Vinodkumar Harshavardhan HUF, Kolkata v. A.C.I.T, Circle-30, Kolkata., Kolkata

ITA 2476/KOL/2013 | 2009-2010
Pronouncement Date: 07-10-2016

Appeal Details

RSA Number 247623514 RSA 2013
Assessee PAN AABHV5732K
Bench Kolkata
Appeal Number ITA 2476/KOL/2013
Duration Of Justice 2 year(s) 11 month(s) 15 day(s)
Appellant Vinodkumar Harshavardhan HUF, Kolkata
Respondent A.C.I.T, Circle-30, Kolkata., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Assessee
Bench Allotted B
Tribunal Order Date 07-10-2016
Date Of Final Hearing 05-10-2016
Next Hearing Date 05-10-2016
Assessment Year 2009-2010
Appeal Filed On 23-10-2013
Judgment Text
1 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH AM & SHRI S. S. VISWAN ETHRA RAVI JM] I.T.A NO. 2476/KOL/2013 ASSESSMENT YEAR: 2009-10 VINODKUMAR HARSHAVARDHAN HUF VS. ASSISTANT COMMI SSIONER OF INCOME-TAX (PAN: AABHV5732K) CIRCLE-30 KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 05.10.2016 DATE OF PRONOUNCEMENT: 07.10.2016 FOR THE APPELLANT: SMT. NILIMA JOSHI FCA FOR THE RESPONDENT: SHRI DAVID Z. CHAWN DR ORDER PER SHRI M. BALAGANESH AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XIV KOLKATA VIDE APPEAL NO. 873/CIT(A)-XIV/2011-12 DATED 12.08.2013. ASSESS MENT WAS FRAMED BY ACIT CIRCLE- 30 KOLKATA U/S. 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS ORDER DATED 29.12.2011. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL OF ASSESSEE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF INTEREST PAID IN THE SUM OF RS.30 11 441/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE A SSESSEE HAS BORROWED MONIES FROM SEVERAL PARTIES AND HAD LENT THOSE MONIES TO SEVERAL PARTIE S AND ACCORDING TO LD AO HAD ALSO PARTIALLY UTILIZED THE SAME FOR INVESTMENT IN MUTUA L FUNDS. THE ASSESSEE HAD DERIVED INTEREST INCOME OF RS.46 96 874/- OUT OF ITS LOANS LENT BY I T AND HAD CLAIMED DEDUCTION FOR INTEREST PAID IN THE SUM OF RS.30 11 441/- UNDER THE HEAD I NCOME FROM OTHER SOURCES AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING INT EREST INCOME. THE LD AO FOUND THAT THE NEXUS OF BORROWED FUNDS UTILIZED FOR GIVING LOANS T O FETCH INTEREST INCOME WAS NOT CLEARLY PROVED BY THE ASSESSEE AS ADMITTEDLY THE ASSESSEE HAD ALSO MADE INVESTMENTS IN MUTUAL FUNDS FOR OPTIMUM UTILISATION OF ITS FUNDS. ACCORD INGLY THE AO DISALLOWED THE ENTIRE INTEREST PAID OF RS.30 11 411/- AS EXPENDITURE NOT INCURRED FOR THE PURPOSE OF EARNING 2 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 INTEREST INCOME. THIS ACTION OF THE AO WAS UPHELD BY LD. CIT(A). AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND NO.1 : 1. LD. CIT(A) CONFIRMED DISALLOWANCE OF INTEREST PAID OF RS.30 11 441/- UNLAWFULLY DEDUCTION OF WHICH WAS TAKEN AGAINST INTEREST RECEI VED OF RS.46 96 874/-. LD. CIT(A) DID NOT CONSIDER THE PLEA OF ASSESSEE WHERE IT WAS CLAIMED THAT LOAN FUNDS RECEIVED WERE UTILIZED FOR GIVING OF LOANS. 2.2. THE LD. AR AT THE TIME OF HEARING ARGUED THAT THE LOANS BORROWED WERE INDEED UTILIZED FOR GIVING INTEREST BEARING LOANS TO SEVER AL PARTIES AND ASSESSEE HAD RIGHTLY CLAIMED THE PAYMENT OF INTEREST AS AN EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING INTEREST INCOME U/S. 57 OF THE ACT. SHE ALSO FURNISHED THE DETAILS OF BALANCE SHEET OF THE ASSESSEE HUF AS ON 31.03.2008 AND 31.03.2009 AND ALSO GAVE THE BREA K-UP OF LOANS RECEIVED AND LOANS PAID AS BELOW: LOANS RECEIVED LOANS PAID OPENING BALANCE RS. 1.01 CR. RS. 2.03 CR. ADD: FRESH TRANSACTIONS DURING THE YEAR RS. 2.23 C R. RS. 3.18 CR. TOTAL : RS. 3.24 CR. RS. 5.48 CR. LESS: REFUNDED DURING YEAR RS. 0.00 CR. RS. 4.30 CR. CLOSING BALANCE AS ON 31.03.2009 RS. 3.24 CR. R S. 1.19 CR. 2.3. THE LD. AR PLEADED THAT FROM THE AFORESAID DET AILS IT COULD BE VERY WELL SEEN THAT THE AMOUNTS BORROWED HAD BEEN DIRECTLY UTILIZED FOR GIV ING LOANS THEREBY PROVING THE NEXUS OF BORROWED FUNDS BEING UTILIZED FOR ADVANCING OF LOAN S WHICH FETCHED INTEREST INCOME. 2.4. IN RESPONSE TO THIS THE LD. DR HAS VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND URGED BEFORE THE BENCH TO CONFIRM T HE ORDER OF LD. CIT(A). 2.5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE DETAILS FILED BY THE LD. AR BEFORE US THAT THESE DETAILS WERE NOT FILED BEFORE THE LOWER AUTHORITIES AND HENCE BECOME ADDI TIONAL EVIDENCE WHICH DESERVES TO BE ADMITTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE. ADMITTEDLY THE LD AO DID NOT HAVE AN OCCASION TO E XAMINE THESE FIGURES IN THE LIGHT OF ARGUMENTS ADVANCED BY THE LD. AR. HENCE WE DEEM I T FIT AND PROPER TO SET ASIDE THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF LD AO WI TH A DIRECTION TO THE ASSESSEE TO EXPLAIN BEFORE THE LD AO AS TO FROM WHICH FUNDS THE LOANS W ERE GIVEN BY THE ASSESSEE TO VARIOUS PARTIES WHICH ULTIMATELY FETCHED INTEREST INCOME. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE ENTIRE TRANSACTION OF INTEREST INCOME EARNED BY THE ASSESSEE WOULD HAVE TO BE TAXED 3 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 UNDER THE HEAD INCOME FROM OTHER SOURCES AS ADMIT TEDLY ASSESSEE IS NOT ENGAGED IN ANY BUSINESS ACTIVITY. THE AFORESAID DETAILS TO BE FIL ED BY THE ASSESSEE AS DIRECTED HEREINABOVE WOULD ENABLE THE ALLOWABILITY OF CLAIM OF DEDUCTION U/S. 57 OF THE ACT WITH REGARD TO INTEREST PAID BY THE ASSESSEE. ACCORDINGLY THE GROUND NO. 1 OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 3. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL OF ASSESSEE IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN UPHOLDING THE DETERMINATION OF ANNUAL RENT @ RS.30 000/- PER MONTH AS AGAINST RENTAL INCOME DECLARED BY THE ASSESSEE I N THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAD TAKEN A PROPERTY ON LEASE FROM ONE SHRI MANISHES MALLICK VIDE AN IRREVOCABLE DEED. IN FACT THIS PROPERTY IS IN POSSESSION OF THE ASSESSEE FOR MORE THAN 30 YEARS. THE EARLIER T ENANCY WAS WITH THE ORIGINAL LANDLORD AND SHRI MANISHES MALLICK BEING THE LEGAL HEIR OF THE P ROPERTY CONFIRMED THE OLD TENANCY OF THE ASSESSEE. THE SALIENT FEATURES OF THE SAID AGREEME NT ARE REPRODUCED HEREUNDER WHICH ARE RELEVANT FOR THE DISPOSAL OF THE ISSUE BEFORE US: (I) THE LEASE IS A PERPETUAL LEASE. THERE IS NO CL AUSE REGARDING VACATING THE PREMISES BY THE ASSESSEE. (II) THE REPAIRS AND MAINTENANCE WILL BE CARRIED OU T BY THE TENANT AT HIS OR HER OWN COST. (III) THE TENANT HAS THE RIGHT TO MAKE ALTERATION I N THE BUILDING INCLUDING REMOVING THE WALLS OF THE ROOMS AND VERANDAS. (IV) THE LANDLADY HAS BEEN EXONERATED FROM ANY LIAB ILITY ON ACCOUNT OF REPAIRS AND MAINTENANCE CHARGES IN THE BUILDING. (V) THE COST OF CHARGES FOR ALTERATION WILL BE BORN E BY THE TENANT I.E. THE ASSESSEE. (VI) THE TENANT IS FREE TO SUB-LET OR ASSIGN THE TE NANCY TO ANY THIRD PARTY WITHOUT THE APPROVAL OR CONSENT OF THE LANDLADY. 4.1 THE ABOVE FACTS PROVE THAT THE ASSESSEE IS DEEM ED OWNER OF THE PROPERTY SITUATED AT NO. 7/2 QUEENS PARK KOLKATA-700 019. ACCORDINGLY THE ASSESSEE HAD SUBLET THE SUBJECT MENTIONED PROPERTY AT RS.7 200/- PER MONTH AND DECL ARED THE SAME AS INCOME FROM HOUSE PROPERTY AFTER REDUCING MUNICIPAL TAXES PAID BY TH E ASSESSEE AND AFTER CLAIMING DEDUCTION TOWARDS 30% OF REPAIRS. IT IS NOT IN DISPUTE THAT THE RENTAL INCOME FROM SUBJECT MENTIONED PROPERTY IS TO BE ASSESSED UNDER THE HEAD INCOME F ROM HOUSE PROPERTY. THE LD AO 4 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 OBSERVED THAT THE PROPERTY IS SITUATED IN ONE OF TH E MOST POSH LOCALITY IN THE CITY OF KOLKATA AND ACCORDINGLY SHOW CAUSED THE ASSESSEE TO SUBSTIT UTE THE FAIR MARKET RENT OF THE SUBJECT MENTIONED PROPERTY AND CALLED FOR THE DETAILS OF T HE SAME FROM THE ASSESSEE. THE ASSESSEE DID NOT PRODUCE ANY DETAILS REGARDING THE SAME. TH E LD AO DEPUTED HIS INSPECTOR TO THE SUBJECT MENTIONED PROPERTY AND BASED ON THE INSPECT ORS REPORT DETERMINED THE FAIR MARKET RENT AT RS.30 000/- PER MONTH AND ACCORDINGLY PROC EEDED TO DETERMINE THE GROSS ANNUAL VALUE AT RS.7 20 000/- AND GRANTED DEDUCTION AT 30% FOR REPAIRS ON AN AVERAGE BASIS WITHOUT GIVING DEDUCTION FOR MUNICIPAL TAXES PAID BY THE AS SESSEE. THIS ACTION OF THE AO WAS UPHELD BY THE LD. CIT(A). AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND NO. 2: 2. LD. CIT(A) CONFIRMED ENHANCEMENT OF INCOME FROM HOUSE PROPERTY FROM RS.4752/- TO RS.5 04 000/- UNJUSTIFIABLY WITHOUT UNDERSTANDING FACTS & FIGURES. LD. AO HAD GIVEN EXPLANATION IN PAGE NO. 4 & 5 OF THE ORDER U/S. 143 (3) THAT ASSESSEE HAS SHOWN RENTAL INCOME UNDER INCOME FROM OTHER SOURCES. FACTUALLY IN R ETURN IT WAS OFFERED UNDER INCOME FROM HOUSE PROPERTY WHICH SHOWS LD. AO DID NOT THINK IT NECESSARY TO GO THROUGH RETURN OR COMPUTATION OF INCOME. BEFORE MAKING ORDER U/S. 14 3(3). LD. CIT(A) WAS UNJUSTIFIED AND UNFAIR IN CONSIDERIN G THE FAIR MARKET RENT AT RS.30 000/- PER MONTH EACH FROM TWO TENANTS. NOTIONAL INTERPRETATI ON OF FAIR MARKET RENT IS TOTALLY UNFAIR ON PART OF LD. CIT(A). LD. CIT(A) DID NOT CONSIDER TH E PLEA OF ASSESSEE WHERE IT WAS CLAIMED THAT RS.6412/- PAID ON ACCOUNT OF MUNICIPAL TAX SHOULD H AVE BEEN ALLOWED FOR DEDUCTION. 4.2. AT THE TIME OF HEARING BEFORE US LD. AR ARGUE D THAT THE ASSESSEE HAD NEVER RECEIVED THIS EXORBITANT RENT DETERMINED BY THE AO AND IT WO ULD RESULT IN AN ABSURD SITUATION OF ASKING THE ASSESSEE TO PAY TAX WHICH WOULD BE SEVER AL TIMES MORE THAN THE ACTUAL RENT RECEIVED. IN SUPPORT OF HER ARGUMENT SHE PLACED RE LIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KISHANLA L & SONS (UDYOG) (P) LTD. (2003) 260 ITR 481`(CAL). SHE ALSO ARGUED THAT THE INSPECTOR OF INCOME TAX DEPARTMENT IS NOT TECHNICALLY QUALIFIED TO DETERMINE THE FAIR MARKET RENT OF THE PROPERTY. HENCE SHE URGED BEFORE THE BENCH TO SET ASIDE THE ORDERS OF THE LOW ER AUTHORITIES. 4.3. IN RESPONSE TO THIS THE LD. DR ARGUED THAT TH E FACT OF DETERMINATION OF QUANTUM OF FAIR MARKET RENT BY THE AO WAS NEVER DISPUTED BY TH E ASSESSEE BEFORE THE LOWER AUTHORITIES AND WHAT THE LD AO HAS DONE IN THE INSTANT CASE IS ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 23 OF THE ACT WHICH IS SUPREME AND WHICH HA S TO BE FOLLOWED AS AGAINST THE DECISION RELIED ON BY THE HONBLE CALCUTTA HIGH COURT. HE A LSO ARGUED THAT THE ASSESSEE ON ITS PART HAD NOT BOTHERED TO SUBMIT THE FAIR MARKET RENT OR EVEN MUNICIPAL VALUE TO PROVE THAT THE FAIR 5 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 MARKET RENT DETERMINED BY THE AO IS EXORBITANT COMP ARED TO THE FACTS OF THE CASE. HE URGED BEFORE THE BENCH TO CONFIRM THE ACTION OF THE LD. C IT(A). 4.4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROU GH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT IN THE INSTANT CASE IT IS NOT I N DISPUTE THAT THE SUBJECT MENTIONED PROPERTY WHICH DERIVED RENTAL INCOME IS TO BE TAXED UNDER TH E HEAD INCOME FROM HOUSE PROPERTY. WE HAVE ALSO GONE THROUGH THE INCOME TAX RETURN OF THE ASSESSEE WHEREIN THE ASSESSEE HAS DULY SHOWN THE SAME ONLY UNDER THE HEAD INCOME FRO M HOUSE PROPERTY. HENCE THE PROVISIONS OF SECTION 23 OF THE ACT WOULD COME INTO PLAY FOR DETERMINATION OF ACTUAL VALUE OF THE SUBJECT MENTIONED PROPERTY. THE PROVISIONS OF SECTION 23 READ AS UNDER: [ ANNUAL VALUE HOW DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22 THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE 20 BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF TH E SUM REFERRED TO IN CLAUSE (A) THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREVIOUS YEAR AND OWING TO SUCH VAC ANCY 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 RECEIVED OR RECEIVABLE : 4.5. WE ALSO FIND THAT THE ASSESSEE HAD NOT PRODUCE D ANY EVIDENCE WITH REGARD TO FAIR MARKET RENT OR MUNICIPAL VALUE DETERMINED THE MUNIC IPAL AUTHORITIES ON THE BASIS OF WHICH THE MUNICIPAL TAXES WERE LEVIED BY THEM. HOWEVER WE FIND THAT THE ACTUAL RENT RECEIVED BY THE ASSESSEE IS FAR LESS THAN THE FAIR MARKET RENT DETERMINED BY THE LD AO BASED ON INSPECTORS REPORT. WE ALSO FIND THAT THE LD AO WHI LE DETERMINING THE INCOME FROM HOUSE PROPERTY HAS NOT GRANTED DEDUCTION TOWARDS MUNICIPA L TAXES PAID BY THE ASSESSEE WHICH IS SQUARELY ALLOWABLE AS PER THE PROVISIONS OF THE ACT . THE LD. AO IS DIRECTED TO ALLOW THE SAME AFTER VERIFICATION OF THE PROOF OF PAYMENT OF MUNICIPAL TAXES. HOWEVER IN ORDER TO MEET THE ENDS OF JUSTICE WE DEEM IT FIT AND PROPER TO SET ASIDE THIS ISSUE TO THE FILE OF THE LD AO WITH A CORRESPONDING DIRECTION TO THE ASSESSEE T O SUBMIT THE MUNICIPAL VALUATION OF THE SUBJECT MENTIONED PROPERTY. THE LD AO ALSO IS HERE BY DIRECTED TO ASCERTAIN THE GOING RATE PER SQ. FT. AT THE RELEVANT POINT OF TIME FROM THE JURISDICTIONAL SUB-REGISTRARS OFFICE. THE LD AO IS DIRECTED TO DETERMINE THE ANNUAL VALUE OF THE PROPERTY BASED ON ANY OF THE METHODS AS DIRECTED ABOVE OR THE AVERAGE OF THE TWO AND ALSO I N THE LIGHT OF THE DECISION RELIED ON BY THE LD. AR AS STATED SUPRA AS ADMITTEDLY THE SAID DECI SION HAS NOT BEEN CONTROVERTED BY THE LD. 6 ITA NO. 2476/KOL/2013 VINODKUMAR HARSHAVARDHAN HUF AY 2009-10 CIT(A) IN HIS APPELLATE ORDER. ACCORDINGLY THE GR OUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE . 5. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07.10.2016 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 7 TH OCTOBER 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT VINODKUMAR HARSHAVARDHAN HUF 7/2 QUE ENS PARK KOLKATA-700 019 2 RESPONDENT ACIT CIRCLE-30 KOLKATA. 3 . THE CIT(A) KOLKATA 4. 5. CIT KOLKATA DR KOLKATA BENCHES KOLKATA / TRUE COPY BY ORDER ASSTT. REGISTRAR .