Shri Sandeep Manudhane, Indore v. The ACIT- Circle 3(1), Indore

ITA 235/IND/2013 | 2004-2005
Pronouncement Date: 01-10-2013 | Result: Allowed

Appeal Details

RSA Number 23522714 RSA 2013
Assessee PAN ACYPM1878G
Bench Indore
Appeal Number ITA 235/IND/2013
Duration Of Justice 5 month(s) 8 day(s)
Appellant Shri Sandeep Manudhane, Indore
Respondent The ACIT- Circle 3(1), Indore
Appeal Type Income Tax Appeal
Pronouncement Date 01-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 01-10-2013
Assessment Year 2004-2005
Appeal Filed On 23-04-2013
Judgment Text
1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO. 235/IND/2013 A.Y. 2004-05 SANDEEP MANUDHANE INDORE PAN ACYPM 1878 G :: APPELLANT VS ACIT-3(1) INDORE :: RESPONDENT APPELLANT BY SHRI P.D. NAGAR RESPONDENT BY SHRI R.A.VERMA DATE OF HEARING 1. 10 .2013 DATE OF PRONOUNCEMENT 1. 1 0.2013 O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 6.2.2013 OF THE LEARNED CIT(A)-II INDORE ON THE GR OUND THAT THE LD. CIT(A) UNDER THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE IS NOT JUSTIFIED IN CONFIRMING THE ADDITION O F RS.2 25 000/- MADE BY THE ASSESSING OFFICER UNDER T HE HEAD 2 INCOME FROM PROPERTY BEING NOTIONAL INTEREST @15% ON THE SECURITY DEPOSIT OF RS.15 LACS. 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHR I P.D. NAGAR LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R. A. VERMA LEARNED SENIOR DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE LD. CIT(A) DID NOT CONSIDER TH E SEC. 23 OF THE ACT WHICH PROVIDES THAT WHERE THE ACTUAL RENT RECEIVED/RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN SEC. 23(1)(A) OF THE ACT I.E. REASONABLE EXPECTED RENT THE ALV OF SUCH PROPERTY WILL BE THE RENT ACTUALLY RECEIVED/RECEIVABLE. IT DOES NOT PROVIDE F OR INCREASING THE ALV BY ESTIMATING OF NOTIONAL INTEREST ON TENAN CY DEPOSITS. THE ASSESSEE RECEIVED RENT OF RS.9 LACS AS PER AGRE EMENT WHICH WAS NOT DOUBTED UPON BY THE ASSESSING OFFICER. NOT ONLY THIS BASED ON THE LEASE AGREEMENT SUBMITTED FOR THE PURP OSE OF ASSESSMENT OF PROPERTY TAX FAIR RENT OF RS.9 LACS PER ANNUM FOR SAID PROPERTY WAS ALSO ACCEPTED BY MUNICIPAL CORPOR ATION INDORE. THEREFORE BY NO STRETCH OF IMAGINATION NO TIONAL 3 INTEREST ON INTEREST FREE DEPOSIT CAN BE TAKEN AS D ETERMINATIVE FACTOR TO ARRIVE AT THE FAIR RENT AS PROVISIONS OF SEC. 23(1)(A) DO NOT MANDATE THIS AS HELD IN THE CASE OF CIT VS. MON AKUMAR SUBBA (2011) 333 ITR 38 (DELHI). ACCORDINGLY ADDIT ION IS UNJUSTIFIED AND DESERVES TO BE DELETED. ON THE OTHE R HAND THE LD. SR. DR DEFENDED THE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF ARE THAT THE ASSESSEE OWNS A RESIDENTIAL PROPERTY LOCATED AT 41D F SCHEME NO.74C VIJAY NAGAR INDORE WHICH CONSISTS OF OFFIC E PORTION PENT HOUSE AND TERRACE. THE ASSESSEE WAS PROPRIETOR OF PROFESSIONAL TUTORIAL CONDUCTING COACHING CLASSES OR TUTORIAL TO ASPIRANTS OF COMPETITIVE EXAMS LIKE MCA/MBA AT I NDORE. HE TRANSFERRED ALL HIS PROPRIETARY RIGHTS (AND NOT THE HOUSE PROPERTY) ON 1.4.2002 AS A GOING CONCERN WITH ALL T HE ASSETS AND LIABILITIES TO M/S. P.T. EDUCATION TRAINING SER VICE LTD. INDORE. AS PER TENANCY AGREEMENT THE ASSESSEE RECE IVED SECURITY DEPOSIT OF RS.15 LACS AGAINST THE PROPERTY LEASED OUT TO 4 M/S. P.T. EDUCATION & TRAINING SERVICES LTD. @RS.9 LACS PER ANNUM. THE ASSESSEE UTILISED THE SECURITY DEPOSIT T OWARDS REPAYMENT OF LOAN TO THE BANK OF BARODA. ACCORDING TO THE LD. ASSESSING OFFICER TO ARRIVE AT THE CORRECT ALV OF THE SAID PROPERTY U/S 23(1)(B) OF THE ACT NOTIONAL INTEREST ON THE SECURITY DEPOSIT OF RS.15 LACS SHOULD BE ADDED. THE LD. ASSESSING OFFICER THEREFORE CALCULATED NOTIONAL I NTEREST @15% ON THE SECURITY DEPOSIT OF RS.15 LACS AND ADDED A S UM OF RS.2 25 000/- TO THE TOTAL INCOME. AS PER THE ASSES SEE NORMAL RENT OF THE OFFICE PREMISES IN THAT LOCATION DURING THOSE DAYS WAS NOT MORE THAN RS.4 TO RS.5 PER SQ.FT. BASED ON CARPET AREA. THE ASSESSEE HAD GIVEN CONSTRUCTED AREA OF 13 100 S Q.FT. WHICH INCLUDES THE BASEMENT GROUND FLOOR FIRST FLOOR S ECOND FLOOR AND THIRD FLOOR ON RENTAL OF RS.75 000 PER MONTH WH ICH WORKS OUT TO RS.5.75 PER SQ.FT. WHICH CANNOT BE SAID TO B E LESS THAN THE EXPECTED RENT IN THOSE DAYS. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION UNDER THE HEAD INCOME FROM PROPERTY 5 BEING NOTIONAL INTEREST @15% ON THE SECURITY DEPOSI TS. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 3.1 IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDER REASON FOR MAKING THE ADDITION WHILE FRAMING THE ASSESSMENT BY THE LD. ASSESSING OFFICER AND THE ASSERTION MADE BY THE LD. RESPECTIVE COUNSEL ARE KEPT IN JUXTAPOSITION AND ANALYSED WE ARE OF THE CONSIDERED OPINION THAT THE NOTIONAL INTEREST ON TH E INTEREST FREE SECURITY BY NO STRETCH OF IMAGINATION CAN BE TAKEN AS THE DETERMINATIVE FACTOR TO ARRIVE AT FAIR RENT BECAU SE THE PROVISIONS OF SEC. 23(1)(A) OF THE ACT DO NOT MANDA TE THIS. THE RATIO LAID DOWN BY THE FULL BENCH OF THE HONBLE DE LHI HIGH COURT IN CIT VS. MONAKUMAR SUBBA (SUPRA) AND IN CIT VS. SATYA CO. LTD. (1994) 75 TAXMAN 193 (CAL) SUPPORTS OUR VIEW. THE HONBLE PUNJAB & HARYANA HIGH COURT IN TILAKRAJ VS. CIT (178 ITR 327) HELD THAT OPEN MARKET RENT CANNOT BE BASIS. IN CIT VS. BHASKAR MITTER (1994) 73 TAXMAN 437 (CAL) THE HON'BLE HIGH COURT HELD THAT MUNICIPAL VALUE IF AV AILABLE THAT ITSELF WOULD BE THE ANNUAL LETTING VALUE UNDER THE ACT. IN VIEW 6 OF THE CLEAR FACT AND THE AFORESAID DECISION IN THE CASE OF MONAKUMAR SUBBA FROM HONBLE DELHI HIGH COURT WE D IRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 2 25 000/-. THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 1.10.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1.10.2013 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE !VYS!