WILLINGDON PROPERITES P. LTD, MUMBAI V. ITO 7(3)(4), MUMBAI

ITA 6384/MUM/2009

• Counselvise Citation: 638419914 RSA 2009
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: PRADEEP KAPASI
• Keywords: Additional evidence; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.6384/MUM/2009 ASSESSMENT YEAR 2005-06 M/S. WILLINGDON PROPERTIES PVT. LTD., 5, TANIBAI NIWAS, PLOT NO. 251, STATION ROAD, MUMBAI-400 031 VS. THE ITO 7(3)(4), AAYAKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP KAPASI RESPONDENT BY: SHRI A.K. NAYAK DATE OF HEARING : 24.8.2011 DATE OF PRONOUNCEMENT: O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 29.8.2009 PASSED BY THE LD. CIT(A)-VII FOR THE ASSESSMENT YEAR 2005- 06. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE PURC HASED A PROPERTY AS PER THE SALE DEED REGISTERED ON 9.12.2004. THE ASSE SSING OFFICER STATED THAT THE LESSEE (TENANT) I.E. M/S. BARBER SHIP MANAGEMEN T (I) PVT. LTD. IN THEIR LETTER TO M/S. SATELLITE PVT. LTD. SAID THAT THEY A RE IN POSSESSION OF THE FLAT FROM 15.2.2005 FOR INTERNAL FITOUTS. THE AO THERE FORE CONCLUDED THAT THE ASSESSEE GOT THE POSSESSION OF THE FLAT PRIOR TO 15 .2.2005 AND SUBSEQUENT TO THE DATE OF REGISTRATION I.E. 9.12.2004. THE AO FU RTHER HELD THAT THE ASSESSEE WAS THE OWNER OF THE PROPERTY AND THE PROPERTY HAD BEEN HANDED OVER TO ITA NO. 6384/M/09 2 HIM AS ABOVE AND THEREFORE THE ANNUAL LETTING VALU E OF THE PROPERTY FOR 3 MONTHS FROM JANUARY TO MARCH 2005 IS TAXABLE U/S. 2 3(1)(A). 3. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO FILE DOCUMENT ARY EVIDENCE AS TO THE EXACT DATE OF OCCUPATION. SATELLITE GROUP LETTER D T. 17.2.2005 TO THE ASSESSEE MERELY STATES THAT POSSESSION HAS BEEN HANDED OVER THE ASSESSEE. IT DOES NOT MENTION ACTUAL DATE OF HANDING OVER THE POSSESS ION. FURTHER HE NOTED THAT AS PER THE RENT AGREEMENT DT. 22.3.2005, BETWE EN THE ASSESSEE M/S. WILLINGDON PROPERTIES PVT. LTD. (ASSESSEE ) & M/S. BARBERSHIP MANAGEMENT (I) PVT. LTD. THE RENT WAS TO COMMENCE FROM 1.4.2005. THE LD. CIT(A) THEN HELD THAT THE MAHARASHTRA RENT CONTROL ACT, 1999 SEC. 23 (1)(B) OF THE RENT CONTROL ACT SHALL NOT APPLY TO ANY PREMISES LET OUT TO PVT. LTD. COMPANIES HAVING A PAID UP SHARE CAPITAL OF MORE THAN RS. 1 CRORE OR M ORE AND THEREFORE THE CONCEPT OF STANDARD RENT PROVIDED IN THE MAHARASHTR A RENT CONTROL ACT/MUNICIPAL RATEABLE VALUE SHALL NOT APPLY TO THE ASSESSEE. 4. THE LD. CIT(A) HELD AS FOLLOWS: THERE IS MATERIAL ON RECORD TO SHOW THE EXPECTED L ET OUT VALUE I.E. ACTUAL RENT RECEIVED FROM 1.4.2005 ONWARDS. T HE SAME SHALL THEREFORE WILL BE TAKEN AS THE FAIR RENT/ALV FOR THE MONTHS OF JANUARY TO MARCH 2005 ALSO. THIS VIEW HAS ALSO BEEN CONFIRMED IN THE CASE OF SEWA REM OIL MILLS LTD. 2 05 ITR 384 (ALL.), HELD, WHERE THE BUILDING NOT COVERED UNDER U.P. URBAN BUILDINGS (REGULATION OF LETTING, RENT AND EVICTION )ACT, 1972-FAIR RENTAL VALUE DETERMINED ON THE BASIS OF RENT OF ADJ ACENT PROPERTY NO INTERFERENCE WAS CALLED FOR. 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SHRI PRADEEP KAPASI TOOK US THROUGH THE PA PER BOOK AND SHOWED US THE OCCUPATION CERTIFICATE DT. 27.1.2005. HE PLEAD ED THAT THE AO WAS WRONGLY TAKEN THE ALV OF THE PROPERTY FOR 3 MONTHS INSTEAD OF 1 MONTHS AS THE POSSESSION LETTER DT. 17.2.2005 AT PAGE 38 OF THE P APER BOOK WHERE IT HAS BEEN STATED THAT PROVISIONAL MONTHLY CHARGES HAVE T O BE PAID FROM THE DATE OF ITA NO. 6384/M/09 3 THE OCCUPATION CERTIFICATE. THE AR POINTED OUT THA T THE POSSESSION CANNOT BE GIVEN BEFORE THE OCCUPATION CERTIFICATE. 6. THE OTHER ISSUE WAS AS TO WHETHER THE RENT HAS T O BE ASSESSED AS INCOME FROM HOUSE PROPERTY OR INCOME FROM BUSINESS. AS THE ASSESSEE IS ONLY LETTING OUT THE PROPERTY AND EXPLOITING THE PR OPERTY AS ITS OWNER, THE RENT THERE FROM HAS TO BE ASSESSED AS INCOME FROM H OUSE PROPERTY. HOWEVER IT IS CLEAR THAT THE OBJECT OF THE ASSESSEE IN ACQU IRING THE PROPERTY IS ONLY TO LET IT OUT. EVEN AS EARLY AS 15.2.2005, THE TENANT HAS INDICATED THEIR INTENTION TO TAKE THE PROPERTY ON HIRE. IN THIS VIEW OF THE M ATTER, WE ARE OF THE OPINION THAT PROVISION OF SEC 23(1)(C) WILL BE APPLICABLE. THE CO ORDINATE BENCH OF THE MUMBAI TRIBUNAL, IN THE CASE OF PREMSUDHA EXPORT PV T. LTD V ACIT (110 ITD 158) HAS HELD THAT THE EXPRESSION PROPERTY LET IN S EC 23(1)(C) DOES NOT MEAN THAT THE PROPERTY SHOULD BE LET OUT EARLIER OR IN T HE RELEVANT PREVIOUS YEAR. IT IS ENOUGH THE PROPERTY WAS INTENDED TO BE LET OUT. THE TRIBUNAL HELD THAT AS THE PROPERTY WAS INTENDED TO BE LET OUT BUT COULD N OT BE LET OUT THE WHOLE YEAR, THE ANNUAL VALUE HAS TO BE COMPUTED U/S 23(1) (C). IN THE PRESENT CASE ALSO THE PROPERTY WAS INTENDED TO BE LET OUT FROM T HE VERY TIME OF ACQUISITION. THE TENANT HAS GIVEN A LETTER IN FEBRUARY, 2005 THA T THEY PROPOSE TO TAKE THE PROPERTY ON RENT AND HAVE INDICATED THAT THEY HAVE TAKEN POSSESSION FOR FITMENTS. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOW ING THE DECISION OF THE COORDINATE BENCH IN THE CASE OF PREMSUDHA EXPORT S P LTD V ACIT (110 ITD 158), WE DIRECT THE ASSESSING OFFICER TO DETERMINE THE ANNUAL VALUE AS PER SEC 23(1)(C). THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS FAILED TO FILE DOCUMENTARY EVIDENCE AS TO THE EXACT DATE OF OCCUPA TION. AT THE TIME OF HEARING BEFORE US THE LETTER DT. 22.2.2005 WAS FILE D BY THE LD. COUNSEL. SINCE ADDITIONAL EVIDENCE HAS BEEN FILED FOR THE FIRST TI ME BEFORE US, WE SENT BACK THE ISSUE TO THE FILE OF THE AO TO DETERMINE THE AC TUAL DATE OF HANDING OVER THE POSSESSION AND DECIDE THE ANNUAL VALUE AS PER S EC. 23(1)(C). 7. WITH RESPECT TO DISALLOWANCE OF MAINTENANCE EXPE NSES, THE LD. CIT(A) HAS RESTRICTED THE ALLOWANCE TO RS. 39,931/- BEING THE BMC TAX PAID DURING ITA NO. 6384/M/09 4 THE YEAR. THE ASSESSEE HAS CLAIMED MAINTENANCE EXP ENSES INCLUDING BMC TAX AT RS. 90,000/-. THE LD. COUNSEL RELIED ON THE DEC ISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS SAHAR D EVELOPERS WHEREIN IT HAS BEEN HELD AS FOLLOWS: IN FURTHER APPEAL BEFORE TRIBUNAL IT WAS SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF VARIOU S BENCHES I.E. IN CASE OF BOMBAY OIL INDUSTRIES LTD IN ITA NO . 550/M/2000 ORDER DT. 15.11.2000. IN THIS CASE, THE DECISIONS OF THE DELHI BENCH OF THE TRIBUNAL IN TH E CASES OF NEELAM CABLE MFG. IN 63 ITR 01 AND IN CASE OF LEKHR AJ CHANNA IN 37 TTJ 297 AND THE DECISION OF THE BOMBAY BENCH OF THE TRIBUNAL IN CASE OF BLUE MELLOW INVEST MENT & FINANCE (P) LTD. ITA NO. 1757/BOM/1993 ORDER DT. 6.5.1993 WERE FOLLOWED AND IT WAS HELD THAT MAINTEN ANCE CHARGES HAVE TO BE DEDUCTED EVEN WHILE ARRIVING AT THE ANNUAL LETTING VALUE OF THE PROPERTY U/S. 23. FOLLOWING THE ORDER OF THE TRIBUNAL THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. HERE ALSO THE F ACTS ARE SIMILAR TO THE FACTS IN CASE OF SMT. SHARMILA TAGOR E (SUPRA). WE DIRECT THE AO TO RECALCULATE THE INCOME OF THE A SSESSEE AFTER ALLOWING THE DEDUCTION ON ACCOUNT OF VARIOUS MAINTENANCE CHARGES. WE ORDER ACCORDINGLY. RESPECTFULLY FOLLOWING THE ABOVE DECISION IN ASSESS EES OWN CASE FOR THE A.Y. 1998-99, WE DISMISS THIS GROU ND RAISED BY THE REVENUE. 8. THE LD. COUNSEL FOR THE ASSESSEE ALSO PUT FORTH AN ARGUMENT THAT VACANCY ALLOWANCE IS TO BE ALLOWED AS THIS IS THE F IRST YEAR OF LETTING OUT. HE RELIED ON THE DECISION OF ITO VS RAJA TIMBER CO. (2 TTJ COCH 920) & PREMSUDHA EXPORTS (P) LTD VS ACIT (110 ITD 158). 9. WE ARE UNABLE TO APPRECIATE HIS ARGUMENT AS THE CASES RELIED ON HIM ARE ONLY WITH RESPECT TO PROPERTY REMAINING VACANT FOR WHOLE OF THE PREVIOUS YEAR WHICH IS NOT SO IN THE ASSESSEES CASE. HENCE WE REJECT THIS GROUND TAKEN BY THE COUNSEL. ITA NO. 6384/M/09 5 10. THE NEXT ISSUE IS WITH RESPECT TO DISALLOWANCE OF RS. 8400/- PAID TO AUDITORS TOWARDS SERVICES RENDERED BY THEM AND RS. 1350/- TOWARDS BANK CHARGES. WE FIND THAT THE LD. CIT(A) HAS DISALLOWED RS. 9750 ALLOWED BY THE AO. ASSESSEE IS A PRIVATE LIMITED COMPANY. IT HAS C ERTAIN LEGAL OBLIGATIONS LIKE GETTING THEIR ACCOUNTS AUDITED, REPRESENTATION S IN TAX MATTERS ETC. SIMILARLY MAINTENANCE OF A BANK ACCOUNT IS NECESSAR Y FOR CONTINUATION OF THEIR OPERATIONS. THEREFORE, EXPENSES INCURRED IN CONNECT ION WITH THE LEGAL OBLIGATIONS WHICH ARE TO BE COMPLIED WITH FOR THE C ONTINUED EXISTENCE OF THE COMPANY ARE ALLOWABLE AS REVENUE EXPENDITURE U/S 37 OR SEC 57. IN THE CIRCUMSTANCES WE DIRECT THE ASSESSING OFFICER TO AL LOW THE EXPENSES OF RS. 8400/- AND RS. 1350/-. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF AUGUST, 2011 SD/- SD/- (R.S. SYAL ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH AUGUST, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 6384/M/09 6 DATE INITIALS 1. DRAFT DICTATED ON: 25.8.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26.08.2011 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: