JATOYAH INVESTMENTS AND HOLDINGS LTD, MUMBAI V. ITO WD 9(2)(1), MUMBAI

ITA 6878/MUM/2013

• Counselvise Citation: 687819914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MANDAL DR
• Assessee Lawyers: VISHWAS MEHENDOLE
• Keywords: Question of law; Notional interest
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.6878/MUM/2013 ASSESSMENT YEAR: 2010-11 JATOYAH INVESTMENTS AND HOLDINGS LTD. 207/208, A WING, ST. JOHNS RD, BANDRA (W) MUMBAI-400050 / VS. ITO WD 9(2)(1) AAYAKAR BHAVAN, M.K. RD. MUMBAI-400 023 (ASSESSEE) (REVENUE) P.A. NO.AAACJ9683R !' / ASSESSEE BY SHRI VISHWAS MEHENDOLE (AR) / REVENUE BY SHRI SATYAJIT MANDAL (DR) # $ % & / DATE OF HEARING : 2 6 /08 /2015 ! % & / DATE OF ORDER: 11/09/2015 ! / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2 0, JATOYAH INVESTMENTS 2 MUMBAI DATED 02.09.2013 FOR THE ASSESSMENT YEAR 201 0-11. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED H EREUNDER: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE ASSESSMENT ON RS.18,45,970/- U/S 143(3) OF THE INCO ME TAX ACT, 1961. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,20,316/- UNDER THE HEAD INCOME F ROM HOUSE PROPERTY BY REJECTING THE APPELLANT'S SUBMISS ION THAT NO INTEREST ON INTEREST FREE ADVANCE OF RS.25,15,000/- WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY U/S. 23(1 )(A) OF THE INCOME TAX ACT, 1961 . WITHOUT PREJUDICE TO THE AFORESAID GROUND OF APPEAL . (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CITA ERRED IN TAKING THE SECURI TY DEPOSIT AMOUNT AT THE RS.25,15,000/- INSTEAD OF COR RECT AMOUNT OF RS. 25,00,000/-. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN HOLDING THA T THE NOTIONAL INTEREST @ 12% ON INTEREST FREE DEPOSIT OF RS.25,15,000/- WAS ASSESSABLE AS INCOME FROM THE HOUSE PROPERTY BY RELYING ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS LTD ., VS. C.I.T. REPORTED IN 248 I.T.R. PG. 723. (V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T. (A) ERRED IN CONFIRMING THE ADDITION OF RS.1 0,68,568/- ON ACCOUNT OF DISALLOWA NCE OF BANK INTEREST AND BANK CHARGES ON THE GROUND THAT T HE BANK LOAN IS UTILIZED FOR OTHER THAN BUSINESS PURPO SE. (VI) THE APPELLANTS CRAVE LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY GROUND(S) OF APPEAL EITHER BEFORE OR DUR ING THE COURSE OF HEARING OF THE APPEAL. 2. GROUND NO.1 AND 6 ARE GENERAL AND DO NOT NEED ANY SPECIFIC ADJUDICATION. JATOYAH INVESTMENTS 3 3. GROUND NO.2: THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.4,80,75 4/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY BY REJECTING TH E SUBMISSIONS OF THE ASSESSEE THAT NO INTEREST ON INT EREST FREE ADVANCE OF RS.25,15,000/- WAS ASSESSABLE AS INCOME FROM HOUSE PROPERTY U/S 23(1)(A) OF THE INCOME TAX ACT, 1961. 3.1. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTI CED THAT THE ASSESSEE HAS GIVEN ON RENT GROUND FLOOR OF BUNG ALOW AT ST. JOHNS ROAD, BANDRA (W), MUMBAI @ OF RS.60,000/ - PER MONTH. THE AO OBSERVED THAT THE RENTAL INCOME SHOWN WAS ON LOWER SIDE AS ASSESSEE HAS NOT TAKEN INTO ACCOUNT T HE INTEREST ELEMENT AS THERE WAS INTEREST FREE SECURITY DEPOSIT OF RS.25,15,000/- RECEIVED BY THE ASSESSEE FROM THE TE NANT OF THE AFORESAID PROPERTY. ACCORDING TO THE AO, AS PER SEC TION 23(1)(A), HOUSE PROPERTY INCOME WAS TAXED ON ANNUAL VALUE WHICH WAS DEEMED TO BE SUM FOR WHICH THE PROPERTY M IGHT REASONABLY BE EXTRACTED LET FROM YEAR TO YEAR. THE ASSESSEE CLAIMED THAT MUNICIPAL VALUATION OF THE AFORESAID P ARTY WAS ONLY OF RS.35,595/- BUT, CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO. IT WAS OBSERVED BY THE AO THAT THE FAIR RENT OF THE PROPERTY WOULD BE DETERMINED, KEEPING I N MIND THAT FOR EXTRANEOUS CONSIDERATION PROPERTY HAS BEE N LET OUT FOR LOWER RENT. ACCORDING TO THE AO, ANNUAL VALUE O F THE PROPERTY WAS REQUIRED TO BE CALCULATED ON THE BASIS OF INTEREST ON SECURITY DEPOSIT UTILIZED BY THE ASSESSEE COMPAN Y AND ACCORDINGLY AO COMPUTED 12% INTEREST PER ANNUM FOR WORKING OUT THE RENTAL INCOME AS VALUE OF FAIR MARKET RENT AND JATOYAH INVESTMENTS 4 ACCORDINGLY ADDITION WAS MADE BY THE AO TO THE RENT AL INCOME OF THE PROPERTY @ OF RS.25,115/- PER MONTH. IN THIS MANNER THE AO INCREASED MONTHLY RENT FROM A SUM OF RS.60,0 00/- PER MONTH TO RS.85,150/- PER MONTH. 3.2. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THAT IN VIEW OF JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA 333 ITR 38 (DELHI) AND JUDGMENT O F HONBLE BOMBAY BENCH OF ITAT DATED 05.11.2012 IN TH E CASE OF GAGAN TRADING CO. LTD. VS. ACIT, IN VIEW OF CIRC ULAR NO.204 DATED 24.07.1976 ISSUED BY THE CBDT, THE EXPRESSIO N THE ANNUAL LETTING VALUE HAS TO BE DECIDED ON EITHER THE MUNICIPAL VALUE AS PER SECTION 23(1)(A) OR THE ACTUA L RENT RECEIVED AS PER SECTION 23(1)(B), WHICHEVER IS HIGH ER. THE ASSESSEE FURTHER SUBMITTED THAT THERE WAS NO SCOPE FOR ADDING THE NOTIONAL INTEREST ON THE AMOUNT OF SECURITY DEP OSIT. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE AO HAS F AILED TO ARRIVE AT THE MUNICIPAL VALUATION U/S 23(1)(A) AND W ITHOUT APPLICATION OF MIND, AO HAS ADDED NOTIONAL INTEREST ON THE AMOUNT OF SECURITY DEPOSITS, WHICH DID NOT FALL EIT HER IN THE MUNICIPAL VALUATION, FAIR RENT OR IN MAHARASHTRA REN T CONTROL ACT. THE LD. CIT(A) DID NOT ACCEPT THE SUBM ISSIONS OF THE ASSESSEE ON THE GROUND THAT ELEMENT OF INTEREST INCOME COULD NOT HAVE BEEN IGNORED WHILE CONSIDERING THE GENUINENESS OF FAIR RENT OF THE PROPERTY. 3.3. BEFORE US, LD. COUNSEL HAS SUBMITTED THAT THE ADDITION MADE WAS ILLEGAL AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT, 1961. IT HAS BEEN SUBMITTED BY THE LD. COUNSEL THAT AO JATOYAH INVESTMENTS 5 HAS NOT ASCERTAINED THE FAIR MARKET RENT OF THE IMP UGNED PROPERTY AS PER SECTION 23(1)(A) OF THE ACT, BUT H AS SIMPLY MADE THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST O N THE GROUND OF SECURITY DEPOSIT AND ADDED IT TO THE ACTU AL RENT RECEIVED BY THE ASSESSEE. THERE IS NO FINDING BASED UPON ANY INVESTIGATION OR ANY COMPARABLE CASE OR ANY ADVERSE MATERIAL ESTABLISHING THAT ACTUAL RENT RECEIVED BY THE ASSES SEE WAS LESS THAN THE FAIR MARKET RENTAL VALUATION OF THE SAID P ROPERTY. THE LD. COUNSEL HAS RELIED UPON THE JUDGMENT OF MUMBAI BENCH OF ITAT IN CASE OF ACIT VS. MRS. BHARATI ANIRUDH KI LACHAND 53 TAXMANN.COM 403 AND JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TIP TOP TYPOGRAPHY 368 ITR 330 (BOM). ON THE OTHER HAND, LD. DR HAS ARGUED THAT THE AO HA S RIGHTLY MADE THE ADDITION AND THEREFORE SAME SHOULD BE UPHE LD. 3.4. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE T HROUGH THE JUDGMENTS RELIED UPON THE LD. COUNSEL WHICH ARE DIRECTLY ON THIS ISSUE. WE HAVE ALSO GONE THROUGH THE RELEVA NT MATERIAL PLACED ON RECORD FOR THE PURPOSE OF COMPUTATION OF ANNUAL VALUE OF THE PROPERTY. THE RELEVANT PROCEDURE IN TH IS REGARD HAS BEEN PRESCRIBED U/S 23(1) OF THE INCOME TAX ACT . THIS VERY ISSUE HAS BEEN DEALT WITH AND DISCUSSED IN DETAIL B Y THE COORDINATE BENCH OF MUMBAI ITAT IN THE CASE OF ACIT VS. MRS. BHARATI ANIRUDH KILACHAND (SUPRA), RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELOW: JATOYAH INVESTMENTS 6 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. FOR THE PURPOSE OF COMPUTATION OF ANNUAL VALUE OF THE PROPERTY, THE PROCEDURE IS STIPULATED U/S 23(1) OF THE INCOME TAX ACT. AS PER THE PRESCRIBED PROCEDURE, THE ASSESSING OFFICER HAS TO FIRST DETERMINE THE SUM FOR WHICH TH E PROPERTY MIGHT REASONABLY BE EXPECTED TO FETCH THE RENT FROM YEAR TO YEAR AS PER CLAUSE (A) OF SUB-SEC TION 1 AND THEN IF THE PROPERTY IS LET OUT, COMPARE THE SAME WITH THE ANNUAL/ACTUAL RENT RECEIVED OR RECEIVABLE. THEREFORE, THE REASONABLE RENT EXPECTED TO BE FETCHED BY THE PROPERTY BY LETTING OUT YEAR TO Y EAR HAS TO BE DETERMINED AS PER SECTION 23(1)(A) AND IN THE CASES WHERE THE PROPERTY IS ACTUALLY LET OUT TH EN COMPARED THE SAME WITH THE REASONABLE EXPECTED RENT TO BE FETCHED AS DETERMINED IN CLAUSE (A) OF T HIS SECTION. IF THE REASONABLE EXPECTED RENT IS FOUND T O BE MORE THAN THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER THEN THE REASONABLE RENT EXPECTED FROM TH E LETTING OUT THE PROPERTY FROM YEAR TO YEAR DETERMIN ED UNDER CLAUSE (A) TO THIS SECTION WOULD BE THE ANNUA L VALUE FOR THE PURPOSE OF SECTION 22 OF THE ACT. TO DETERMINE THE REASONABLE RENT TO BE FETCHED BY THE PROPERTY, THE ASSESSING OFFICER HAS TO CONDUCT THE PROPER ENQUIRY AND TAKE THE NECESSARY STEPS TO FIND OUT THE PREVAILING FAIR MARKET RENT. IN THE CASE IN HAND, THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY ENQUIRY OR MADE ANY ATTEMPT TO DETERMINE THE FAIR MARKET RENT U/S 23(1)(A). THE ASSESSING OFFICER HAS MADE THE ADDITION BY ADOPTING 12% INTEREST RATE ON THE INTEREST FREE DEPOSITS AND DETERMINED THE ANNUA L VALUE OF THE PROPERTY BY ADDING THE SAID NOTIONAL INTEREST IN THE ACTUAL RENT RECEIVED BY THE ASSESSE E. THERE IS NO QUARREL ON THIS POINT THAT IF THE ASSESS ING OFFICER FINDS THAT THE INTEREST FREE DEPOSITS HAS T HE EFFECT TO DEFLATE OR INFLATE THE RENT AGREED BETWEE N THE PARTIES THEN THE ASSESSING OFFICER IS FREE TO CARRY OUT THE NECESSARY INVESTIGATION AND ENQUIRY. HOWEVER, HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HI S POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION AS OBSERVED BY THE JATOYAH INVESTMENTS 7 HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. TIP TOP TYPOGRAPHY (SUPRA) IN PARA 47 AS UNDER: - 47. WE ARE OF THE VIEW THAT WHERE RENT CONTRO L LEGISLATION IS APPLICABLE AND AS IS NOW URGED THE TREND IN THE REAL ESTATE MARKET SO ALSO IN THE COMMERCIAL FIELD IS THAT CONSIDERING THE DIFFICULTI ES FACED IN EITHER RETRIEVING BACK IMMOVABLE PROPERTIE S IN METRO CITIES AND TOWNS, SO ALSO THE TIME SPENT I N LITIGATION, IT IS EXPEDIENT TO EXECUTE A LEAVE AND LICENSE AGREEMENTS. THESE ARE USUALLY FOR FIXED PERIODS AND RENEWABLE. IN SUCH CASES AS WELL, THE CONCEDED POSITION IS THAT THE ANNUAL LETTING VALUE WILL HAVE TO BE DETERMINED ON THE SAME BASIS AS NOTED ABOVE. IN THE EVENT AND AS URGED BEFORE US, T HE SECURITY DEPOSIT COLLECTED AND REFUNDABLE INTEREST FREE AND THE MONTHLY COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REFLECT THE PREVAILING RATE OR THE ATTEMPT IS TO DEFLATE OR INFLATE THE RENT BY SUCH METHODS, THEN, AS HELD BY THE DELHI HIGH COURT, THE ASSESSING OFFICER IS NOT PREVENTED FROM CARRYING OUT THE NECESSARY INVESTIGATION AND ENQUIRY. HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION AND WHICH WILL INDICATE THAT THE PARTIES HAVE CONCEALED THE REAL POSITION. HE MUST NOT MAKE A GUESS WORK OR ACT ON CONJECTURES AND SURMISES. THERE MUST BE DEFINITE AND POSITIVE MATERIAL TO INDICATE THAT THE PARTIES HAVE SUPPRESSED THE PREVAILING RATE. THEN, THE ENQUIRIES THAT THE ASSESSING OFFICER CAN MAKE WOULD BE FOR ASCERTAINING THE GOING RATE. HE CAN MAKE A COMPARATIVE STUDY AND MAKE AN ANALYSIS. IN THAT REGARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN BE ASCERTAINED BY OBTAINING THE REQUISITE DETAILS. HOWEVER, THERE ALSO THE ASSESSING OFFICER MUST SAFEGUARD AGAINST ADOPTING THE RATE STATED THEREIN STRAIGHTWAY. HE MUST FIND OUT AS TO WHETHER THE PROPERTY WHICH HAS BEEN LET OUT OR GIVEN ON LEAVE A ND LICENSE BASIS IS OF A SIMILAR NATURE, NAMELY, COMMERCIAL OR RESIDENTIAL. HE SHOULD ALSO SATISFY HIMSELF AS TO WHETHER THE RATE OBTAINED BY HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS IN RELATIO N JATOYAH INVESTMENTS 8 THERETO CAN BE APPLIED OR WHETHER A DEPARTURE THERE FROM CAN BE MADE, FOR EXAMPLE, BECAUSE OF THE AREA, THE MEASUREMENT, THE LOCATION, THE USE TO WHICH THE PROPERTY HAS BEEN PUT, THE ACCESS THERETO AND THE SPECIAL ADVANTAGES OR BENEFITS. IT IS POSSIBLE THAT IN A HIGH RISE BUILDING BECAUSE OF SPECIAL ADVANTAGES AN D BENEFITS AN OFFICE OR A BLOCK ON THE UPPER FLOOR MA Y FETCH HIGHER RETURNS OR VICE VERSA. THEREFORE, THER E IS NO MAGIC FORMULA AND EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE. HOWEVER, WE EMPHASIZE THAT BEFORE THE ASSESSING OFFICER DETERMINES THE RATE BY THE ABOVE EXERCISE OR SIMILA R PERMISSIBLE PROCESS HE IS BOUND TO DISCLOSE THE MATERIAL IN HIS POSSESSION TO THE PARTIES. HE MUST NOT PROCEED TO RELY UPON THE MATERIAL IN HIS POSSESSION AND DISBELIEVE THE PARTIES. THE SATISFACTION OF THE ASSESSING OFFICER THAT THE BARGAIN REVEALS AN INFLAT ED OR DEFLATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER CONSIDERATIONS MAKES IT UNREASONABLE MUST PRECEDE THE UNDERTAKING OF THE ABOVE EXERCISE. AFTER THE ABOVE ASCERTAINMENT IS DONE BY THE OFFICER HE MUST, THEN, COMPLY WITH THE PRINCIPLES OF FAIRNESS AND JUSTICE AND MAKE THE DISCLOSURE TO THE ASSESSEE SO AS TO OBTAIN HIS VIEW . 7. SINCE IN THE CASE IN HAND, THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION TO FIND OUT THE EFFECT OF INTEREST FREE DEPOSITS AND TO DETERMINE THE FAIR MARKET RENT EXPECTED TO BE FETCHED BY THE PROPERTY IN QUESTION AS PER CLAUSE (A) OF SECTION 23 THEN THE ASSESSING OFFICER CANNOT BE ALLOWED TO MAKE THE ADDITION ON ACCOUNT OF NOTIONAL INTEREST. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. TIP TOP TYPOGRAPHY (SUPRA) WHILE CONSIDERING THE JU DGMENT OF FULL BENCH OF THE HONBLE DELHI HIGH COURT IN TH E CASE OF CIT VS. MONI KUMAR SUBBA (SUPRA) HAS HELD IN PARA 5 1 TO 54 AS UNDER:- 51.WE QUITE SEE THE FORCE IN THE ARGUMENTS OF MS. VISSANJEE THAT ORDINARILY THE LICENSE FEE AGREED BETWEEN THE WILLING LICENSOR OR A WILLING LICENSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES WOULD AFFORD RELIABLE EVIDENCE OF WHAT THE LANDLORD JATOYAH INVESTMENTS 9 MIGHT REASONABLY BE EXPECT TO GET FROM A HYPOTHETIC AL TENANT. SHE HAS IN MAKING THIS SUBMISSION, ANSWERED THE ISSUE AND SUMMED UP THE CONCLUSION AS WELL. THEN, IT IS BUT NATURAL AND LOGICAL THAT I N THE EVENT, THE TRANSACTION IS INFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES OR VITIATED BY FRAUD, OR T HE LIKE THAT THE ASSESSING OFFICER CAN ADOPT A 'FAIR RE NT' BASED ON THE OPINION OBTAINED FROM RELIABLE SOURCES . THERE AS WELL, WE DO NOT SEE AS TO HOW WE CAN UPHOLD THE SUBMISSIONS OF MR. CHHOTARAY THAT THE NOTIONAL RENT ON THE SECURITY DEPOSIT CAN BE TAKEN INTO ACCOUNT AND CONSIDERATION FOR THE DETERMINATIO N. IF THE TRANSACTION ITSELF DOES NOT REFLECT ANY OF T HE AFORE STATED ASPECTS, THEN, MERELY BECAUSE A SECURI TY DEPOSIT WHICH IS REFUNDABLE AND INTEREST FREE HAS BEEN OBTAINED, THE ASSESSING OFFICER SHOULD NOT PRESUME THAT THIS SUM OR THE INTEREST DERIVED THERE FROM AT BANK RATE IS THE INCOME OF THE ASSESSEE TIL L THE DETERMINATION OR CONCLUSION OF THE TRANSACTION. THE ASSESSING OFFICER OUGHT TO BE AWARE OF SEVERAL ASPECTS AND MATTERS INVOLVED IN SUCH TRANSACTIONS. IT IS NOT NECESSARY THAT IF THE LICENSE IS FOR THREE Y EARS THAT IT WILL OPERATIVE AND CONTINUING TILL THE END. THERE ARE TERMS AND CONDITIONS ON WHICH THE LEAVE AND LICENSE AGREEMENT IS EXECUTED BY PARTIES. THESE TERMS AND CONDITIONS ARE WILLINGLY ACCEPTED. THEY ENABLE THE LICENSE TO BE DETERMINED EVEN BEFORE THE STATED PERIOD EXPIRES. EQUALLY, THE LICENSEE CAN OP T OUT OF THE DEAL. A LEAVE AND LICENSE DOES NOT CREAT E ANY INTEREST IN THE PROPERTY. THEREFORE, IT IS NOT AS IF THE SECURITY DEPOSIT BEING MADE, IT WILL BE NECESSA RILY REFUNDABLE AFTER THE THIRD YEAR AND NOT OTHERWISE. EVERYTHING DEPENDS UPON THE FACTS AND CIRCUMSTANCES IN EACH CASE AND THE NATURE OF THE DEAL OR TRANSACTION. THESE ARE NOT MATTERS WHICH ABIDE BY ANY FIXED FORMULA AND WHICH CAN BE UNIVERSALLY APPLIED. TODAY, IT MAY BE COMMERCIALLY UNVIABLE TO ENTER INTO A LEASE AND, THEREFORE, THIS MODE OF INDUCTING A 'THIRD PARTY' IN THE PREMISES I S ADOPTED. THIS MAY NOT BE THE TREND TOMORROW, THEREFORE, WE DO NOT WISH TO CONCLUDE THE MATTER BY EVOLVING ANY RIGID TEST. JATOYAH INVESTMENTS 10 52. WE HAVE ALSO NOTED THE SUBMISSIONS OF SHRI AHUJA. WE ARE OF THE OPINION THAT EVEN IN THE CASES AND MATTERS BROUGHT BY HIM TO OUR NOTICE, IT IS EVI DENT THAT THE ASSESSING OFFICER CANNOT BRUSH ASIDE THE RENT CONTROL LEGISLATION, IN THE EVENT, IT IS APPLI CABLE TO THE PREMISES IN QUESTION. THEN, THE ASSESSING OFFICE R HAS TO UNDERTAKE THE EXERCISE CONTEMPLATED BY THE RENT CONTROL LEGISLATION FOR FIXATION OF STANDARD R ENT. THE ATTEMPT BY THE ASSESSING OFFICER TO OVERRIDE THE RENT CONTROL LEGISLATION AND WHEN IT BALANCES THE RIGHTS BETWEEN THE PARTIES HAS RIGHTLY BEEN INTERFE RED WITH IN THE GIVEN CASE BY THE APPELLATE AUTHORITY. THE ASSESSING OFFICER EITHER MUST UNDERTAKE THE EXERCISE TO FIX THE STANDARD RENT HIMSELF AND IN TERMS OF TH E MAHARASHTRA RENT CONTROL ACT, 1999 IF THE SAME IS APPLICABLE OR LEAVE THE PARTIES TO HAVE IT DETERMIN ED BY THE COURT OR TRIBUNAL UNDER THAT ACT. UNTIL, THEN , HE MAY NOT BE JUSTIFIED IN APPLYING ANY OTHER FORMU LA OR METHOD AND DETERMINE THE 'FAIR RENT' BY ABIDING WITH THE SAME. IF HE DESIRES TO UNDERTAKE THE DETERMINATION HIMSELF, HE WILL HAVE TO GO BY THE MAHARASHTRA RENT CONTROL ACT, 1999. MERELY BECAUSE THE RENT HAS NOT BEEN FIXED UNDER THAT ACT DOES NOT MEAN THAT ANY OTHER DETERMINATION AND CONTRARY THERETO CAN BE MADE BY THE ASSESSING OFFICER. ONCE AGAIN HAVING RESPECTFULLY CONCURRED WITH THE JUDGMENT OF THE FULL BENCH OF THE DELHI HIGH COURT, WE NEED NOT SAY ANYTHING MORE ON THIS ISSUE. 53.THUS, APART FROM THE THREE ASPECTS NAMELY OF A MUNICIPAL VALUATION, OF OBTAINING INTEREST FREE SECURITY DEPOSIT AND THE PROPERTIES BEING COVERED B Y THE MAHARASHTRA RENT CONTROL ACT BUT NO STANDARD RENT THERE UNDER IS FIXED, OUR ATTENTION HAS NOT BE EN INVITED TO ANY OTHER CASE. SUFFICE IT TO HOLD THAT IN THOSE CASES AND TO WHICH OUR ATTENTION IS NOT INVIT ED THE PRINCIPLES LAID DOWN IN THE DECISIONS OF THE HON'BLE SUPREME COURT AND REFERRED TO BY THE FULL BENCH OF THE DELHI HIGH COURT WOULD GOVERN THE ENQUIRY. 54.AS A RESULT OF THE ABOVE DISCUSSION, WE ARE OF T HE OPINION THAT WHEREVER THE ASSESSING OFFICER HAS NOT JATOYAH INVESTMENTS 11 ADHERED TO THE ABOVE PRINCIPLES, AND HIS FINDING AN D CONCLUSION HAS BEEN INTERFERED WITH, BY THE HIGHER APPELLATE AUTHORITIES, THE REVENUE CANNOT BRING THE MATTER TO THIS COURT AS NO SUBSTANTIAL QUESTION OF LAW CAN BE ARISING FOR DETERMINATION AND CONSIDERATION OF THIS COURT. THEN, THE FINDINGS BY THE LAST FACT FIN DING AUTHORITY, NAMELY THE TRIBUNAL AND AGAINST THE REVENUE SHALL HAVE TO BE UPHELD AS THEY ARE CONSISTENT WITH THE FACTS AND CIRCUMSTANCES BROUGHT BEFORE IT. IF THEY ARE NOT VITIATED BY ANY PERVERSI TY OR ERROR OF LAW APPARENT ON THE FACE OF THE RECORD, TH E APPEALS OF THE REVENUE CANNOT BE ENTERTAINED. THEY WOULD HAVE TO BE ACCORDINGLY DISMISSED. 8. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE ASSESSING OFFICER HAS NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION AND BY FOLLOWING THE JUDGM ENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. TIP TOP TYPOGRAPHY (SUPRA), WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF CIT(A) QUA THIS ISSUE. 3.5. THUS, IN NUTSHELL, IN PARA 7 OF AFORESAID JUDG MENT, HONBLE MUMBAI BENCH OF ITAT HAS HELD THAT SINCE THE ASSESSING OFFICER HAD NOT CONDUCTED ANY ENQUIRY OR INVESTIGATION TO FIND OUT THE EFFECT OF INTEREST FREE DEPOSITS AN D TO DETERMINE THE FAIR MARKET RENT EXPECTED TO BE FETCHED BY THE PROPERTY IN QUESTION AS PER CLAUSE (A) OF SECTION 23 THEN THE A SSESSING OFFICER CANNOT BE ALLOWED TO MAKE THE ADDITION ON A CCOUNT OF NOTIONAL INTEREST. 3.6. IN THE PRESENT CASE BEFORE US, IT IS SEEN THAT THE AO HAS NOT MADE ANY ENQUIRY, NOR ANY MATERIAL HAS BEEN BRO UGHT ON RECORD TO SHOW THAT RENT RECEIVED BY THE ASSESSEE W AS LESSER THEN THE FAIR MARKET RENT NOR ANY INQUIRY OR INVEST IGATION HAS BEEN DONE TO FIND OUT THE EFFECT OF INTEREST FREE D EPOSITS AND TO JATOYAH INVESTMENTS 12 DETERMINE THE FAIR MARKET RENT EXPECTED TO BE FETCH ED BY THE PROPERTY IN QUESTION, AS PER CLAUSE (A) OF SECTION 23(1). UNDER THESE CIRCUMSTANCES, AO CANNOT BE ALLOWED TO MAKE A DDITION ON ACCOUNT OF NOTIONAL INTEREST. SINCE THIS ISSUE S TANDS SQUARELY COVERED WITH THE AFORESAID JUDGMENTS, IT I S HELD THAT THE ADDITION MADE BY THE AO OF RS.2,20,316/- IS CON TRARY TO LAW AND FACTS AND THE SAME IS DIRECTED TO BE DELETE D. 4. GROUND NO.3: THE ASSESSEE HAS CHALLENGED THE COMPUTATION MISTAKES IN WORKING OUT THE AMOUNT OF N OTIONAL INTEREST. SINCE ADDITION IN THIS REGARD HAS BEEN DE LETED BY US IN PURSUANCE TO GROUND NO.2 ABOVE. THEREFORE, GROUN DS NO. 3 & 4 DO NOT SURVIVE FOR ADJUDICATION AND THESE ARE D ISMISSED AS INFRUCTUOUS. 5. GROUND NO.5 : THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.10,68,5 68/- ON ACCOUNT OF DISALLOWANCE OF BANK INTEREST AND BANK C HARGES ON THE GROUND THAT THE BANK LOAN IS UTILIZED FOR OT HER THAN BUSINESS PURPOSE. 5.1. THE BRIEF FACTS ARE THAT DURING THE YEAR ASSES SEE WAS IN THE BUSINESS OF RESORTS. DURING THE YEAR ASSESSEE H AD TAKEN LOAN FROM BAJAJ FINANCE. THIS LOAN WAS UTILIZED FOR LAND PURCHASED AND REST HAS BEEN USED IN REGULAR COURSE OF BUSINESS. THE ASSESSEE O FFICER MADE FOLLOWING DISALLOWANCES ON THE GROUND THAT LOAN WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS: JATOYAH INVESTMENTS 13 SR. NO. HEAD AMOUNT (RS.) 1. INTEREST ON LOAN RS.8,26,301 2. LOAN PROCESSING CHARGES RS.1,88,815 3. BANK CHARGES RS.53,452 TOTAL RS.10,68,568 5.2. THE ASSESSEE CONTESTED THIS ISSUE BEFORE LD. C IT(A), WHEREIN NO RELIEF WAS GRANTED BY THE LD. CIT(A) AND DISALLOWANCE MADE BY THE AO WAS CONFIRMED. 5.3. BEFORE US, LD. COUNSEL HAS FAIRLY STATED THAT DISALLOWANCE WITH REGARD AMOUNT UTILIZED FOR ACQUIRING THE LAND WAS NOT ALLOWABLE; BUT OTHER AMOUNT HAS BEEN WRONGLY DISALL OWED BY THE AO. ON THE OTHER HAND, LD. DR HAS SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5.4. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND ORDER PASSED BY THE LD. CIT(A) AND MATERIAL PLACED BEFORE US. IT HAS BEEN ARGUED THAT PART OF THE LOAN RAISED DURING THE YEAR HAS BEEN UTILIZED FOR REPAYMENT OF THE OLD LOAN. THIS F ACT HAS NOT BEEN CONTROVERTED BY THE LD. DR. IT HAS BEEN FURTHER STATED BEFORE US THAT NO DISALL OWANCE HAS BEEN MADE OUT TO THE AMOUNT OF INTEREST PAID ON THE OLD LOANS IN EARLIER YEARS. IN VIEW OF ALL THESE FACTS AND CI RCUMSTANCES, JATOYAH INVESTMENTS 14 WE DIRECT THE AO TO ALLOW THE PROPORTIONATE AMOUNT OF INTEREST PAID ON AMOUNT OF LOAN OF BAJAJ FINANCE WHICH HAS B EEN UTILIZED IN MAKING REPAYMENT OF THE OLD LOANS. THE BALANCE DISALLOWANCE OUT OF THE AMOUNT OF INTEREST IS CONFI RMED. 5.5. WITH REGARD TO DISALLOWANCE OF LOAN PROCESSING CHARGES FOR RS.1,88,815/- AND BANK CHARGES FOR RS.53,452/-, IT IS NOTED BY US THAT THESE HAVE BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND THEREFORE THESE ARE DI RECTED TO BE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. SD/- (JOGINDER SINGH ) SD/- (ASHWANI TANEJA) ' # / JUDICIAL MEMBER $ # / ACCOUNTANT MEMBER # '$ MUMBAI; ( DATED : 11/09/2015 CTX? P.S/. . . ! %'&'( )(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # '$ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. ! / BY ORDER, .3* - //TRUE COPY// +/, - (DY./ASSTT. REGISTRAR) , # '$ / ITAT, MUMBAI