ITO 12(3)(4), MUMBAI V. TIP TOP TYPOGRAPHY, MUMBAI

ITA 5888/MUM/2011

• Counselvise Citation: 588819914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: R MURLIDHAR
• Keywords: Fair market value; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 5888/MUM/2011 ASSESSMENT YEARS: 2008-09 ITO -12(3)(4) ROOM NO. 123, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-. 20 VS. M/S. TIP TOP TYPOGRAPHY C/O. JITENDRA SANGHAVI & CO. 405, CHURCHGATE CHAMBERS 5, MARINE LINES. MUMBAI. 400 020 PAN:AACFT 2182 Q (APPELLANT) (RESPONDENT) ITA NO. 6953/MUM/2010 ASSESSMENT YEARS: 2007-08 ITO -12(3)(4) ROOM NO. 138 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-. 20 VS. M/S. TIP TOP TYPOGRAPHY 16, COMMERCE HOUSE, 140, N.M. ROAD, ROPEWALK LANE, FORT, MUMBAI. 400 023 PAN:AACFT 2182 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. MURLIDHAR REVENUE BY : SHRI PITAMBAR DAS DATE OF HEARING : 14.10.2013 DATE OF PRONOUNCEMENT : 27.11.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE ORDERS OF THE LD.CIT(A)-23, MUMBAI, BOTH DATED 26.07.2010 FOR THE ASSESSMENT YEARS 2007-08 & 2008- 09. SINCE IDENTICAL ISSUES ARE INVOLVED IN BOTH THE APPEALS, THE SAME ARE DISPOSED OFF BY THIS COMMON ORDER. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN BOTH THE APPEALS RELATE TO THE DECISION OF THE LD.CIT(A) AS TO THE DETERMINATION OF ANNUAL LET TING VALUE U/S 23(1)(A) OF THE INCOME TAX ACT. ITA NOS. 5888/MUM/2011 & 6953/MUM/2010 M/S. TIP TOP TYPOGRAPHY ASSESSMENT YEARS: 2007-08 & 2008-09 2 3. BRIEFLY STATED, THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD GIVEN ITS COMMERCIAL PREMISES ADMEASURING 8118 SQ.FT IN SHETH HOUSE, S ITUATED AT DR. V.B. GANDHI ROAD, MUMBAI-23 TO M/S RELIANCE INDUSTRIES LTD. FOR A MON THLY RENT OF RS.30,000/-. BESIDES THE MONTHLY RENTAL, THE LICENSEE HAD ALSO PAID A SUM OF RS.5,25,00,000/- AS INTEREST FREE DEPOSIT TO THE ASSESSEE. ASSESSEE, IN ITS RETURN OF INCOME HAD DECLARED RS.3,60,000/- AS ALV OF THE PROPERTY CONSIDERING THE FACT THAT THE A CTUAL RENT RECEIVED (I.E. RS.30,000/- PER MONTH) WAS MORE THAN THE MUNICIPAL VALUE I.E., RS.3 9,576/- (RS.3,298/- PER MONTH). HOWEVER, IN THE ASSESSMENT FRAMED, THE AO DID NOT A CCEPT THE CONTENTION OF THE ASSESSEE AND THEREBY DETERMINED THE ALV U/S 23(1)(A) BY TAKI NG THE FAIR MARKET RENT OF COMPARABLE PROPERTIES WHICH HE WORKED AT RS.94/- PER SQ.FT WHI CH WOULD MEAN A RENT OF RS.7,65,742/- PER MONTH. ACCORDINGLY, THE ANNUAL VALUE OF THE PRE MISES IN QUESTION WAS DETERMINED AT RS.91,88,904/- AND THE ASSESSEES INCOME FROM HOUSE PROPERTY WAS ACCORDINGLY CALCULATED. ON APPEAL, THE LD.CIT(A) DIRECTED THE AO TO ACCEPT THE ACTUAL RENT DECLARED BY THE ASSESSEE AS THE ALV OF THE PROPERTY SINCE TH E SAME WAS HIGHER THAN THE RATEABLE VALUE ADOPTED BY THE MUNICIPAL AUTHORITIES BY FOLLO WING THE ORDER OF THE ITAT IN THE ASSESSEES OWN CASE FOR A.Y. 2005-06. AGGRIEVED BY THE IMPUGNED DECISION, THE REVENUE HAS PREFERRED THESE APPEALS BEFORE US. 4. BEFORE US, THE LD.DR HAS CONTENDED THAT IF THE R ATEABLE VALUE IS NOT PROPERLY DETERMINED BY THE MUNICIPAL AUTHORITIES, THE SAID V ALUE IS NOT BINDING ON THE AO AND THE AO CAN DETERMINE THE ALV U/S 23(1)(A) BY TAKING THE FAIR MARKET RENT ON THE BASIS OF COMPARABLE PROPERTIES LET OUT IN THE SAME LOCALITY. THE LD.DR HAS FURTHER RELIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA REPORTED IN 333 ITR 38 (DELHI) (FB) TO SUBSTANTIATE THE SAID CONTENTION. THE LD.DR HAS FURTHER STATED THAT THE SAID DECISION, BEING A FULL BENCH DECISION OF THE HIGH COURT, THE SAME SUPERSEDES ALL OTHER DECISIONS OF THE TRIBUNAL INCLUDING OTHER DECISIONS OF VARIOUS HIGH COURTS ON THE ISSUE AND HENCE THE LD.CIT(A) IS NOT CORRECT IN FOL LOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 20 05-06. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE HAS REITERATED THE SAME SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND DRAWN OUR ATTENTION TO VARIOU S DECISIONS OF THE TRIBUNAL AND HIGH COURTS MENTIONED AND ATTACHED IN THE COMPILATION WH ICH FORMS PART OF THE RECORD. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. IT IS NOT DISPUTED THAT THE ASSESSEE HAS SHOWN THE ACTUAL REN T WHICH IS MORE THAN THE MUNICIPAL ITA NOS. 5888/MUM/2011 & 6953/MUM/2010 M/S. TIP TOP TYPOGRAPHY ASSESSMENT YEARS: 2007-08 & 2008-09 3 VALUE. THE ACTUAL RENT DECLARED BY THE ASSESSEE (RS .30,000/- PER MONTH) IS MORE OR LESS TEN TIMES HIGHER THAN THE RATEABLE VALUE FIXED BY T HE MUNICIPAL AUTHORITIES (RS.3,298/- PER MONTH. IT IS PERTINENT TO MENTION THAT THE ASSESSEE , OTHERWISE COULD HAVE CLAIMED/INSISTED THE AO TO ADOPT THE MUNICIPAL VALUE WHICH IS LESS T HAN THE ACTUAL RENT CLAIMED/DECLARED BY THE ASSESSEE. THIS ACT OF THE ASSESSEE ITSELF SHOWS THAT THE CLAIM IS BONA FIDE IN NATURE WHICH PRIMA FACIE APPEARS THAT THERE IS NO CONCEALM ENT IN RESPECT OF THE ACTUAL RENT RECEIVED BY THE ASSESSEE AND ALSO THE ASSESSEE HAS NOT INFLATED/DEFLATED THE RENTAL INCOME BY REASON OF ANY EXTRANEOUS CONSIDERATION. 5.1 THE TRIBUNAL, IN THE CASE OF DY. CIT V. RECLAMATION REALITY INDIA LTD. [2011] 9 TAXMANN.COM 35 (MUM.) HAS OBSERVED THAT AS PER THE AMENDED PROVISI ONS OF SECTION 23(1)(B) MADE APPLICABLE FROM ASSESSMENT YEAR 1976- 77, THE ACTUAL RENT RECEIVED HAS TO BE TREATED TO REPRESENT THE ANNUAL VALUE OF THE PRO PERTY PROVIDED THE SAME IS HIGHER THAN THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE LEGISLATIVE INTENTION OF THE SAID AMENDMENT HAS BEEN EXPLAINED BY THE CBDT IN CIRCULAR NO.204 DATED 24-7-1976 AND AFTER TAKING NO TE OF THE SAID CIRCULAR, THE TRIBUNAL HELD THAT THE POSITION OF LAW PRIOR TO INTRODUCTION OF SECTION 23(1) (B) AS CLARIFIED BY THE BOARD ITSELF IS THAT THE ANNUAL VALUE IS EQUAL TO T HE MUNICIPAL VALUATION OF THE PROPERTY. THE TRIBUNAL HELD THAT THIS IS HOW THE BOARD SOUGHT TO INTERPRET THE EXPRESSION 'THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR' USED IN SECTION 23(1)(A). THE SAME PROPOSITION IS SUPPORTED BY VARIOUS DECISIONS OF THE HONBLE BOMBAY HIGH COURT. 5.2 AS REGARDS THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA (SUPRA) RELIED ON BY THE LD.AR, IT IS RELEVANT TO STATE THAT THE ISSUE RAISED BEFORE THE HIGH COURT PERTAINS TO THE VALIDITY OF DETERMIN ING THE ALV BY ADDING NOTIONAL INTEREST ON THE INTEREST FREE DEPOSIT, WHICH THE COURT HAS H ELD AS NOT PERMISSIBLE. IN THIS CONTEXT, THE HIGH COURT IN THE SAID DECISION HAS OBSERVED TH AT THE ANNUAL VALUE FIXED BY THE MUNICIPAL AUTHORITIES CAN BE A RATIONALE YARDSTICK. HOWEVER, IT WOULD BE SUBJECT TO THE CONDITION THAT THE ANNUAL VALUE FIXED BEARS A CLOSE PROXIMITY WITH THE ASSESSMENT YEAR IN QUESTION IN RESPECT OF WHICH THE ASSESSMENT IS TO B E MADE UNDER THE INCOME-TAX LAWS. IF THERE IS A CHANGE IN CIRCUMSTANCES BECAUSE OF PASSA GE OF TIME, VIZ., THE RATEABLE VALUE FIXED BY THE MUNICIPAL AUTHORITIES IS MUCH EARLIER IN POINT OF TIME ON THE BASIS OF RENT THAN RECEIVED, THIS MAY NOT PROVIDE A SAFE YARDSTICK IF IN THE ASSESSMENT YEAR IN QUESTION WHEN ITA NOS. 5888/MUM/2011 & 6953/MUM/2010 M/S. TIP TOP TYPOGRAPHY ASSESSMENT YEARS: 2007-08 & 2008-09 4 ASSESSMENT IS TO BE MADE UNDER INCOME-TAX ACT. THUS , THE AO IN A GIVEN CASE CAN IGNORE THE MUNICIPAL VALUATION FOR DETERMINING ANNUAL LETT ING VALUE IF HE FINDS THAT THE SAME IS NOT BASED ON RELEVANT MATERIAL FOR DETERMINING THE FAIR RENT IN THE MARKET AND THERE IS SUFFICIENT MATERIAL ON RECORD FOR TAKING A DIFFEREN T VALUATION. IT IS PERTINENT TO MENTION THAT THE OBSERVATION OF THE DELHI HIGH COURT, IN ITS LET TER AND SPRIT, IS NOT INTENDED TO DETERMINE THE FAIR MARKET RENT IN EACH AND EVERY CASE BY IGNO RING THE RATEABLE VALUE DETERMINED BY THE MUNICIPAL AUTHORITIES RATHER IN THE CASES WHERE THERE IS ANY DOUBT/SUSPICION AS TO THE QUANTUM OF ACTUAL RENT CLAIMED BY THE ASSESSEE OR T HE SAME DOES NOT SEEM OTHERWISE JUSTIFIED IN THE NORMAL CIRCUMSTANCES. HOWEVER, WHE RE ACTUAL RENT CLAIMED IS JUSTIFIED IN THE NORMAL CIRCUMSTANCES WHICH IS SUPPORTED BY ACTU AL DOCUMENT SUCH AS LEASE AND LICENSE AGREEMENT AND ALSO IN THE ABSENCE OF ANY HI GHER RENT RECEIVED BY THE ASSESSEE THAN THAT CLAIMED BY THE ASSESSEE, IN OUR VIEW, THE QUESTION OF ASSESSMENT BY RESORTING TO FAIR MARKET VALUE BY IGNORING THE RATEABLE VALUE DO ES NOT ARISE. HAVING NOTED THAT THE ACTUAL RENT DECLARED BY THE ASSESSEE (RS.30,000/- P ER MONTH) IS MORE OR LESS TEN TIMES HIGHER THAN THE RATEABLE VALUE FIXED BY THE MUNICIP AL AUTHORITIES (RS.3,298/- PER MONTH) FOR WHICH WE DO NOT FIND REASONS TO DISBELIEVE THE ACTUAL RENT CLAIMED/DECLARED BY THE ASSESSEE AND HENCE IT IS NOT WARRANTED ON THE PART OF THE AO TO DETERMINE THE INCOME BY TAKING THE FAIR MARKET RENT OF COMPARABLE PROPERTIE S LET OUT IN THE LOCALITIES BY IGNORING THE RATEABLE VALUE FIXED BY THE MUNICIPAL AUTHORITI ES FOR ARRIVING AT THE ALV. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE DO NOT FIND ANY JUSTI FIABLE REASON TO INTERFERE WITH THE DECISION OF THE LD.CIT(A) DIRECTING THE AO TO ACCEP T THE ACTUAL RENT DECLARED/CLAIMED/RECEIVED AS THE INCOME FROM HOUSE PROPERTY AS THE SAME IS HIGHER THAN THE MUNICIPAL VALUE AND THE SAME IS UPHELD. 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 7TH DAY OF NOVEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.11.2013. *SRIVASTAVA ITA NOS. 5888/MUM/2011 & 6953/MUM/2010 M/S. TIP TOP TYPOGRAPHY ASSESSMENT YEARS: 2007-08 & 2008-09 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.