BOHEA PROPERTIES P.LTD, MUMBAI V. ITO 6(1)(4), MUMBAI

ITA 5754/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4204 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U B JAKKE
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH B, MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5754/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S BOHEA PROPERTIES PVT. LTD. 608, REGENT CHAMBERS, NARIMAN POINT, MUMBAI-400021. PAN: AAACB2435R VS. ITO- 6(1)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARIDAS BHAT (AR) REVENUE BY : SHRI U.B. JAKKE (DR ) DATE OF HEARING : 05.04.2016 DATE OF PRONOUNCEMENT : 07.04.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-14, MUMBAI DATED 18.06.2014 FOR ASSESSMENT ORDER (AY) 2 010-11 ON THE FOLLOWING GROUNDS OF APPEAL: GROUND I 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE LEARNED CIT(A) ERRED IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY AT RS.56,05,028/- BASED ON THE REMAND REPORT, THEREBY ENHANCING THE A SSESSED INCOME, WITHOUT UNDERSTANDING THE BASIS OF ACTUAL ANNUAL VALUE OF R S. 3,60,000/-, THE CIT(A) FURTHER ERRED IN NOT ADJUDICATING THE GRIEVANCE OF THE ASSESSEE, ON THE ADDITION OF NOTIONAL INTEREST OF RS.23,70,000/- MADE BY THE ASSESSING OFFICER. 2. THE LD. CIT AND THE AO FAILED TO, APPRECIATE THA T :- A) THE ASSESSEE HAS RECEIVED RENT OF RS.3,60,000/- ONLY WHICH IS OFFERED TO TAX AS ANNUAL VALUE. B) THE LEASE AGREEMENT WAS OLD WHEN THE RATES WERE LESS WHICH HAS NOW INCREASED DUE TO OPENING OF SEA LINK. C) THE FLAT IS VERY MODERATELY FURNISHED AND HENCE COMMANDS LESS RENT. D) ANNUAL VALUE IS TO BE WORKED BASED ON THE MUNICI PAL VALUE WHICH IS RS. 1,04,597 (BEING 50% OF RS.2,09, 193/-) E) THE ASSESSEE OWNED AND HAS COLLECTED ONLY FOR IT S 50% SHARE AND HENCE RENT IS NOT COMPARABLE WITH OTHER FLATS, WHEREAS TH E VALUATION IS DONE FOR 2 ITA NOS. 5754/M/2014 M/S BOHEA PROPERTIES PVT. LTD. 100% OF THE PROPERTY AT RS. 56,05,028/- . THE SHARE OF ASSESSEE WHICH WORKS OUT TO RS. 28,02,514/- BEING THE 50% SHARE, IN CASE THE VALUATION MADE BY CIT(A) IS CONSIDERED.. 3. THE APPELLANT, THEREFORE, PRAYS THAT THE ANNUAL VALUE OF RS.3,60,000/- BE ACCEPTED. 2. THE ONLY EFFECTIVE GROUND RAISED IN THE PRESENT APP EAL IS AGAINST THE DETERMINATION OF ANNUAL VALUE OF PROPERTY AT RS. 56,05,028/-/- BY ADDING NOTIONAL INTEREST OF RS. 23,70,000/- TO THE ACTUAL RENT RECEIPT OF RS. 3,60, 000/- BY INVOKING THE PROVISIONS OF SECTION 23(1(A) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, FILE D RETURN OF INCOME ON 28.09.2010 DECLARING TOTAL INCOME OF RS. 69,362/-. THE RETURN WAS SELECTED FOR SCRUTINY AND IT WAS OBSERVED BY THE ASSESSING OFFICER (AO) THAT DUR ING THE RELEVANT AY, ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 3,60,000/- BY LEASING OUT PROPERTY AT BENREEZA APARTMENTS, WORLI SEA FACE, MUMBAI. ASSESSEE HAS AL SO RECEIVED AN INTEREST FREE SECURITY DEPOSIT OF RS. 2,37,00,000/- FROM THE LESS EE. THE ASSESSEE WAS ASKED TO FURNISH THE DETAIL AS TO WHY THE NOTIONAL INTEREST @ 10% SHOULD NOT BE WORKED OUT ON THE SECURITY DEPOSIT AND SAME BE NOT ADDED TO TH E ANNUAL LETTING VALUE (ALV) OF THE PROPERTY, THE ASSESSEE SUBMITTED HIS REPLY D ATED 26.03.2012 AND RELIED UPON THE DECISION OF J.K. INVESTOR (BOMBAY) LTD. VS. DCI T (74 ITD 274), MALAD INTERNATIONAL LTD. VS. DCIT (13 SOT 49), SUPER LEAS ING LTD. VS. ACIT (56 TTJ 258) AND SUBMITTED THAT PROPERTY UNDER REFERENCE IS JOINTLY OWNED BY THE ASSESSEE- COMPANY WITH M/S NORAZA ESTATES & INVESTMENTS PVT. LTD. 4. AFTER CONSIDERING THE SUBMISSION, THE AO INVOKED TH E PROVISION OF SECTION 23(1)(A) OF THE ACT. THE AO FURTHER OBSERVED THAT W HILE DETERMINING THE ALV THE MUNICIPAL VALUE OF THE PROPERTY OR FAIR RENT OF THE PROPERTY WHICHEVER IS HIGHER IS GENERALLY TAKEN AS THE ANNUAL VALUE. HOWEVER, WHILE CALCULATING THE ALV, THE AO CALCULATED THE ALV ON THE BASIS OF AMOUNT RECEIVED ON ACCOUNT OF LEAVE AND LICENCE BASIS + INTEREST ON SECURITY DEPOSIT AND CA LCULATED GROSS ANNUAL VALUE IN THE ASSESSMENT ORDER. 5. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT(A). AFTER CONSIDERING THE SUBMISSION AND REMAND REPORT SOUGHT DURING THE APPELLATE PROCEEDING, THE CIT(A) ENHANCE THE ALV OF THE PROPERTY TO RS. 56,05,028/-, FOR THE YEAR UNDER CONSIDERATION, AGAI NST WHICH THE PRESENT APPEAL IS FILED BEFORE US. 3 ITA NOS. 5754/M/2014 M/S BOHEA PROPERTIES PVT. LTD. 6. WE HAVE HEARD THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO AS WELL AS CIT(A) ERRED IN CALCULATING THE ALV OF THE PROPERTY. AR OF THE ASSESSEE FURTHER ARGUED THAT TH E PROVISIONS OF RENT CONTROL ACT IS NOT APPLICABLE IN THE CITY OF MUMBAI. 7. DR FOR THE REVENUE VEHEMENTLY ARGUED THAT THE PROPE RTY IS SITUATED AT PRIME LOCATION I.E. AT WORLI SEA PHASE AND THE ALV WAS CO RRECTLY CALCULATED BY THE CIT(A). THE ASSESSEE WAS GIVEN FULL PARTICULAR ON T HE REMAND REPORT OF THE AO AND THUS THE ORDER OF CIT (A) DOES NOT REQUIRE ANY INTERFERENCE OF THIS TRIBUNAL. 8. RIVAL CONTENTION OF THE PARTIES WERE CONSIDERED. DU RING THE APPELLATE PROCEEDING, THE AO WAS DIRECTED TO CONDUCT ENQUIRY FROM THE SOC IETY OR BUILDING TO ASCERTAIN THE FAIR MARKET RENT OF THE PROPERTY ACCORDINGLY. T HE AO COMPLETED THE ENQUIRY AND SUBMITTED HIS REPORT WHICH IS AS UNDER: IN THIS CASE ADDITIONS WERE MADE BY THE A.O. BY WA Y OF ADDITION OF NOTIONAL INTEREST OF RS. 23,70,000/- BEING 10% OF SECURITY D EPOSIT WHILE CALCULATING ANNUAL VALUE OF THE RENTED PROPERTY. THE TOTAL ANNU AL VALUE WAS WORKED AT RS. 27,30,000/- [ORIGINAL RENT OF RS.3,60,000/- + NOTIO NAL INTEREST OF RS. 23,70,000/- NOW, LD. CIT(A) HAS REMANDED MATTER BAC K TO THE A.O. TO CONDUCT THE FRESH ENQUIRIES REGARDING THE SAME FOR WHICH TH E PROPERTY MIGHT REASONABLY TO LIE LET OUT. THE LD CIT(A) FURTHER DI RECTED TO CONDUCT ENQUIRIES FROM THE SOCIETY BUILDING ILL WHICH FLAT IS LOCATED AND ITS ADJACENT SOCIETY TO FIND OUT COMPARABLE RATE A/RENT FOR FLAT AT BENEREE ZA, WORLI, MUMBAI. ACCORDING, INSPECTOR OF CHARGE HAS BEEN DEPUTED TO CONDUCT THE ENQUIRIES. DURING FIELD VISIT TO SOCIETY, INSPECTOR FIND OUT T HAT FLAT ON THE 5 TH FLOOR OF THE SOME BUILDING OF BENREEZA SOCIETY. WORLI, MUMBAI I. E. FLAT NO.5A & 5B WERE ALSO LET OUT DURING THE PERIOD UNDER CONSIDERATION. THE OWNER OF THESE FLATS ARE M/S. IPSITA FINANCE & INVESTMENT PVT. LTD. & SA IGA SECURITIES PVT. LTD. DURING THE COURSE OF ENQUIRIES FROM THESE PARTIES T HEY SUBMITTED LETTER DATED 15.05.2014 [COPY ENCLOSED ALONG WITH L/L AGREEMENT OF FLAT ON 5 TH FLOOR, BENREEZA APARTMENT. IT IS ALSO STATED IN THE FETTER THAT THE LEASE RENT RECEIVED IN F.Y.2009-10 IS RS.28,97,076/-OND RS.27,07,952/ P ERTAINING TO M/S IPSITA FINANCE & INVESTMENT PVT. LED. & SAIGA SECURITIES P VT. LTD. RESPECTIVELY THE COPY OF LEAVE & LICENSE AGREEMENT IS ENCLOSED FOR T HE CONSIDERATION AND REFERENCE OF LD. CIT(A)-14, MUMBAI. IN THIS AGREEME NT THERE IS MENTION OF CHARGE OF LEASE RENT OF RS.7.50,000/- PER MONTH FOR THE PERIOD 11/1/2010 TO 31/3/2010. 9. WE HAVE NOTICED THAT INSPECTOR OF CHARGE CONDUCTED THE ENQUIRIES, AND REPORT WAS SUBMITTED BY AO ,WHICH REVEALED THAT A FLAT ON T HE 5 TH FLOOR OF THE SOME BUILDING OF BENREEZA SOCIETY. WORLI, MUMBAI I.E. FLAT NO.5A & 5 B WERE ALSO LET OUT DURING THE PERIOD UNDER CONSIDERATION. THE OWNER OF THESE FLA TS ARE M/S. IPSITA FINANCE & INVESTMENT PVT. LTD. & SAIGA SECURITIES PVT. LTD. D URING THE COURSE OF ENQUIRIES 4 ITA NOS. 5754/M/2014 M/S BOHEA PROPERTIES PVT. LTD. FROM THESE PARTIES IT WAS REVEALED THAT A OWNER O F A FLAT ON 5 TH FLOOR, BENREEZA APARTMENT RECEIVED LEASE RENT OF RS.28,97,076/-AN D RS.27,07,952/-. 10. WE HAVE OBSERVED THAT CIT(A) WHILE APPRECIATING THE FACT OF THE CASE OBSERVED THAT FOR CALCULATING THE ALV, THE MUNICIPA L VALUATION OF THE PROPERTY OR FAIR RENT OF THE PROPERTY WHICHEVER IS HIGHER IS GENERALLY TAKEN AS GROSS ALV. HOWEVER, WHILE CALCULATING THE ALV, THE CIT(A) CALCULATED THE SAME ON THE BASIS OF AMOUNT RECEIVED AND CALCULATED THE INTEREST ON THE SECURITY DEPOSIT AND CALCULATED THE GROSS ALV. THE ASSESSEE HAS LET OUT THE PROPERTY ON THE BASIS OF LEASE AGREEMENT AND FURTHER EXECUTE D MEMO OF UNDERSTANDING BY VIRTUE OF WHICH THE RENT IS INCREASED FROM TIME TO TIME. INTERESTINGLY, NEITHER THE COPY OF LEASE AGREEMENT NOR THE MEMO OF UNDERSTANDING BY VIRTUE OF WHICH THE LEASE WAS RENEWED FROM TIME TO TIME IS PLACED ON RECORD. SINCE THE PROVISIONS OF MAHARASHTRA RENT CONTROL ACT, 199 9 ARE APPLICABLE IN THE CITY OF MUMBAI WHEREIN THE PROVISIONS FOR FIXATION OF STANDARD RATE IS PROVIDED AS PER SECTION 14 OF THE ACT, SO WE DEEM I T APPROPRIATE TO RESTORE THE CASE TO THE FILE OF AO TO DETERMINE THE ALV IN ACCO RDANCE WITH THE PROVISIONS CONTAINED THEREIN FOR FIXATION OF STANDARD RENT AS AMENDED UP-TO-DATE TO CITY OF MUMBAI. THE AO SHALL PROVIDE ADEQUATE AND FAIR O PPORTUNITY TO THE ASSESSEE AND PASS THE ORDER IN ACCORDANCE WITH LAW. THE ASSESSEE IS ALSO DIRECTED TO FILE THE COPY OF LEASE AGREEMENT AND T HE MEMO OF UNDERSTANDING IN RESPECT OF LEAVE AND LICENCE IN THE RELEVANT AY IN RESPECT OF PROPERTY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH APRIL, 2016. SD/- SD/- ( R.C. SHARMA ) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI; DATED 07/04/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5 ITA NOS. 5754/M/2014 M/S BOHEA PROPERTIES PVT. LTD. / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/