RISHABH V. SHETH, MUMBAI V. ITO 15(1)(3), MUMBAI

ITA 6572/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8539 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: MRS ARATI VISSANJI
• Keywords: Notional interest
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D.MANMOHAN,VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 6572/MUM/2010 ASSESSMENT YEAR-2006-07 MR. RISHABH V. SHETH, SONMARG, FLAT NO. 5, 67/B, NEPEANSEA ROAD, MUMBAI-400 006 PAN - AXFPS 4578R VS. THE ITO 15(1)(3), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. ARATI VISSANJI RESPONDENT BY: SHRI A.B. KOLI DATE OF HEARING :04.10.2012 DATE OF PRONOUNCEMENT:04.10.2012 O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-26, MUMBAI DT.30.6.2010 PE RTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING SUBSTANTIVE GR OUNDS OF APPEAL: 1. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF NOTIONAL INTEREST OF RS. 7,80,000/- WHILE DETERMINING THE AN NUAL VALUE OF THE FLAT UNDER SEC. 23(1)(A). 2. CIT(A) WHILE CONFIRMING THE ADDITION OF NOTIONAL INTEREST OF RS. 7,80,000/- TO THE ANNUAL VALUE OF THE FLAT, FAILED TO APPRECIATE AND ACCEPT THE FACT THAT THE AMOUNT OF R ENT DECLARED I.E. RS. 1,02,000/- IS HIGHER THAN RATABLE VALUE I.E. RS. 11,273/- OF THE FLAT DETERMINED BY BMC. ITA NO. 6572/M/2010 2 3. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BO MBAY RENT CONTROL ACT IS APPLICABLE TO THE SAID FLAT & THAT T HE LICENSE AGREEMENT WAS ENTERED INTO WITH THE LICENSEE FOR A PERIOD OF 3 YEARS AND DID NOT PROVIDE FOR REVISION OF LICENSE FEE IN THE YEAR UNDER CONSIDERATION. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E RETURN FOR THE YEAR UNDER CONSIDERATION WAS SELECTED FOR SCRUTINY UNDER CASS AND STATUTORY NOTICES U/S. 143(2) AND 142(1) WERE ISSUED AND SERV ED UPON THE ASSESSEE. THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD INC OME FROM HOUSE PROPERTY AT RS. 64,050/- FROM THE RENT RECEIVED FR OM BANK OF AMERICA ON A MONTHLY RENT OF RS. 8,500/- PER MONTH. 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS RECEIVED INTEREST FREE SECURITY DEPOSIT OF RS. 65,00,000/- FROM BANK OF AMERICA. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE REGARDING MONT HLY RENTAL INCOME AND DETAILS OF THE UTILIZATION OF INTEREST FREE DEPOSIT S OF RS. 65,00,000/-. THE AO ALSO SOUGHT CLARIFICATION IN RESPECT OF THE BASIS O F RENT VIS-A-VIS FAIR RENT AND WHY THE AMOUNT OF INTEREST ON THE DEPOSIT SHOULD NO T BE TREATED AS RENT FORGONE AND ADDED TO THE INCOME FROM HOUSE PROPERTY . THE ASSESSEE FILED A DETAILED REPLY EXPLAINING THAT THE RATEABLE VALUE O F THE LET OUT FLAT IS RS. 11,273/-. IT WAS FURTHER EXPLAINED THAT THE PROPER TY IS SUBJECT TO BOMBAY RENT CONTROL ACT BY WHICH THE STANDARD RENT IS THE MAXIMUM RENT WHICH A PERSON CAN LEGALLY RECOVER FROM TENANT UNDER THE RE NT ACT. THEREFORE, ANNUAL VALUE CANNOT EXCEED THE STANDARD RENT OR MUNICIPAL RATEABLE VALUE I.E. RS. 11,273/-. AS THE ACTUAL RENT I.E. RS. 1,02,000/- I S HIGHER THAN THE MUNICIPAL RATEABLE VALUE, THE SAME SHOULD BE ACCEPTED. HOWEV ER, THIS SUBMISSION OF THE ASSESSEE WAS REJECTED BY THE AO WHO WAS OF THE OPINION THAT REASONABLE ANNUAL VALUE OF THE HOUSE PROPERTY IS TO BE CONSIDE RED AFTER CONSIDERING THE ADVANTAGE OF INTEREST FREE SECURITY DEPOSIT AND WEN T ON TO COMPUTE THE ANNUAL VALUE OF THE PROPERTY BY ADDING 12% ON INTER EST FREE DEPOSIT AS RENT FORGONE. ITA NO. 6572/M/2010 3 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUES INVOLVED IN THE PRESENT APPEAL ARE COVERED BY THE D ECISION OF THE TRIBUNAL IN ITA NO. 3869/MUM/2011 FOR A.Y. 2005-06 IN THE CASE OF ACIT 16(1) VS SMT. MALINI V. SHETH. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE FACTS UNDER CONSIDERATION ARE IDENTICAL WITH THE FACTS OF ITA NO. 3869 (SUPRA) WHEREIN THE TRIBUNAL AT PARA-10 PAGE-3 OF ITS ORDER HAD HELD THAT THE INTEREST EARNED FROM SECURITY DEPOSIT OF RENTED PREMISES CAN NOT BE MADE A PART OF ANNUAL LETTING VALUE. THE LD. COUNSEL FURTHER DREW OUR ATTENTION TO PARA-11 AT PAGE-4 OF THE TRIBUNAL ORDER WHEREIN THE TRIBUNA L HAS HELD THAT THE INTEREST EARNED FROM SECURITY DEPOSIT CANNOT BE INCLUDED IN THE ANNUAL LETTING VALUE TO BE DETERMINED BY THE AO. THE LD. DEPARTMENTAL REPR ESENTATIVE RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO THE BENEFIT OF THE ORDER OF THE TRIBUNAL IN ITA NO. 3869 (SUPRA). WE FIND THAT ON IDENTICAL FA CTS, THE TRIBUNAL HAS HELD THAT INTEREST EARNED FROM SECURITY DEPOSIT CANNOT B E INCLUDED IN THE ANNUAL LETTING VALUE. AS THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE ARE IDENTICAL WITH THE FACTS OF ITA NO. 3869 (SUPRA), RESPECTFUL LY FOLLOWING THE DECISION OF THE TRIBUNAL, THE APPEAL OF THE ASSESSEE IS ALLOWED . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF OCTOBER, 2012 SD/- SD/- (D.MANMOHAN) (N.K. BILLAIYA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 4 TH OCTOBER, 2012 RJ ITA NO. 6572/M/2010 4 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI