DCIT CC 38, MUMBAI V. SIMRAN R. MAKER, MUMBAI

ITA 7338/MUM/2011

• Counselvise Citation: 733819914 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Assessee Lawyers: PRAKASH K JOTWANI

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI RAJENDRA, AM .. , , ./ I.T.A. NO. 7338/ MUM/2011 ( / ASSESSMENT YEAR : 2008-09 ACIT, CC 38, ROOM NO. 32(1), GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. MS. SIMRAN R. MAKER, MAKER TOWER F IST FLOOR, CUFFE PARADE, MUMBAI 400 005. ./ PAN : AJOPM2088B ( / APPELLANT ) .. ( ! / RESPONDENT ) ./ I.T.A. NO. 4404/ MUM/2012 ( / ASSESSMENT YEAR : 2009-10 ACIT, 12(2), ROOM NO. 134, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. MS. SIMRAN R. MAKER, MAKER TOWER F IST FLOOR, CUFFE PARADE, MUMBAI 400 005. ./ PAN : AJOPM2088B ( / APPELLANT ) .. ( ! / RESPONDENT ) A PPELLANT BY MS. VINITA J. MENON R E SPONDENT BY : SHRI PRAKASH K. JOTWANI ' # $ % & ' / DATE OF HEARING : 28-07-2015 ()*+ % & ' / DATE OF PRONOUNCEMENT : 07-08-2015 [ , / O R D E R ITA 7338/M/11 & 4404/M/12 2 PER A.D. JAIN, J.M . : .. , THESE ARE DEPARTMENTS APPEALS FOR ASSESSMENT YEARS 2008-09 AND 2009-10, FILED AGAINST THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE ALV OF THE HOUSE PROPERTY CANNOT BE MORE THAN THE ANNUAL R ENT DETERMINED BY THE MUNICIPAL CORPORATION AND THAT THE SAME CANNOT EXCE ED RS. 9,296/- AND THAT THE ALV OF RS. 18,06,000/- AS DETERMINED, IS IN-COR RECT. 2. AS PER THE RECORD, THE ASSESSEE GAVE FLAT NO. 13 , AT MAKER TOWER, CUFFEE PARADE, MUMBAI ON RENT TO MAKER DEVELOPMENT SERVICES PVT. LTD. ON AN YEARLY RENT OF RS. 60,000/-. THE A.O. NOTICED T HE ASSESSEE TO HAVE DISCLOSED A NET INCOME OF RS. 42,000/- FROM THE HOU SE PROPERTY. THE ANNUAL RENT WAS SHOWN AT RS. 90,000/-. THIS WAS OBSERVED B Y THE A.O. TO BE VERY LOW, CONSIDERING THE AREA AND LOCATION OF THE FLAT. IT WAS OBSERVED THAT FLAT NO. 192-B, LOCATED AT MAKER TOWER, CUFFEE PARADE, O WNED BY ONE MR. PUNEET R. GUPTA, WAS GIVEN FOR A LICENCE FEE OF RS. 3 LACS PER MONTH. THE SAID FLAT WAS MEASURING 1700 SQ. FT. THE FLAT OF THE ASSESSE E WAS MEASURING 1220 SQ. FT. FROM THIS, THE A.O. OBSERVED THAT THE ASSESSEE S FLAT WOULD HAVE FETCHED A RENT OF RS. 2,15,000/- PER MONTH. THIS AMOUNT WAS ADOPTED AS THE ANNUAL VALUE OF THE ASSESSEES FLAT. THE ANNUAL RENTAL VAL UE OF THE FLAT WAS, THEREFORE, WORKED OUT AT RS. 25,80,000/-, AFTER ALLOWING DEDUC TION U/S 24 OF THE ACT @ 30%, I.E., RS. 7,74,000/-. THE LD. CIT(A) DELETED T HE ADDITION MADE BY THE A.O. IN DOING SO, THE LD. CIT(A) FOLLOWED THE DECISION O F THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMITABEN N. AMBANI VS. CWT, 323 ITR 104, WHICH WAS ALSO FOLLOWED IN ITO VS. M/S SAHAR DEVELOPERS, IN ITA NO. 3164/MUM/2008 VIDE ORDER DATED 28.01.2011. THE LD. CIT(A) ALSO F OLLOWED THE DECISION IN THE CASE OF ACIT VS. SHRI SANDEEP J. SHAH IN ITA NO. 1382/MUM/2008, VIDE ORDER DATED 27.04.2011. ITA 7338/M/11 & 4404/M/12 3 3. THE LD. D.R. HAS CONTENDED THAT THE LD. CIT(A) H AS ERRED IN HOLDING THAT THE ALV OF THE HOUSE PROPERTY CANNOT BE MORE THAN T HE ANNUAL RENT DETERMINED BY THE MUNICIPAL CORPORATION; THAT THE L D. CIT(A) HAS , WHILE WRONGLY FOLLOWING THE TRIBUNAL DECISION IN THE CASE S OF SHRI SANDEEP J. SHAH AND M/S SAHAR DEVELOPERS (SUPRA), ERRED IN IGNORING THE FOLLOWING LATER DECISIONS OF THE TRIBUNAL ON THIS ISSUE, HOLD ING THAT THE ALV DETERMINED BY THE MUNICIPAL CORPORATION IS ONLY ONE OF THE FAC TORS AND IT CANNOT BE IGNORED IF IT DOES NOT REFLECT THE TRUE ALV:- 1. ITO VS. SPEARHEAD PROPERTIES (P) LTD., 46 SOT 208 2. TIVOLI INVESTMENT AND TRADING COMPANY P. LTD. VS. A CIT, 130 ITD 521 3. ITO VS. HANSA MOTORS WORKS, 46 SOT 160. THE LD. D.R. FURTHER CONTENDED THAT THE LD. CIT(A) ERRED IN NOT TAKING INTO CONSIDERATION THE FACT THAT IN THE PRESENT CASE, TH ERE IS EVIDENCE THAT THERE IS A SUPPRESSION OF THE ACTUAL RENT RECEIVED DUE TO CH ARGING OF HUGE SECURITY DEPOSIT AND THAT THE A.O. DETERMINED THE ALV ON THE BASIS OF COMPARABLE RENT EARNED BY SIMILAR PROPERTIES IN THE SAME BUILDING A ND IN THE SAME LOCALITY. 4. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. WHILE DELETING THE ADDITION, THE LD. CIT(A) FOLLOWE D THE TRIBUNAL DECISION IN THE CASE OF SHRI SANDEEP J. SHAH (SUPRA), WHEREIN , FOLLOWING THE CO-ORDINATE BENCH DECISION DATED 26-11-2010, IN THE CASE OF DC IT VS. RECLAMATION REALTY INDIA PVT. LTD., THE TRIBUNAL HELD THAT WHE N THE RATE ACTUALLY RECEIVED BY THE ASSESSEE IS MORE THAN THE MUNICIPAL VALUATIO N OR STANDARD RENT, THE SAME ALONE HAS TO BE TAKEN AS THE ANNUAL VALUE FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESEE UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY; AND THAT NO FURTHER ADDITION CAN BE MADE IN SUCH A CASE. THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI BANSALI, 141 ITR 419 CAL), WAS ALSO TAKEN INTO CONSIDERATION. TH EREIN, THE TRIBUNALS ACTION IN DIRECTING THE A.O. TO DETERMINE THE PROPERTY INC OME ON THE BASIS OF ITS ITA 7338/M/11 & 4404/M/12 4 ANNUAL VALUE WITH REFERENCE TO THE RATABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION, WAS UPHELD. THE TRIBUNAL AL SO REFERRED TO THE CASE OF M.V. SONAWALA, 177 ITR 246 (BOM), WHICH FOLLOWED THE DECISION OF PRABHABATI BANSALI (SUPRA). AS CONSIDERED THEREI N, AS ALSO IN SMITABEN N. AMBANI (SUPRA) AND IN SAHAR DEVELOPERS (SUPRA), U/S 23(1)(A) OF THE ACT, THE ANNUAL VALUE AS DETERMINED IN MUNICIPAL VALUATI ON IS TO BE CONSIDERED AS THE SUM FOR WHICH THE PROPERTY CAN REASONABLY BE EX PECTED TO LET OUT FROM YEAR TO YEAR. 5. IT IS FURTHER SEEN THAT AS PER THE RECORD, THE P ROPERTY WAS GIVEN ON RENT IN 1992. IT HAS BEEN ACCEPTED BY THE DEPARTMENT AL SO, UNDER SCRUTINY ASSESSMENT FOR ASSESSMENT YEARS 2006-07 AND 2007-08 . THE RELEVANT ASSESSMENT ORDERS ARE PLACED IN ASSESSEES PAPER BO OK. AS PER LETTER DATED 1`2-1-2010 FROM MAKER TOWER CO-OPERATIVE HOUSING SO CIETY TO THE ASSESSEE (ASSESSEES PAPER BOOK PAGE, NO. 14), THE RATABLE V ALUE OF THE FLAT IS RS. 774.67 PER MONTH, AS INTIMATED TO THE SOCIETY BY BM C. IN THE CASE OF DCIT VS. SHRI MANISH RANBIR MAKER, VIDE ORDER DATED 30. 8.2013 IN ITA NO. 7341/MUM/2011 FOR A.Y. 2008-09 AND ITA NO. 4405/MUM /2012 FOR A.Y. 2009-10, FOLLOWING, INTER ALIA, SAHAR DEVELOPERS (SUPRA) AND SANDEEP J. SHAH (SUPRA), THE ACTION OF THE TRIBUNAL, HOLDING THAT THE ALV WAS TO BE DETERMINED ON THE BASIS OF THEMUNICIPAL VALUE AND N OT ON SUM ESTIMATED RENT, WAS UPHELD. IT HAS ALSO NOT BEEN DISPUTED TH AT AFTER A.Y. 2009-10, NO ADDITION IN THIS REGARD HAS BEEN MADE. APROPOS THE ALLEGED COMPARABLE CASE OF SHRI PUNEET R. GUPTA, THE LEAVE AND LICENCE AGRE EMENT ITSELF IS DATED 11-5- 2007. THE CASE OF SHRI PUNEET R. GUPTA WAS ALSO UN DER CONSIDERATION IN SHRI MANISH RANBIR MAKER (SUPRA) AND THIS COMPARI SON WAS NOT FOUND TO BE APT. 6. IN CIT VS. TIP TOP TYPOGRAPHY, 368 ITR 330 (BO M), THE HONBLE JURISDICTIONAL HIGH COURT, HAVING CONSIDERED ALL TH E RELEVANT CASE LAWS ON THE ITA 7338/M/11 & 4404/M/12 5 ISSUE AT HAND, INCLUDING PRABHABATI BANSALI (SUPR A) AND M.V. SONAWALA (SUPRA) HAS HELD AS UNDER:- INCOME FROM HOUSE PROPERTY HAS TO BE 'COMPUTED' BY COMPUTING THE ANNUAL VALUE OF THE PROPERTY. THE ANNUAL VALUE FIRS TLY TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. IN THE EVENT, THE PROPERTY WHICH CONSISTS OF ANY BUILDINGS OR LANDS APPURTENANT THERETO, IF THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), IT IS THAT AMOUNT SO RECEIVED OR RECEIVABLE WHICH SHALL B E DEEMED TO BE THE ANNUAL VALUE FOR THE PURPOSES OF COMPUTING THE TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THE PRINCIPLES APPLIC ABLE IN DETERMINING THE ANNUAL LETTING VALUE ARE: (I) THE ANNUAL LETTIN G VALUE WOULD BE THE SUM AT WHICH THE PROPERTY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCU MSTANCES ; (II) AN INFLATED OR DEFLATED RENT BASED ON EXTRANEOUS CONSI DERATIONS MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS; (III) THE ACTU AL RENT RECEIVED, IN NORMAL CIRCUMSTANCES, 'WOULD BE A RELIABLE EVIDENCE UNLESS THE TENT IS INFLATED OR DEFLATED BY REASON OF EXTRANEOUS CONSID ERATIONS ; (IV) SUCH ANNUAL LETTING VALUE, HOWEVER, CANNOT EXCEED THE ST ANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROP ERTY; (V) IF THE STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTROLLER, THE N IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE STANDARD RENT AS PER THE PROVISIONS OF RENT CONTROL ENACTMENT; (VI) THE STANDARD RENT IS T HE UPPER LIMIT, AND IF THE FAIR RENT IS LESS THAN THE STANDARD RENT, THEN IT I S THE FAIR RENT WHICH SHALL BE TAKEN AS THE ANNUAL LETTING VALUE AND NOT THE ST ANDARD RENT. IT IS A WELL RECOGNISED PRINCIPLE IN RATING THAT BOTH GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFERENCE TO THE RENT AT WHI CH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HY POTHETICAL RENT, FOR INSTANCE, BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHER COMPARABLE TO IT OR WHERE THERE ARE NO RENTS BY REF ERENCE TO THE ASSESSMENTS OF COMPARABLE PROPERTIES OR TO THE PROF ITS CARRIED FROM THE PROPERTY OR TO THE CAST OF CONSTRUCTION. CONSIDERIN G THE DIFFICULTIES FACED IN EITHER RETRIEVING IMMOVABLE PROPERTIES IN METRO CITIES AND TOWNS, AND THE TIME SPENT IN LITIGATION, IT IS EXPEDIENT TO EX ECUTE LEAVE AND LICENCE AGREEMENTS. THESE ARE USUALLY FOR FIXED PERIODS AND RENEWABLE. IN SUCH CASES AS WELL, THE CONCEDED POSITION IS THAT THE AN NUAL LETTING VALUE WILL HAVE TO BE DETERMINED ON THE SAME BASIS AS NOTED AB OVE. IN THE EVENT A SECURITY DEPOSIT COLLECTED AND REFUNDABLE INTEREST- FREE AND THE MONTHLY- COMPENSATION SHOWS A TOTAL MISMATCH OR DOES NOT REF LECT THE PREVAILING RATE OR THE ATTEMPT IS TO DEFLATE OR INFLATE THE RE NT BY SUCH METHODS, THE ASSESSING OFFICER IS NOT PREVENTED FROM CARRYING OU T NECESSARY INVESTIGATION AND ENQUIRY. HE MUST HAVE COGENT AND SATISFACTORY MATERIAL IN HIS POSSESSION WHICH WILL INDICATE THAT THE PART IES HAVE CONCEALED THE REAL POSITION. HE MUST NOT MAKE A GUESS WORK OR ACT ON CONJECTURES AND SURMISES. THERE MUST BE DEFINITE AND POSITIVE MATER IAL TO INDICATE THAT THE PARTIES HAVE SUPPRESSED THE PREVAILING RATE. TH EN THE ENQUIRIES THAT ITA 7338/M/11 & 4404/M/12 6 THE ASSESSING OFFICER CAN MAKE, WOULD BE FOR ASCERT AINING THE GOING RATE. HE CAN MAKE A COMPARATIVE STUDY AND AN ANALYSIS. IN THAT REGARD, TRANSACTIONS OF IDENTICAL OR SIMILAR NATURE CAN BE ASCERTAINED BY OBTAINING THE REQUISITE DETAILS. HOWEVER, THERE ALS O THE ASSESSING OFFICER MUST SAFEGUARD AGAINST ADAPTING THE RATES STATED TH EREIN STRAIGHTAWAY. HE MUST FIND OUT WHETHER THE PROPERTY WHICH HAS BEE N LET OUT OR GIVEN AN LEAVE AND LICENCE BASIS IS OF A SIMILAR NATURE, NAM ELY, COMMERCIAL OR RESIDENTIAL. HE SHOULD ALSO SATISFY HIMSELF WHETHER THE RATE OBTAINED BY HIM FROM THE DEALS AND TRANSACTIONS AND DOCUMENTS I N RELATION THERETO CAN BE APPLIED OR WHETHER A DEPARTURE THEREFROM CAN BE MADE. BEFORE THE ASSESSING OFFICER DETERMINES THE RATE BY THE ABOVE EXERCISE OR SIMILAR PERMISSIBLE PROCESS HE IS BOUND TO DISCLOSE THE MAT ERIAL IN HIS POSSESSION TO THE PARTIES. HE MUST NOT PROCEED TO RELY UPON TH E MATERIAL IN HIS POSSESSION AND DISBELIEVE THE PARTIES. THE SATISFA CTION OF THE ASSESSING OFFICER THAT THE BARGAIN REVEALS AN INFLATED OR DEF LATED RATE BASED ON FRAUD, EMERGENCY, RELATIONSHIP AND OTHER CONSIDERAT IONS MAKES IT UNREASONABLE MUSE PRECEDE THE UNDERTAKING OF THE AB OVE EXERCISE. 7. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE DEPAR TMENT IS FOUND NOT TO HOLD ANY FORCE AND IS REJECTED AS SUCH. THE ACTION OF THE LD. CIT(A) IS CONFIRMED. 8. SINCE THE FACTS IN BOTH THESE APPEALS ARE, MUTATIS MUTANDIS, IN PARI MATERIA, OUR ABOVE OBSERVATIONS SHALL APPLY EQUALLY TO ITA NO. 4404/MUM/2012, FOR A.Y. 2009-10 ALSO. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2015. , % ()*+ ' -. / 0 07-08-2015 ) % 8$ SD/- SD/- (RAJENDRA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER - ' D$ MUMBAI ; / DATED 07-08-2015 [ ITA 7338/M/11 & 4404/M/12 7 #.../ R.K. R.K. R.K. R.K. , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ' E& () / THE CIT(A)- CONCERNED, MUMBAI 4. ' E& / CIT- CONCERNED , MUMBAI 5. H#I 8 &JK , ' JK+ , - ' D$ / DR, ITAT, MUMBAI E BENCH 6. 8 L M $ / GUARD FILE. ! ( / BY ORDER, ! H& & //TRUE COPY// )/(* + ( DY./ASSTT. REGISTRAR) , - ' D$ / ITAT, MUMBAI