AKSHAR COMMERCIAL COMPLEX PVT. LTD. (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP), MUMBAI V. DCIT- CIRCLE -15 (1)(1), MUMBAI

ITA 666/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6062 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Keywords: Question of law

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.C. SHARMA (AM) & SHRI PAWAN SINGH (J M) I.T.A. NO. 666/MUM/2019 (ASSESSMENT YEAR 2014-15) M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 203, BIG SPLASH, PLOT NO. 78 & 79, SECTOR 17, VASHI NAVI MUMBAI-400 703. PAN : AAGCA6075L VS . DCIT CIRCLE - 15(1)(1) ROOM NO.470 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY MS. RITIKA AGARWAL DEPARTMENT BY SHR I MICHAEL JERALD DATE OF HEARING 28.1 . 20 20 DATE OF PRONOUNCEMENT 28 . 1 . 20 20 O R D E R PER SHRI PAWAN SINGH (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LEARNED CIT(A)-24, MUMBAI DATED 7.12.2018 WHICH ARISES FROM THE ASSESSMENT ORDER PASSED U/S. 153(3) DATED 28.12.2016 FOR A.Y. 2014-1 5. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- (1) BECAUSE THE LD CIT(A) HAS ERRED IN LAW AND FACTS CO NFIRMING THE ADDITIONS OF RS. 58,81,176/- ON ACCOUNT OF NOTIONAL RENTAL INCOME ON UNSOLD STOCK U/S 23(A) MADE BY THE AO BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING LTD 354 ITR 180 (DELH I) (2) BECAUSE THE LD CIT(A) HAS FAILED TO APPRECIATE THAT CALCULATION OF NOTIONAL RENTAL INCOME ON COMMERCIAL PROPERTY IS OUTSIDE THE SCOPE OF SECTION 23(1)(A). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF BUILDING, DEVELOPMENT AND SELLING O F IMMOVABLE PROPERTY ETC., FILED ITS RETURN OF INCOME FOR RELEVANT TO THE ASS ESSMENT YEAR ON 8.12.2014 DECLARING TAXABLE INCOME AT RS. 1,22,79,970/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 2 CONSTRUCTED A COMMERCIAL BUILDING NAMELY PROXIMA ON LEASEHOLD PLOT OWNED BY ARUNACHAL PRADESH INDUSTRIAL DEVELOPMENT AND FIN ANCIAL CORPORATION LIMITED (APIDC). PROJECT WAS UNDERTAKEN BY THE ASSE SSEE VIDE ASSIGNMENT CUM DEVELOPMENT AGREEMENT DATED 29.10.2007 ALONG WITH M /S. U.S. ROOF LIMITED OUT OF TOTAL DEVELOPMENT AREA OF 6,500 SQUARE FEET WAS GIVEN TO APIDC ORIGINAL LESSOR. REMAINING AREA WAS TO BE SHARED BETWEEN THE ASSESSEE AND M/S. U.S. ROOF LTD. IN THE RATIO OF 40:60. THE ASSESSEE VIDE LEASE AGREEMENT DATED 6.3.2013 LET OUT 8170 SQUARE FEET TO M/S. KALYAN JE WELLERS INDIA PVT. LIMITED. THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE AS T O WHY REMAINING UNOCCUPIED COMMERCIAL AREA SHOULD NOT BE CONSIDERED FOR DEEMED ANNUAL LETTING VALUE U/S. 23(1)(A) OF THE ACT IN ACCORDANC E WITH THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL HOUSE FINANCE & LEASING LTD. (354 ITR 180). THE ASSESSEE VIDE ITS REPLY DATED 24 .12.2016 STATED THAT AGAINST THE DECISION OF HON'BLE DELHI HIGH COURT SLP HAS BE EN ADMITTED IN THE SUPREME COURT AND IT IS NOT FAIR TO DETERMINE DEEME D LETTING VALUE AGAINST THE ASSESSEE. CONTENTION OF THE ASSESSEE WAS NOT ACCEPT ED. THE ASSESSING OFFICER WORKED OUT DEEMED ANNUAL LETTING VALUE AT THE SAME RATE AT WHICH PORTION OF PROPERTY WAS LET OUT TO KALYAN JEWELLERS INDIA P. LTD. AND WORKED ANNUAL LETTING VALUE AT RS. 84,01,680/- AND AFTER ALLOWING 30% DEDUCTION MADE OUT ADDITION OF RS. 58,81,176/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON AN APPEAL BEFORE LEARNED CIT(A) ACTION OF THE ASSESSING OFFICER WAS UPHELD. THUS FURTHER AGGRIEVED THE ASSESSEE HAS FIL ED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSION OF THE LEARNED AR O F THE ASSESSEE AND LEARNED DEPARTMENTAL REPRESENTATIVE OF THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LEARNED AR SUBMITS THAT THE AS SESSEE CONSTRUCTED COMMERCIAL BUILDING IN VASHI AFTER TAKING DEVELOPME NT RIGHTS FROM U.S. ROOF LIMITED, WHO IN TURN OBTAINED CONTRACT FOR DEVELOPM ENT FROM APIDC. THE ASSESSEE AFTER OBTAINING DEVELOPMENT RIGHTS DEVELOP ED A PLOT ALLOTTED TO APIDC. THE ASSESSEE LET OUT SOME PART OF DEVELOPED PROPERT Y AT GROUND FLOOR TO M/S. M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 3 KALYAN JEWELLERS INDIA PVT. LIMITED. THE RENT OF SA ID PORTION/PREMISES WAS OFFERED TO TAX. 6. THE PLOT OF LAND ON WHICH THE DEVELOPMENT WAS CARRIED OUT BY ASSESSEE, WAS ALLOTTED BY CITY AND INDUSTRIAL DEVELOPMENT COR PORATION (CIDCO) TO APIDC. THE CIDCO ISSUED SHOW-CAUSE NOTICE DATED 25. 08.2013 TO APIDC FOR CANCELLATION OF LEASE AND FOR REOCCUPATION OF PLOT AS THE DEVELOPMENT OF THE PLOT WAS NOT IN CONSONANCE OF TERMS OF LEASE. THE APIDC FILED REPLY DATED 01.12.2014 TO THE SHOW-CAUSE OF CANCELLATION OF LEA SE. AFTER CONSIDERING THE REPLY OF APIDC, CIDCO FINALLY CANCELLED THE LEASE O F THE PLOT ON THE GROUND THAT APIDC VIOLATED BASIC OBJECT OF THE ALLOTMENT VIDE O RDER DATED 31.12.2015. THUS DUE TO LEGAL EMBARGO AND NOTICE OF CANCELLATION OF LEASE OF THE PLOT THE ASSESSEE WAS NOT IN A POSITION TO LET OUT THE BALANCE COMMER CIAL ARE IN ITS POSSESSION DUE TO IMPOSSIBILITY. 7. IN THE ALTERNATIVE SUBMISSION LEARNED AR SUB MITS THAT PROVISIONS OF SECTION 23(1) ARE APPLICABLE ON RESIDENTIAL UNIT. T HE PROVISIONS OF SUB- SECTION(2) OF SECTION 23 PRESCRIBED THAT (A) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSES OF HIS OWN RESIDENCE OR (B) CANNOT ACTUALL Y BE OCCUPIED BY THE OWNER BY REASON OF THE FACT THAT OWING TO HIS EMPLOYMENT, BUSINESS OR PROFESSION CARRIED ON AT ANY OTHER PLACE, HE HAS TO RESIDE AT THAT OTHER PLACE IN A BUILDING NOT BELONGING TO HIM, THE ANNUAL VALUE OF SUCH HOU SE OR PART OF HOUSE SHALL BE TAKEN TO BE NIL. FURTHER SUBSECTION (3) OF SECTION 23 PRESCRIBED THAT THE PROVISIONS OF SUBSECTION (2) SHALL NOT APPLY IF (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE OWNER. THUS SEC TION 23 DEALS WITH RESIDENTIAL PROPERTY/HOUSE AND NOT IN RESPECT OF CO MMERCIAL PROPERTY. 8. THE LEARNED AR FURTHER SUBMITS THAT AFTER CANCEL LATION OF LEASE BY THE SUPER LESSOR I.E. CIDCO THE ASSESSEE COULD NOT HAVE LEGALLY OCCUPY THE PROPERTY NOR COULD USE FOR COMMERCIAL EXPLOITATION THERE WAS LEGAL IMPEDIMENT IN LETTING OUT OF THE PROPERTY. IN SUPPORT OF HIS S UBMISSION LEARNED AR RELIED M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 4 UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF SHARAN HOSPITALITY PVT LTD VS THE DEPUTY COMMISSIONER OF I NCOME (INCOME TAX APPEAL NO. 557 OF 2017). 9. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENT ATIVE FOR THE REVENUE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AS WEL L AS LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT THE ASSESSEE HAS UNDERTAKEN DEVELOPMENT/CONSTRUCTION OF COMMERCIAL BUILDING NAMELY PROXIMA AT PLOT NO. 19, SECTOR 30A, VASHI. PROJECT WAS UNDERTAKEN BY THE ASSESSEE ON ASSIGNMENT CUM DEVELOPMENT AGREEM ENT DATED 29.10.2007 WITH M/S. U.S. ROOF LIMITED. UNDER THE AGREEMENT TH E ASSESSEE WAS ENTITLED TO RETAIN AN AREA OF 19,840 SQUARE FEET OF DEVELOPED A REA. THERE IS NO DISPUTE THAT THE ASSESSEE LET OUT 8170 SQUARE FEET TO M/S. KALYA N JEWELLERS INDIA PVT. LTD. IN THE SAME DEVELOPED COMPLEX. DURING THE ASSESSMEN T THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY REMAINING UNOCCUPIED C OMMERCIAL AREA SHOULD NOT BE CONSIDERED FOR DEEMING LET OUT PURPOSES U/S. 23(1)(A) OF THE ACT. ON THE BASIS OF DECISION OF HON'BLE DELHI HIGH COURT IN TH E CASE OF CIT VS. ANSAL HOUSING FINANCE & LEASING CO. LTD. (SUPRA). THE ASS ESSEE IN ITS REPLY DATED 24.12.2016 HAS STATED THAT THE SLP HAD BEEN ADMITTE D BY HON'BLE APEX COURT AGAINST THE DECISION OF HON'BLE DELHI HIGH COURT. T HE ASSESSING OFFICER NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND WORKED OUT DEEMED LETTING OUT VALUE OF UNOCCUPIED AREA AND WORKED OUT THE GROSS R ENTAL INCOME AND AFTER ALLOWING 30% DEDUCTION MADE ADDITION OF RS. 5,81,17 6/-TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROP ERTY. 11. BEFORE LEARNED CIT(A) THE ASSESSEE URGED THAT T HE PROPERTY/VACANT PORTION IS STOCK-IN-TRADE, THE SAME WOULD PARTAKE CHARACTER OF STOCK IN TRADE AND ANY INCOME DERIVED THEREFROM WOULD BE INCOME FR OM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. IT WAS ALSO URGED THAT THE BUSINESS OF THE ASSESSEE WAS TO CONSTRUCT PROPERTY AND SALE IT AND NOT TO LET OUT. SUBMISSION M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 5 OF THE ASSESSEE WAS NOT ACCEPTED BY LEARNED CIT(A) AS THE ASSESSEE HAD LEASED OUT PART OF UNSOLD PROPERTY ON COMMERCIAL TO M/S. K ALYAN JEWELLERS INDIA PVT. LTD., AND LEARNED CIT(A) AFFIRMED THE ACTION OF THE ASSESSING OFFICER. 12. BEFORE US LEARNED AR OF THE ASSESSEE VEHEMEN TLY ARGUED THAT LEASE OF THE PLOT ON WHICH ASSESSEE DEVELOPED PROJECT FOR APIDC HAS BEEN CANCELLED BY LESSOR CIDCO VIDE ORDER DATED 31.12.2015. BEFORE CA NCELLATION LEASE DEED SHOW-CAUSE NOTICE DATED 25.8.2013 WAS ISSUED TO API DC AS TO WHY LEASE SHOULD NOT BE CANCELLED AS THE DEVELOPMENT OF LEASE D PLOT WAS NOT IN ACCORDANCE WITH CONDITION OF LEASE. LEARNED AR OF T HE ASSESSEE HAS STRONGLY RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHARAN HOSPITALITY PVT LTD. (SUPRA) WHEREIN HON'BLE COURT WHILE CONSIDERING THE QUESTION OF LAW WHETHER ON THE FACTS AND CIRCU MSTANCES OF THE CASE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN H OLDING THE ANNUAL LETTING VALUE OF THE PROPERTY IS QUESTION FOR RELEVANT PREV IOUS YEAR CAN BE DETERMINED U/S. 23(1)(A). HON'BLE COURT AFTER CONSIDERING THE CONTENTION OF THE PARTY HELD THAT THE ASSESSEE LET OUT PROPERTY W.E.F. 1.4.2018 WITHOUT WAITING FOR OCCUPATION CERTIFICATE, ENTIRE PROPERTY DURING WHIC H THE ASSESSEE COULD HAVE LET THIS PROPERTY, TAX ON NOTIONAL BASIS SHOULD BE CHAR GED. IT WAS FURTHER HELD THAT BETWEEN 1.1.2009 UP TO 31.3.2009 PROPERTY WAS LEGAL LY NOT OCCUPYABLE AND NOT OCCUPIED. UNDER SUCH CIRCUMSTANCES CHARGING OF TAX ON NOTIONAL RENTAL BASIS AND THE QUESTION OF INTERPRETATION OF SECTION 23(1) (A) DID NOT ARISE AT ALL. 13. IN THE CASE IN HAND A SHOW-CAUSE NOTICE FOR C ANCELLATION OF LEASE WAS ISSUED ON 25.8.2013 AND ULTIMATELY LEASE OF PLOT WA S CANCELLED VIDE ORDER DATED 31.12.2015, THEREFORE, WE FIND FORCE IN THE S UBMISSION OF LEARNED AR OF THE ASSESSEE THAT AFTER ISSUANCE OF SHOW-CAUSE NOTI CE FOR CANCELLATION OF LEASE ON WHICH BUILDING WAS DEVELOPED, THE ASSESSEE WAS N OT ENTITLED TO LET OUT OCCUPIED/CONSTRUCTED PORTION. THEREFORE, WE FIND FO RCE IN THE SUBMISSION OF THE LEARNED AR THAT AFTER ISSUANCE OF SHOW-CAUSE NO TICE THE ASSESSEE WAS NOT ENTITLED TO LET OUT THE PROPERTY. HENCE, TAXING NOT IONAL INCOME OF UNOCCUPIED M/S. AKSHAR COMMERCIAL COMPLEX PRIVATE LIMITED (NOW M/S. AKSHAR COMMERCIAL COMPLEX LLP) 6 PORTION OF BUILDING ON THE BASIS OF DEEMED ANNUAL L ETTING VALUE IS NOT JUSTIFIED BY THE ASSESSING OFFICER. HENCE, WE DIRECT THE ASSE SSING OFFICER TO DELETE THE DISALLOWANCE. CONSIDERING THE FACT THAT WE HAVE ACC EPTED THE CONTENTION OF LEARNED AR THAT THE ASSESSEE WAS LEGALLY NOT ENTITL ED TO LET OUT THE PROPERTY. THEREFORE ADJUDICATION ON OTHER SUBMISSIONS OF LEAR NED AR HAS BECOME ACADEMIC. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 28.01.20 20. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) JUDICIAL MEMBER ACCOUNTANT MEM BER MUMBAI; DATED : 28/01/2020 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI