ITO 8(1)(4), MUMBAI V. M/S. GIGANTIC TRADING PVT. LTD., MUMBAI

ITA 6713/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1905 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 22-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G ,MUMBAI BEFORE SHRI R.S. SYAL(AM) & SHRI VIJAY PAL RAO (JM) I.T.A.NO. 6713/MUM/2008 (A.Y. 2004-05)) INCOME-TAX OFFICER-8(1)(4), 260A, AAYKAR BHAVAN, 2 ND FLOOR, M.K. ROAD, MUMBAI-400 020. VS. M/S. GIGANTIC TRADING P.LTD., B-1, HEM COLONY, NEXT TO GOLDEN TOBACCO, SV ROAD, VILE PARLE(W), MUMBAI-400 056. PAN: AAACG2457Q APPELLANT RESPONDENT APPELLANT BY SHR I S.M. KESHKAMAT. RESPONDENT BY SHRI B HUPENDRA SHAH. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 18-09-2008 IN RELATION TO THE ASSTT. YEAR 2004-0 5. 2. THE ONLY RAISED IN THIS APPEAL IS AGAINST THE DI RECTION GIVEN BY THELD. CIT(A) TO ADOPT THE FAIR MARKET VALUE AT RS.12,00,0 00 AS ANNUAL RENT INSTEAD OF RS.54,15,060 COMPUTED BY THE A.O. BRIEFLY STATED, T HE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS THE OWNER OF SHOP PREMISES NO.B-1, HEM COLONY, S.V. ROAD, VILE PARLE (W), MUMBAI, WHICH WAS GIVEN ON LEAVE & LICENCE TO M/S.C. BHOGILAL WESTEND AT A RENT OF RS.1,00,000/- P.M. FOR USE OF PROPERTY ADMEASURING 3,150 SQ.FT.. THE AO FOUND THE RENTAL INCOME OF RS.1.00 L AC PER MONTH, SHOWN BY THE ASSESSEE, AS TOO LESS. HE ADOPTED FAIR MARKET RENT AT RS.4,51,255/- P.M. BY CONSIDERING IT AS ANNUAL RENT U/S. 23(1)(A) AND COM PUTED THE INCOME FROM HOUSE PROPERTY ACCORDINGLY. THE LD. CIT(A) ACCEPTED THE A SSESSEES CLAIM ON THIS ISSUE, AGAINST WHICH THE REVENUE HAS COME UP IN APPEAL BEF ORE US. ITA 6713/M/08 GIGANTIC TRADING P.LTD. 2 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SEC. 23(1) PROVIDES THAT TH E ANNUAL VALUE OF THE PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERT Y MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR WHERE SUCH PRO PERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET, THEN THE AMOUNT SO R ECEIVED OR RECEIVABLE. THUS, FOR DETERMINING THE ANNUAL LETTING VALUE, NOT ONLY THE ACTUAL RENT BUT THE FAIR OR REASONABLE RENT AND ALSO THE STANDARD RENT ARE REQU IRED TO BE CONSIDERED. WHERE STANDARD RENT IS FIXED AS PER RENT CONTROL LEGISLAT ION, THE ANNUAL LETTING VALUE CANNOT EXCEED THE SAME. IF THE STANDARD RENT IS NOT FIXED BY THE RENT CONTROL ACT, THEN THE AO HAS TO DETERMINE STANDARD RENT AS PER T HE RENT CONTROL ENACTMENT. THIS VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL IN ITO VS. MAKRUPA CHEMICALS PVT. LTD. (2007) 108 ITD 95 (MUM) AND JCIT VS. MRS. GITA MECHANDANI (2005) 4 SOT 353. SINCE THE LD. CIT(A) F AILED TO APPRECIATE THE LEGAL POSITION IN THIS REGARD IN RIGHT PERSPECTIVE AND AC CEPTED THE ACTUAL RENT WITHOUT CONSIDERING THE STANDARD RENT AND FAIR RENT OF THE PROPERTY, HIS ACTION CANNOT BE UPHELD. WE FIND THAT AO, TOO, DID NOT APPRECIATE TH E ISSUE ON THE TOUCHSTONE OF THE LEGAL POSITION DISCUSSED ABOVE AS PER THE DETAI LED ORDERS PASSED BY THE MUMBAI BENCHES OF THE TRIBUNAL. UNDER SUCH CIRCUMST ANCES, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF AO FOR A FRESH DECISION AS PER LAW, AFTER ALLOWING A REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA 6713/M/08 GIGANTIC TRADING P.LTD. 3 4. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THE 30TH DAY OF APRIL, 2 010. SD/- SD/- (VIJAY PAL RAO) ( R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER * MUMBAI: 30TH APRIL , 2010 NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-VIII,MUMBAI. 4 CIT-VIII,MUMBAI. 5.DR,G BENCH,MUMBAI. (TRUE COPY) BY ORDER, NG: ASST.REGISTRAR, ITAT, MUMBAI. ITA 6713/M/08 GIGANTIC TRADING P.LTD. 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 22-4-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 22-4-2010 SR.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/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER