The ACIT, Circle-6, Ahmedabad V. Smt. Madhuriben H.Gala, Ahmedabad

ITA 90/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60572 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Keywords: Deemed owner of house property
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 90/AHD/2010 ASSESSMENT YEAR :2005-06 ACIT, CIRCLE-6, AHMEDABAD V/S . SMT. MADHURIBEN H. GALA, AHMEDABAD PAN NO. AA ZPG9742N (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI M. MATHIVANAN, SR.D.R. /BY RESPONDENT SHRI ASEEM THAKKAR, A.R. /DATE OF HEARING 26.06.2012 /DATE OF PRONOUNCEMENT 06.07.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT (A)-I, AHMEDABAD, ORDER DATED 15.11.2009 FOR ASSESSMENT YEAR 2005-06 AGAINST THE DELETION OF ADD ITION OF RS. 20,99,311/- ON ACCOUNT OF ANNUAL LETTING VALUE OF THE HOUSE PRO PERTY. 2. THE BRIEF FACT OF THE CASE IS THAT THE ASSESSEE IS INDIVIDUAL ASSESSEE. SHE HAS TWO IMMOVABLE PROPERTIES, ONE AT AHMEDABAD AND ONE AT MUMBAI WHICH ARE SHOWN SELF AS SELF OCCUPIED. THE A.O. NO TICED THAT THE ASSESSEE ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 2 WAS OCCUPYING THE PROPERTY AT AHMEDABAD AND HAS SHO WN ALV OF THE PROPERTY AT MUMBAI AT RS.9527/- WHICH IS VERY MEAGE R AMOUNT IN COMPARED TO PROPERTIES OWNED BY THE ASSESSEE. THE A.O. HAD GIV EN REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AT THE T IME OF ASSESSMENT PROCEEDING. THE ASSESSEE CLAIMED BEFORE THE A.O. T HAT TOTAL MUNICIPAL TAX WAS PAID RS. 11,96,322/- AND HER SHARE OF THE SAME WORKED OUT TO RS. 9,527/- WHICH IS 4.3% OF THE TOTAL TAXES. THE AREA OF THE PROPERTY OWNED BY THE ASSESSEE IS 313.33 SQ.MTR. IT WAS FURTHER CONTENDE D BY THE ASSESSEE THAT IN CASE OF DEEMED LET OUT THE REASONABLE EXPECTED RENT OF THE PROPERTY WOULD BE DETERMINED AND FOR DETERMINING THE REASONABLE EXPEC TED RENT MUNICIPAL VALUATION OF THE BUILDING IS FAIR AND RELIABLE INDI CATOR, FOR COLLECTING MUNICIPAL TAXES LOCAL AUTHORITIES MAKE PERIODICAL SURVEY OF A LL BUILDING IN THEIR JURISDICTION. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS BEFORE THE A.O.:- A. C.J.GEORGE V CIT (1973) 92 ITR 137 (KER.) B. CIT V BHASKAR MITTER 73 TAXMAN 437 (CAL.) C. CIT V SATYA & CO. 75 TAXMAN 193 (CAL.) D. CIT V PRABHAVATI BHANSALI 141 ITR 419 (CAL.) E. M.V.SONVALA V CIT 177 ITR 246 (MUM.) FURTHER, THE ASSESSEE HAD CONTENDED BEFORE THE A.O. THAT THE PROPERTY WAS COVERED UNDER THE RENT CONTROL ACT IN THE CITY OF MUMBAI AND STANDARD RENT WOULD APPLY. THE VALUATION OF THE PROPERTY HA S BEEN ACCEPTED IN THE EARLIER YEARS AND THAT THERE IS NO CHANGE OR DEVIAT ION IN THE MANNER OF VALUATION DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO CLAIMED ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 3 BEFORE THE A.O. THAT MUMBAI PROPERTY SHOULD BE TREA TED AS SELF OCCUPIED PROPERTY AND AHMEDABAD PROPERTY FOR VALUING THE ALV . THE A.O. HAD GIVEN DETAILED REASONING IN PARAGRAPH NO. 1.4 AND ALSO RE LIED UPON SAKARLAL BALABHAI VS. ITO (1975) 100 ITR 97, 107, HONBLE GU JARAT HIGH COURT, SMT. RADHADEVI DALMIYA VS. CIT (1980) 125 ITR 134 & SHRI BIPINBHAI VADILAL FAMILY TRUST V COMMISSIONER OF INCOME TAX IN 208 ITR. THE A.O. FINALLY CONCLUDED THE ESTIMATED VALUE OF PROPERTY ON THE BA SIS OF RATE OF INTEREST ON COST OF HOUSE PROPERTY @ 5% ON CAPITAL VALUE OF RS. 4,19,86,220/- WHICH WAS RS.20,99,311/-. THE A.O. MADE ADDITION OF RS. 20,9 9,311/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE FILED FIRST APPEAL BEFORE LD. CIT (A). HE HAS DISCUSSED THOROUGHLY TH E FACTS OF THE CASE ON PAGE NOS. 2 TO 13 AND RELIED UPON THE VARIOUS CASE LAWS WHICH ARE SUMMARIZED AS UNDER:- I. PARKPAPER INDUSTRIES (P) LTD. V ITO (2008) 25 S OT 406 (MUMBAI) II. DELITE ENTERPRISE (P) LTD V ITO (2008) 22 SOT 245 (MUMBAI) III. DR. V.S. PRAYAG V ITO (1983) 17 TTJ (PUNE) 495 IV. ACIT V J.M.P. INVESTMENTS LTD. (2007) 15 SOT 18 0 (MUMBAI) AND THE LD. CIT(A) ALLOWED THE APPEAL IN PARAGRAPH NOS. 6, 6.1, 6.2 & 6.3, WHICH ARE REPRODUCED AS UNDER:- 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT. IT IS OBSERVED THAT SIMILAR ADDITIONS HAVE NOT BEEN MADE EITHER IN THE EARLIER YEARS OR IN SUBSEQUENT YEAR, THOUGH ASSESSMENT IN THESE YEAR S HAVE BEEN MADE IN SCRUTINY U/S. 143(3) OF THE IT. ACT. THE ASSESSM ENT ORDER OF A.Y.2006- ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 4 07 HAS BEEN PASSED ON 22.10.2008 U/S. 143(3) OF THE IT. ACT, WHEREIN NO SUCH ADDITIONS HAVE BEEN MADE. 6.1 IT IS ALSO OBSERVED THAT IN THE IMPUGNED ASSESS MENT ORDER, THE ASSESSING OFFICER HAS DETERMINED THE VALUE OF THE P ROPERTY AT RS.4,19,86,220/- AND THEN COMPUTED THE ANNUAL LETTING VALUE OF THE PROPERTY @ 5% OF THE CAPITAL VALUE. IN THE PROCESS, THE ASSESSING OFFICER FAILED TO UNDERSTAND THAT MUMBAI PROPERTY H AS BEEN TREATED AS SELF OCCUPIED PROPERTY BY THE APPELLANT AND SHE (AP PELLANT) IS NOT GETTING ANY RENT FROM THAT PROPERTY. THE ASSESSING OFFICER FAILED TO UNDERSTAND THAT TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY ' IS NOT A TAX UPON RENT OF THE PROPERTY, BUT IT IS TAXED ON THE INHERE NT CAPACITY OF A BUILDING TO YIELD INCOME. THE COURTS HAVE CONSISTENTLY HELD THAT REASONABLE EXPECTED RENT CAN BE DETERMINED BY TAKING INTO CONS IDERATIONS OF MUNICIPAL VALUATION OF PROPERTY AND FAIR RENT OF TH E PROPERTY- HOWEVER, IF THE PROPERTY IS COVERED BY RENT CONTROL ACT, THEN, THE AMOUNT SO COMPUTED CANNOT EXCEED THE STANDARD RENT, AS DETERM INED UNDER THE RENT CONTROL ACT. 6.2 IN VIEW OF THE LANGUAGE OF SECTION 23(I) WHICH, BEFORE AMENDMENT IN 1975 WAS IN PAN MATERIAL WITH THAT USED IN MUNIC IPAL TAX LEGISLATION, THE SUPREME COURT IN SHEILA KAUSHISH V. C/T [(1981) 131 ITR 435 (SUPREME COURT) AND AMOLAK RAM KHOSLA V. CIT [(1981 ) 131 ITR 589 (SC)], BALBIR SINGH (DR.) V. MCD [(1985) 152 ITR 38 8 (SC)] AND THE OTHER HIGH COURTS IN SEVERAL CASES HELD THAT WHERE PROPERTY LET OUT IS GOVERNED BY THE RENT CONTROL ACTS, THE STANDARD REN T AS DEFINED BY OR FIXED UNDER THE RELEVANT RENT CONTROL LEGISLATION W ILL HAVE TO BE TAKEN FOR DETERMINING THE BONA FIDE ANNUAL VALUE. FROM THESE JUDGEMENTS, IT IS CLEAR THAT IN CASE OF THE PROPERTY GOVERNED BY THE RENT CONTROL ACT, ITS ANNUAL VALUE U/S.23(1)(A) CANNOT EXCEED THE STANDAR D RENT (FIXED OR DETERMINABLE) UNDER THE RENT CONTROL ACT. THESE JUD GEMENTS WERE ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 5 GIVEN FOR THE ASSESSMENT YEARS PRIOR TO THE ASSESSM ENT YEAR 1976-77 WHEN CLAUSE (B) WAS NOT INTRODUCED IN SECTION 23(1) . THE SAID CLAUSE (B) PROVIDES THAT IF THE ACTUAL RENT RECEIVED / RECEIVA BLE IS MORE THAN THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPE CTED TO LET FROM YEAR TO YEAR, THE ACTUAL RENT WILL BE TAKEN AS ANNU AL VALUE IN CASE OF LET OUT PROPERTY. IN THE CONTEXT OF THE CLAUSE (B), THE IMPLICATION OF THE AFORESAID JUDGEMENTS OF THE SUPREME COURT WILL BE A S FOLLOWS : - IN THE CASE OF THE PROPERTY OCCUPIED BY THE ASSES SEE FOR HIS RESIDENCE, THE ANNUAL VALUE CANNOT EXCEED THE AMOUN T OF STANDARD RENT DETERMINABLE UNDER THE RENT CONTROL A CT. - IN CASE OF THE LET OUT PROPERTY, THE ANNUAL VALUE CANNOT EXCEED THE STANDARD RENT (FIXED OR EVEN DETERMINABL E IF NOT FIXED) UNDER THE RENT CONTROL ACT, EXCEPT WHERE THE RENT RECEIVED / RECEIVABLE EXCEEDS THE STANDARD RENT. 6.3 IN THE PRESENT CASE, BASED ON ANNUAL RATEABLE V ALUE OF THE PROPERTY AT MUMBAI, THE ALV OF THE PROPERTY BELONGI NG TO APPELLANT HAS BEEN DETERMINED AT RS.9,527/- . THIS VALUE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER'S IN EARLIER AS WELL AS IN SUBSEQ UENT ASSESSMENT YEARS IN SCRUTINY ASSESSMENTS. IN THE IMPUGNED ASSE SSMENT ORDER, THE ASSESSING OFFICER GROSSLY ERRED IN DETERMINING THE FAIR RENT OF SELF OCCUPIED PROPERTY ON THE BASIS OF CAPITAL VALUE OF PROPERTY. SUCH AN ESTIMATION IS NOT PERMISSIBLE. THE ASSESSING OFFICE R IS DIRECTED TO TAX THE INCOME FROM HOUSE PROPERTY, AS DECLARED IN THE RETURN OF INCOME. THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 4. THE REVENUE IS BEFORE US. THE LD. D.R. RELIED U PON THE ORDER OF THE A.O. WHEREAS THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A). ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 6 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW, HEARD THE ARGUMENTS FROM BOTH THE SIDES AND GONE THROUGH THE CASE LAW. IN THIS CASE, THE ASSESSEE HAD CHOSEN MUMBAI HOUSE FOR SELF OCCUP IED AND FOR ALV TO AHMEDABAD HOUSE. THIS WAS CLAIMED BY THE ASSESSEE BEFORE THE A.O. EVEN THEN HE HAD ASSESSED THE ALV AT MUMBAI HOUSE. THE RENT CONTROL ACT IS APPLICABLE IN MUMBAI. THE ANNUAL VALUATION U/S 23( 1)(A) CANNOT EXCEED THE STANDARD RENT UNDER THE RENT CONTROL ACT. THE A.O. HAD ACCEPTED THE ALV ON THE BASIS OF RENT CONTROL ACT IN EARLIER YEARS AS W ELL AS SUBSEQUENT YEAR IN SCRUTINY ASSESSMENT WHEREAS IN YEAR UNDER CONSIDERA TION, THE LD. A.O. HAD TAKEN BASIS OF CAPITAL VALUE OF PROPERTY. SUCH EST IMATION IS NOT JUSTIFIED. THEREFORE, WE HAVE CONSIDERED VIEW THAT THERE IS NO REASON TO INTERVENE IN THE ORDER OF LD. CIT (A). 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. ITA NO. 90/AHD/2010 A.Y. 05-06 PAGE 7 BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 02.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 03.07.2012 4) DATE OF CORRECTION XXX 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 06.07.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 06.07.2012