CAN PROPERTIES P.LTD, MUMBAI V. ITO 8(1)(2), MUMBAI

ITA 7294/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3517 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA SINDH E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH C, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7294/MUM/2013 ASSESSMENT YEAR: 2010-2011 CAN PROPERTIES PRIVATE LTD. 24, 2 ND FLOOR, THOSAR WADI, HANUMAN ROAD NO.1 NR SHIV LEELA HOTEL, VILE PARLE (EAST), MUMBAI-400057. PAN: AADCC7832L VS. ITO WARD 8(1)(2), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL SATHE ( AR) REVENUE BY : SHRI RAVINDRA SINDH E (DR) DATE OF HEARING : 24.02.2015 DATE OF ORDER : 25.05.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(A)-16, MUMBAI DATED 03.09.2013, FOR ASSESSMENT YEAR (AY) 2 010-11) RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE HON. COMMISSIONER OF INCOME TAX-(APPEALS) ER RED IN DIRECTING THE LEARNED ASSESSING OFFICER TO COMPUTE ANNUAL LET TING VALUE IN TERMS OF PERCENTAGE OF INVESTMENT IN THE PROPERTY, WHILE IGN ORING THE RENT ACTUALLY RECEIVED. 2. IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN ADOPTING A RATE OF 8.5% OF INVESTME NT IN PROPERTY WITHOUT APPRECIATING THE FACTUAL MATRIX AND COMMERC IAL REALITY. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACTUAL MATRIX OF THE CASE AND THE INTENT OF THE APPELLANT AS EXPLAIN ED DURING ASSESSMENT AND BORNE OUT BY THE OBJECTS CLAUSE OF THE MEMORAND UM OF ASSOCIATION. 4. THE HON. CIT(A) ERRED IN CONFIRMING THE ACTION O F THE LD. ASSESSING OFFICER ERRED IN DISALLOWING THE EXPENSES OF RS. 8, 099 INCURRED BY THE APPELLANT FOR OPERATING THE COMPANY, WITHOUT APPREC IATING THE FACT THAT 2 ITA NO. 7294/M/13 CAN PROPERTIES PVT. LTD. THE SAME WERE INCURRED FOR THE EXISTENCE AND SURVIV AL OF THE BUSINESS OF THE APPELLANT. 5. THE LD. ASSESSING OFFICER ERRED IN COMING TO A C ONCLUSION THAT THE APPELLANT IS NOT ENTITLED TO SET OFF THE BUSINESS L OSS OF RS.8,099 AGAINST' THE INCOME FROM HOUSE PROPERTY. 2. THE ASSESSEE FURTHER VIDE ITS APPLICATION DATED 23. 02.2016 RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL: THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT S ECTION 23(1)(C) IS APPLICABLE AND ACTUAL RENT RECEIVED SHOULD BE CONSI DERED AS THE ANNUAL LETTING VALUE OF THE PROPERTY AS ONLY A PART OF PRO PERTY WAS LET OUT DURING THE YEAR. 3. WE HAVE HEARD LD AR FOR ASSESSEE AND LD DR FOR REVE NUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AR OF ASSESSEE ARGUED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE ACQUIRED 10 SHOPS AT LUMBINI PALACE AT VILE PARLE, MUMBAI ON 01.01.2010 FOR A TOTAL CONSIDERATION OF R S. 4,99,98,460/-. DURING THE ASSESSMENT PROCEEDING, AO ASKED THE ASSESSEE TH AT THE RENT DECLARED BY THE ASSESSEE IS TOO LOW CONSIDERING THE RENTAL VALU E AND LOCATION OF THE PROPERTY. THE ASSESSEE SUBMITTED HIS REPLY, WHEREIN IT WAS CONTENDED THAT DUE TO UN-AUSPICIOUS VASTU FACTOR THE ASSESSEE WAS UNAB LE TO UTILIZE THE PROPERTY. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO INVOKE THE PROVISION OF SECTION 23(1) (A) OF IT ACT, TO DETERM INE THE ALV OF THE PROPERTY. AND THE AO EXTRACTED THE BASIS OF INFORMA TION AVAILABLE ON INTERNET, IN RESPECT OF THE PREVAILING RENT IN THE AREA @ RS. 116/- PER SQ. FT. PER MONTH. THE ASSESSEE CONTENDED THAT PREVAILING RENT IN THE AREA @ RS. 60 PER SQ. FT. PER MONTH. THUS THE AO ACCORDINGLY, ADOPTED RS. 85 PER SQ. FT. PER MONTH( AVERAGE OF THE RATE) AND CALCULATED THE ALV OF THE PROPERTY AT RS. 10,87,113/- (RS.15,15,018/- MINUS MUNICIPAL TAX RS. 4,65,905/-) . HOWEVER, THE LD. CIT(A) RELYING UPON THE DECISION OF ITAT, MUMBAI IN ITO VS. CHEM MECH (P) LTD. VIZ 83 ITD 427 MUMBAI, DIRECTED THE AO TO COMPUTE THE ALV IN TERM OF PERCENTAGE OF THE INVESTMENT IN PROPERTY. L D. AR OF THE ASSESSEE ARGUED THAT THE METHOD ADOPTED BY AUTHORITY BELOW I S WRONG. LD. AR FOR ASSESSEE FURTHER RELIED UPON THE CASE OF CIT VS. TI P TOP TYPOGRAPHY (2014) 48 TAXMANN.COM 191 (BOMBAY). LD. DR RELIED UPON THE ORDER OF AUTHORITIES BELOW. 3 ITA NO. 7294/M/13 CAN PROPERTIES PVT. LTD. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE SEEN THAT THE AO WHILE CALCULATING ALV OF THE PROPERTY RELIED UPON THE INFORMATION GAT HERED FROM INTERNET IN RESPECT OF AVERAGE RENT PREVAILING IN THE AREA. THE ASSESSEE CONTENTED THAT THE AVERAGE RENT PREVAILING IN THE AREA IS RS. 50-60 PE R SQ.FT. PER MONTH. THE AO CALCULATED THE ALV ON THE BASIS OF AVERAGE RATE CON TENDED BY ASSESSEE AND THE INFORMATION GATHERED BY HIM FROM INTERNET. HOWE VER THE LD. CIT (A) WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE DIREC TED THE AO TO COMPUTE THE ALV OF THE PROPERTY IN TERM OF PERCENTAGE OF INVEST MENT OF THE PROPERTY. 5. THE HONBLE JURISDICTIONAL HIGH COURT WHILE DEALING WITH THE ISSUE WITH REGARD TO THE METHOD OF ALV IN THE CASE OF TIP T OP TYPOGRAPHY(SUPRA) HELD AS UNDER: 31. SECTION 23 STATES THAT FOR THE PURPOSE OF SECTI ON 22, THE ANNUAL VALUE OF PROPERTY SHALL BE DEEMED TO BE UNDER CLAUSE (A), THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR OR UNDER CLAUSE (B) WHEN THE: PROPERTY OR ANY PART OF THE PROPERTIES ARE LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE O WNER IN RESPECT THEREOF, IS IN EXCESS OF THE SUM WHICH IS REFERRED TO IN CLAUSE (A). THEN, THE AMOUNT SO RECEIVED OR RECEIVABLE WOULD BE DEEME D TO BE THE ANNUAL VALUE FOR THE PURPOSES OF SECTION 22. THERE IS A TH IRD CATEGORY WHERE THE PROPERTY OR ANY PART OF IT HAS BEEN LET BUT WAS VAC ANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND BECAUSE OF SUC H VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER-IN RESPECT THEREOF, IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A) THE AMOUNT SO REC EIVED OR RECEIVABLE WILL BE THE ANNUAL VALUE. THEREAFTER THERE IS A PRO VISO AND WHICH REFERS TO THE DEDUCTION TOWARDS TAX LEVIED BY ANY LOCAL AU THORITY IN RESPECT OF THE PROPERTY AND THESE HAVE TO BE DEDUCTED IN DETER MINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHIC H SUCH TAXES ARE ACTUALLY PAID BY THE ASSESSEES, THEN, THERE IS AN EXPLANATION AND WHICH STATES THAT FOR THE PURPOSE OF CLAUSE (B) OR (C) OF SUB-SECTION (I) THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE, SUBJECT TO THE RULES, THE AMOUNT OF RENT W HICH THE OWNER CANNOT REALIZE. BY SUB-SECTIONS (2) AND (3) IT HAS BEEN CL ARIFIED THAT THE ANNUAL VALUE IN VIEW OF THE CIRCUMSTANCES SET OUT IN THIS SUB-SECTION WILL BE TAKEN TO BE NIL BUT SUB-SECTION (2) OF SECTION 23 I F WILL NOT APPLY IN THE CIRCUMSTANCES SET OUT BY SUB-SECTION(3). IF THE OWN ER HAS MORE THAN ONE HOUSE THEN, HOW THE ANNUAL VALUE HAS TO BE DETERMIN ED IS SET OUT IN SUB- SECTION (4) OF SECTION 23. 32. THUS, THE SCHEME IS THAT INCOME FROM HOUSE PROP ERTY SHALL BE TAKEN AS A COMPONENT OF THE INCOME CHARGEABLE TO TAX. HOW THAT INCOME FROM HOUSE PROPERTY HAS TO BE 'COMPUTED' IS THEN PROVIDE D BY THE LEGISLATURE. 4 ITA NO. 7294/M/13 CAN PROPERTIES PVT. LTD. THAT IS THE ANNUAL VALUE OF THE PROPERTY. THUS, THE LEGISLATURE DEEMS THE ANNUAL VALUE FIRSTLY TO BE THE SUM FOR WHICH TH E PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. IN THE EVENT, THE PROPERTY WHICH CONSISTS OF ANY BUILDINGS OR LANDS A PPURTENANT THERETO, THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IF IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), IT IS THAT AMOUNT SO RECEIVED OR RECEIVABLE WHICH SHALL BE DEEMED TO BE THE ANNUAL VALUE FOR THE PURPOSES OF COMPUTING THE TAX UNDER THE HEAD IN COME FROM HOUSE PROPERTY. 6. IN VIEW OF THE ABOVE LEGAL POSITION AND CONSIDERING THE ORDER OF AUTHORITIES BELOW, THE METHOD ADOPTED BY THE AUTHORITIES BELOW IS NOT IN CONSONANCE WITH THE PROVISION OF SEC 23(1) (A ) OF THE ACT, HENCE WE DEEM IT APPROPRIATE TO RESTORE THE CASE FOR THE FILE OF AO FOR DETERMINATI ON OF ALV OF THE PROPERTY IN ACCORDANCE WITH THE RATIO LAID DOWN BY HONBLE HIGH COURT IN THE CASE OF TIP TOP TYPOGRAPHY (2014) 48 TAXMANN.COM 191 (BOMBAY). IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH MAY, 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 25/05/2016 S.K.PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/