 2 3. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. THE ORDERS PASSED BY LEARNED CIT(A) ASSESSING O FFICER & COMMISSIONER OF INCOME-TAX (APPEALS) IS AGAINST EQU ITY AND JUSTICE. 2. THE LEARNED ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XVII ERRED IN CONSIDERING DEEMED INCOME FROM HOUSE PROPERTY BEING A SELF OCCU PIED RESIDENTIAL BUNGALOW AT `. 8,40,000/- BY ESTIMATING ALV @6% OF INVESTMENT, INSTEAD OF ASSESSING THE SAME BASED ON SUBSTANDARD RENT. WITHOUT PREJUDICE THE LEARNED ASSESSING OFFICER HAS ERRED IN ESTIMATI NG ALV @ 6% ON `. 200,00,000/- (WHICH IS TOTAL INVESTMENT IN HOUSE INCLUDING FURNITURE, EQUIPMENT AND OPEN LAND) AS AG AINST `. 128,57,935/- (WHICH IS COST OF HOUSE). 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE OWNED A PROPERTY BEING A BUNGLOW AT PUNE. IN THE COMPUTATION OF INCO ME FROM HOUSE PROPERTY THE ASSESSEE HAD DECLARED THE ANNUAL RATEA BLE VALUE OF THE PROPERTY AT `. 15,000/- ONLY. ACCORDING TO THE AO THE SAME IS ON T HE LOWER SIDE CONSIDERING THE INVESTMENT IN THE HOUSE AT `. 1,98,45,369/-. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME FROM PUNE BUNGLOW SHOULD NOT BE ESTIMATED. REJECTING THE EXPL ANATION GIVEN BY THE ASSESSEE AND RELYING ON THE DECISIONS OF THE ITAT I N THE CASE OF ITO VS. CHEM MECH. (P) LTD REPORTED IN 83 ITD 427 (MUM) AND IN THE CASE OF ACIT VS. OMPRAKASH & CO. REPORTED IN 87 TTJ 183 (MUM) TH E AO DETERMINED THE ANNUAL LETTING VALUE (ALV) OF THE HOUSE PROPERT Y AT 6% OF THE INVESTMENT ON HOUSE PROPERTY. HE CONSIDERED THE TOT AL COST OF INVESTMENT IN THE HOUSE PROPERTY AT `. 2 CRORE AND APPLYING THE RATE OF 6% ON THE INVESTMENT DETERMINED THE ALV AT `. 12 LAKHS. 4. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT FOR THE PURPOSE OF SECTION 23(1)(A), THE FAIR MARKET VALUE OF THE PROPERTY HAS TO BE DETERMINED WITH ITA NO : 5742/MUM/2009 SHRI HIT EN BAGMAL PARIKH 3 REFERENCE TO THE STANDARD RENT PAYABLE UNDER RENT C ONTROL ACT APPLICABLE TO THE AREA WHERE THE PROPERTY IS SITUATED. IT WAS SUBMITTED THAT THE PROPERTY INCOME OF PUNE BUNGLOW SHOULD BE TAKEN IN TUNE WITH PROPERTY TAX LEVIED BY THE CONCERNED GRAM SEVAK. IT WAS SUBM ITTED THAT THE PROPERTY TAX SO LEVIED FOR THE BUNGLOW IS `. 17,167/- AND FOR THE VACANT AREA AT `. 6,457/-. ACCORDINGLY, IT WAS ARGUED THAT THE LETTAB LE VALUE SHOULD BE TAKEN ON THIS BASIS. 5. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED WITH T HE ARGUMENTS ADVANCED BEFORE HIM AND UPHELD THE ACTION OF THE AO . WHILE DOING SO HE OBSERVED THAT FOR THE PURPOSE OF SECTION 23(1)(A), ALV HAS TO BE DETERMINED ON THE BASIS OF THE AMOUNT WHICH THE PROPERTY CAN B E REASONABLY LET OUT FROM YEAR TO YEAR. SINCE, THE PROPERTY UNDER CONSID ERATION IS NOT WITHIN THE MUNICIPAL LIMITS, THEREFORE, THERE IS NO APPLIC ABILITY OF STANDARD RENT. HE NOTED THAT THE PROPERTY APPEARS TO BE A LUXURIOU S BUNGLOW WHICH COULD FETCH ADEQUATE RENT IF LET OUT. AGAINST THIS SCENAR IO, THE AO HAD TAKEN A SCIENTIFIC BASIS TO DETERMINE THE ANNUAL RENT @ 6% OF THE TOTAL INVESTMENT WHICH AMOUNTS TO `. 12 LAKHS. ACCORDING TO THE LD. CIT(A) THIS IS A COR RECT ESTIMATION OF THE ANNUAL VALUE OF THE PROPERTY. HE ACCORDINGLY UPHELD THE ACTION OF THE AO. 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE LD.CIT(A). IN HER ALTERNATE CONTENT ION, SHE DREW THE ATTENTION OF THE BENCH TO PAGE NO.49 OF THE PAPER B OOK AND SUBMITTED THAT THE COST OF THE BUNGLOW INCLUDES COST OF FURNITURE AMOUNTING TO `. 13,49,869/- AND COST OF EQUIPMENTS AMOUNTING TO `. 14,90,340/- WHICH ITA NO : 5742/MUM/2009 SHRI HIT EN BAGMAL PARIKH 4 SHOULD BE EXCLUDED FROM THE COST OF INVESTMENT FOR ARRIVING AT THE ANNUAL LETTING VALUE AT 6% OF THE INVESTMENT. 8. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDE R OF THE LD. CIT(A). 9. AFTER HEARING BOTH THE SIDES, WE FIND SOME FORCE IN THE ALTERNATE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE COST OF FURNITURE AT `. 13,49,869/- AND COST OF EQUIPMENT AT `. 14,90,340 SHOULD BE EXCLUDED FROM THE COST OF INVESTMENT OF THE BUNGLOW FOR DETE RMINATION OF THE ALV @ 6% OF THE INVESTMENT. WE, THEREFORE, DIRECT THE AO TO EXCLUDE THE COST OF FURNITURE AND COST OF EQUIPMENT BOTH TOTALING TO `. 28.40 LAKHS FROM THE TOTAL COST OF INVESTMENT OF `. 2 CRORES DETERMINED BY THE AO FOR THE PURPOSE OF COMPUTING THE ANNUAL LETTING VALUE AT 6% OF THE INVESTMENT. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE A SSESSEE ARE ACCORDINGLY, PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF NOVEMBER, 2011. SD/ - SD/- ( D.K. AGARWAL ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTAT MEMBER MUMBAI, DT: 25/11/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, H- BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI