DINU JEWELLERAY P.LTD, MUMBAI v. ITO 5(1)(3), MUMBAI

ITA 2928/MUM/2012 | 2009-2010
Pronouncement Date: 04-10-2013 | Result: Dismissed

Appeal Details

RSA Number 292819914 RSA 2012
Assessee PAN AABCD3020B
Bench Mumbai
Appeal Number ITA 2928/MUM/2012
Duration Of Justice 1 year(s) 5 month(s) 4 day(s)
Appellant DINU JEWELLERAY P.LTD, MUMBAI
Respondent ITO 5(1)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 04-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 04-10-2013
Assessment Year 2009-2010
Appeal Filed On 30-04-2012
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - D BENCH. . ! ! ! ! '#$% '#$% '#$% '#$% # # # # &' &' &' &' BEFORE S/SH.D.MANMOHAN VICE-PRESIDENT & RAJENDRA AC COUNTANT MEMBER /. ITA NO.2928/MUM/2012 ( ( ( ( / ASSESSMENT YEAR-2009-10 DINU JEWELLERY PVT. LTD. 312 3 RD FLOOR PANCHTRANT OPERA HOUSE MUMBAI- 400004 VS. ITO 5(1)(3) 5 TH FLOOR AAYAKAR BHAVAN M.K.ROAD CHURCHGATE MUMBAI-400002 PAN:AABCD3020B ( )* / APPELLANT) ( + )* / RESPONDENT) )* )* )* )* - - - - # ## # / APPELLANT BY : SHRI KIRIT SHETH + )* . - # / RESPONDENT BY : SHRI HARIGOVIND SINGH . .. . / / / / / DATE OF HEARING : 04-09-2013 0( . / / DATE OF PRONOUNCEMENT : 04-10-2013 1961 . .. . 254(1) # ## # $/1/ $/1/ $/1/ $/1/     ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL AGAI NST THE ORDER DATED 09-03-2012 OF THE CIT(A)- 9 MUMBAI: THE LEARNED C.I.T. (A) HAS ERRED IN CONFIRMING ANNUAL RATABLE VALUE IN RESPECT OF NEPEAN SEA ROAD PROPERTY AT RS 4 60 200/- AS DETERMINED BY THE A.O. YOUR APPELLANT MOST RESPECTFULLY SUBMITS THAT ON FACTS AND IN LAW THE A NNUAL RATABLE VALUE IN RESPECT OF NEPEAN SEA ROAD PROPERTY SHOULD BE ADOPTED AT RS 72 000/-AS DECLARED IN THE RET URN OF INCOME. 2.THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING THE DISALLOWANC ES OF FOLLOWING EXPENDITURE BY THE A.O. (I) ELECTRICITY EXPENDITURE -RS 1 50 024 (II)SOCIETY MAINTENANCE CHARGES -RS 1 11 953 YOUR APPELLANT RESPECTFULLY SUBMITS THAT ON FACTS AND IN LAW BOTH THE ABOVE EXPENSES SHOULD BE PROPORTIONATELY ALLOWED TO THE EXTENT THEY WERE INCURRED FOR ITS OWN USE (1/5TH I. E. 20%). 3.YOUR APPELLANT PRAYS FOR A LEAVE TO ALLOW IT TO ADD TO OR MODIFY T HE GROUNDS OF APPEAL. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF IMPORT EXPORT AND TRADING OF ROUGH DIAMONDS FURNISHED ITS RETURN OF INCOME ON 28.9.2009 DISCLOS ING NIL INCOME.ASSESSING OFFICER (AO)FINALISED THE ASSESS-MENT ON 28.11.2011 UNDER SECTION 143(3) OF THE ACT. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO FOUN D THAT THE ASSESSEE HAD CREDITED AN AMOUNT OF RS. 2 000/- ON ACCOUNT OF RENT OF A FLAT AND THE SAME HAD BEEN DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY.HE DIRECTED THE ASSESSEE VIDE H IS LETTER DATED 04.07.2011 TO FURNISH A COPY OF THE RENT AGREEMENT.PERUSAL OF THE LEASE AGREEMENT D ATED 10.05.2005 REVEALED THAT THE ASSESSEE HAD LEASED ITS PROPERTY BEARING FLAT NO.154/A NAVSHAKTI NAGAR CO-OP.HSG.SOC. LTD.(NNCHS) 98 NEPEAN SEA ROAD FOR A MONTHLY RENT OF RS.6 000/- THAT THE AREA OF THE SAID PROPERTY WAS 650 SQ.FT. THAT THE PROPERTY HAD BEEN GIVEN ON LEASE TO MR.DINESH RASIKLAT SHAH AND MRS. ARUNA DINESH SHAH.HE DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHET HER MR.DINESH RASIKIAL SHAH AND MRS.ARUNA 2 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. D.SHAH WERE RELATED TO THE ASSESSEE COMPANY OR ITS DIRECTORS OR SHARE-HOLDERS.HE FURTHER DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY IT HAD LEASED ITS PROPERTY AT NEPEAN SEA ROAD TO MR.DINESH RASIKLAL SHAH AND MRS. ARUNA D.SHAH AT A NOMINAL RE NT OF RS.6 000/- P.M WHEN THE MARKET RENT OF THE PROPERTY WOULD BE MUCH HIGHER.AFTER CONSIDERING THE REPLY OF THE ASSESSEE AO FOUND THAT IT HAD NOT OFFERED ANY EXPLANATION WITH REGARD TO THE SMAL LNESS OF RENT THAT SHRI SUDHIR K SHAH WAS ALSO ONE OF THE DIRECTOR OF THE ASSESSEE-COMPANY THAT S HRI DINESH SHAH WAS GIVEN POWER OF ATTORNEY BY THE COMPANY FOR ENTERING INTO LEASE AGREEMENTS OF O THER PROPERTY OWNED BY IT.AO WAS OF THE OPINION THAT PROPERTY IN QUESTION WAS LEASED TO A P ERSON WHO WAS NOT ONLY A VERY GOOD FRIEND OF THE DIRECTOR AS ACCEPTED BY THE ASSESSEE BUT WAS ALSO W ORKING FOR IT.SO HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ANNUAL LETTING-OUT VALUE (ALV) OF THE PROPERTY SHOULD NOT BE DETERMINED AS PER THE PROVISIONS OF SECTION 23(1)(A) OF THE ACT.AS NO REP LY WAS RECEIVED BY HIM IN THIS REGARD SO IN ORDER TO FIND OUT THE FAIR MARKET RENT OF THE PROPERTY HE DECIDED TO CALLED FOR INFORMATION FROM NNCHS.AS PER THE INFORMATION PROVIDED BY THE SOCIET Y FLAT NO.185B OF THE SAME SOCIETY IN THE SAME YEAR WAS RENTED OUT FOR MONTHLY RENT OF RS.50 000/- AND A DEPOSIT OF RS.2 LACS WAS ALSO TAKEN BY THE OWNER FROM THE TENANT.AO HELD THAT THERE WAS A WIDE DIFFERENTIAL BETWEEN THE RENT RECEIVED BY THE ASSESSEE AND THE RENT RECEIVED BY OTHER PERS ON LOCATED IN THE SAME SOCIETY.HE REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY ALV OF THE PROPERTY S HOULD NOT BE WORKED OUT @ RS.59 PER SQ FT I.E RS.38 350/ PER MONTH(650 X 59) IN VIEW OF THE PROVI SIONS OF SECTION 23(1)(A) OF THE ACT.IN RESPONSE THE ASSESSEE VIDE LETTER DATED 25-11-2011 STATED THAT HE WAS IN AGREEMENT FOR ADOPTING THE ALV @ RS. 59 PER SQ.FT.IN VIEW OF THESE FACTS A LV OF THE ABOVE PROPERTY WAS DETERMINED AT RS.4 60 200/-(RS.38 350/- X12) PER ANNUM AND THE S AME WAS TREATED AS INCOME FROM HOUSE PROPERTY. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FAA HELD THAT AO HAD MA DE EXTENSIVE ENQUIRY FROM NCHSL THAT HE GATHERED INFORMATION ABOUT THE ADJACENT FLATS IN TH E SAME BUILDING THAT RENT WAS AS HIGH AS RS. 50 000/- PER MONTH AS AGAINST RS. 6 000/-SHOWN BY T HE ASSESSEE THAT ASSESSEE HAD ACCEPTED THE ALV OF THE SAID PROPERTIES AT RS. 4.62 LACS.DURING THE APPELLATE PROCEEDINGS ASSESEE MADE AN OFFER BEFORE THE FAA TO ASSESS THE INCOME OF THE PROPERTY @ RS. 42 PER SQ.FT.FAA HELD THAT WAVERING STAND TAKEN BY THE ASSESSEE COULD NOT BE ACCEPTED T HAT THE ASSESSEE HAD EARLIER ACCEPTED THE RENTAL INCOME TO BE ASSESSED AT RS.59 PER SQ.FT. THAT SAME WAS COMPARABLE RENT IN THE SAME BUILDING AND IN THE SAME SOCIETY.REFERRING TO THE PROVISIONS OF SEC TION 23(1) OF THE ACT AND RELYING UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CO RPORATION OF CALCUTTA VS.SMT.PADMA DEVI(AIR1962SC151) GUNTOOR MUNCIPAL COUN -CIL(AIR 1971 SC 353) DEWAN DAULAT RAI KAPOOR (122 ITR 700) DR. BALBIR SINGH(152 ITR 388) MRS. SHIELA KAUSHISH (131 ITR 435) AND KASHI PRASAD KATARUKA (101 ITR 810). HE CONCLUDED THAT: I).ALV WOULD BE THE SUM AT WHICH THE PROPERTY MAY B E REASONABLY LET OUT BY A WILLING LESSER TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCU MSTANCES II).AN INFLATED OR DEFLATED RENT BASED ON EXTRANEOU S CONSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS III).ACTUAL RENT RECEIVED IN NORMAL CIRCUMSTANCES W OULD BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED /DEFLATED BY REASON OF EXTRANEOUS CONSIDER ATION IV).SUCH ALV HOWEVER CANNOT EXCEED THE STANDARD RE NT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROPERTY V).IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTROLLER THEN IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE STANDARD RENT AS PER THE P ROVISIONS OF RENT CONTROL ENACTMENT VI).THE STANDARD RENT IS THE UPPER LIMIT IF THE FA IR RENT IS LESS THAN THE STANDARD RENT THEN IT IS THE FAIR RENT WHICH SHALL BE TAKEN AS ALV AND NOT THE STANDA RD RENT. HE ALSO RELIED UPON THE JUDGMENT OF J.K. INVESTORS LTD. DECIDED BY THE HONBLE JURISDICTION HIGH COURT (168 CTR 189) AND HELD THAT U/S.23(1)(A) OF T HE ACT AO COULD TAKE INTO CONSIDERATION VARIOUS FACTORS FOR DECIDING THE ALV THAT IF THE AC TUAL RENT RECEIVED/RECEIVABLE WAS HIGHER THAN THE FAIR RENT THAN THE ACTUAL RENT WOULD BE TREATED AS ALV THAT AO WAS COMPETENT TO DETERMINE THE ALV IF HE FOUND THAT ACTUAL RENT RECEIVED WAS SUPPR ESSED DUE TO EXTRANEOUS FACTORS THAT ALV COULD 3 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. NOT BE RESTRICTED TO STANDARD RENT UNDER MAHARASHTR A RENT CONTROL ACT THAT ALV HAS TO BE DETERMINED CONSIDERING THE FACTORS LIKE AREA OF FLA T LOCATION OF PROPERTY COST OF PROPERTY INTEREST FR EE DEPOSIT RECEIPT AND COMPARA -TIVE RATES IN THE SAME BUILDING. FINALLY HE HELD THAT THERE WERE EVIDENCES ON RECORD THAT PROVED THAT ASSESSEE HAD N OT DISCLOSED THE ACTUAL RENTAL VALUE FROM THE SAID HOUSE PROPERTY THAT THE PURCHASE VALUE OF THE FLAT WAS ALSO VERY HIGH THAT ACTION OF THE AO IN ESTIMATING ALV AT RS. 4.60 LACS WAS REASONABLE. CON FIRMING THE ORDER OF THE AO HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 2.2. BEFORE US AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT REPORT OF THE REGISTERED-VALUER WAS AVAILABLE THAT AS PER THAT REPORT ALV WAS RS. 42/- PER SQ. FT. THAT THAT ASSESSEE HAD NOT RECEIVED MORE RENT THAN THE RENT SHOWN IN THE BOOKS OF ACCOU TNS THAT PROPERTY WAS LET OUT TO FRIEND OF ONE OF THE DIRECTORS THAT NOTIONAL INCOME FROM HOUSE PROP ERTY COULD NOT BE TAXED HE REFERRED TO PAGE NO. 23-33 OF THE (PAPER BOOK-PB).HE RELIED UPON THE CAS ES OF RECLAMATION REALITY PVT.LTD. (ITA NO. 1441-43/MUM/2007 DATED 26.11.2010) GAGAN TRADING CO MPANY LTD.(ITA NO.4080/ MUM/ 2010- AY 2006-07 DTD. 12.10. 2012) AND J.M.P. INVESTMENT PVT. LTD.(ITA NO.3127/MUM/2011-AY 2007- 08DATED 30.01.2013) DELIVERED BY THE D G AND J BENCHES OF MUMBAI TRIBUNAL RESPECTIVELY. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT AO HAD DECIDED THE ISSUE AFTER OBTAINING INFORMA -TION FROM THE SOCIETY WHERE THE HOUSE PROPERTY WAS SITUATED THAT ASSESSEE HAD ITSELF AGREED BEFORE THE AO THAT HIGHER RENT COULD BE ADOPTED THAT THER E WAS SPECIAL RELATION BETWEEN THE OWNER AND THE TENANT. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE WE PROCEED FURTHER IT WOULD BE USEFUL TO REFER TO THE PROVISI ONS OF SECTION 23(1)OF THE ACT.SAID SECTION OF THE ACT PROVIDES THE METHOD FOR DETERMINING THE ANNUAL VALUE A HOUSE PROPERTY.SUB-SECTION (A) TALKS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR.COURTS ARE OF THE VIEW THAT IF RENT IS INFLATED /DEFLATED BY REAS ON OF EXTRANEOUS CONSIDERATION THEN AO CAN TAKE A REASONABLE BASE FOR CALCULATING HOUSE PROPERTY INCO ME.IN THE CASE OF N. NATARAJ (266 ITR 277) HONBLE MADRAS HIGH COURT HAS HELD AS UNDER : WHAT IS REQUIRED TO BE ASCERTAINED FOR THE PURPOSE OF DETERMINING THE ANNUAL VALUE AS PROVIDED IN SECTION 23(1)(A) OF THE INCOME-TAX ACT 1961 IS TH E SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. IN THAT MATTER ASSESSEE OWNED A BUILDING THAT WAS C ONSTRUCTED IN 1981 AND AFTER ITS COMPLETION A LEASE DEED WAS ENTERED INTO BETWEEN THE ASSESSEE AN D THE FIRM L CONSISTING OF THE WIFE DAUGHTER OF THE KARTA OF THE ASSESSEE-HINDU UNDIVIDED FAMILY AN D A TRUSTED EMPLOYEE OF THE KARTA.AS PER THE AGREEMENT ENTIRE BUILDING WAS LEASED OUT TO THE FIR M ON A MONTHLY RENT OF RS. 6 250/- AND THE FIRM IN TURN ENTERED INTO SEVERAL AGREEMENTS OF LEASE W ITH DIFFERENT TENANTS IN RESPECT OF SEVERAL PORTION S OF THE BUILDING.AO FOUND THAT A LEASE DEED DATED DE CEMBER 9 1982 WAS ENTERED INTO BETWEEN THE FIRM AND INDIAN BANK SHOWED THAT THE RENTAL RECEIVE D BY THAT FIRM FROM ITS TENANTS WAS NEARLY THREE TIMES THE RENT STIPULATED IN THE LEASE AGREEMENT BE TWEEN THE ASSESSEE AND THE FIRM. CONSIDERING THESE FACTS AO HELD THAT THAT THE AMOUNT WHICH WAS RECEIVED BY THE FIRM FROM ITS TENANTS WAS IN FACT THE AMOUNT THAT WAS REASONABLY TO BE EXPECTED TO BE RECEIVED FROM LETTING OUT THE PROPERTY AND THEREFORE THE AMOUNT WAS REQUIRED TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF DETERMINING THE ANNUAL VALUE OF THE BUILDING UNDER SECTION 23(1)(A) OF THE ACT.ACTION OF THE AO WAS CONFIRMED BY THE FAA AND THE TRIBUNAL. ON APPEAL TO THE HIGH COU RT HONBLE COURT HELD AS UNDER : WHEN THE DOCUMENTS PLACED BEFORE THE ASSESSING OFFICER CLEARLY SHOWED THAT THE LETTING EFFECTED BY THE ASSESSEE WAS TO A FIRM OF WHICH HIS WIFE AND DAUGHTER WERE PARTNERS THAT LETTING WAS RIGHTLY NOT REGARDED BY THE ASSESSING OFFICER AS A RELIABLE RECORD FOR DETERMINING THE REASONABLE RENT. THE BUILDING WAS OCCUPIED BY TENANTS WITHIN T HREE MONTHS FROM THE DATE OF COMPLETION OF CONSTRUCTION AND THE AMOUNT AGREED TO BE PAID BY SU CH TENANTS AS RENTAL COULD BE REGARDED AS THE AMOUNT WHICH COULD REASONABLY BE EXPECTED TO BE REC EIVED BY WAY OF RENTAL. THE RENT PAID BY THEM DURING THE ASSESSMENT YEAR WAS THUS REQUIRED TO BE REGARDED AS THE AMOUNT WHICH COULD BE REASONABLY EXPECTED TO BE RECEIVED FROM LETTING OUT THE BUILDING. SIMILAR QUESTION AROSE BEFORE THE HONBLE DELHI HIG H COURT ALSO IN THE CASE OF MONI KUMAR SUBBA (333ITR38).HONBLE COURT HELD AS UNDER : 4 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. THE OPERATIVE WORDS IN SECTION 23(1)(A) OF THE ACT ARE 'THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR' . THESE WORDS PROVIDE A SPECIFIC DIRECTION TO THE REVENUE FOR DETERMINING THE FAIR RENT. THE ASSESSIN G OFFICER HAVING REGARD TO THIS PROVISION IS EXPECTED TO MAKE AN INQUIRY AS TO WHAT WOULD BE THE POSSIBLE RENT THAT THE PROPERTY MIGHT FETCH. THUS IF HE FINDS THAT THE ACTUAL RENT RECEIVED IS LESS THAN THE FAIR/MARKET RENT HE CAN UNDERTAKE NECESSARY EXERCISE IN THAT BEHALF. FROM THE ABOVE IT IS CLEAR THAT AO CAN ADOPT A REAS ONABLE SUM FOR DETERMINING RENTAL INCOME AND SAME COULD BE REGARDED AS THE AMOUNT WHICH COULD RE ASONABLY BE EXPECTED TO BE RECEIVED BY WAY OF RENTAL.IN OUR OPINION WHILE DETERMINING THE REAS ONABLE RENT SURROUNDING CIRCUMSTANCES CAN BE LOOKED IN TO BY THE AO.GENERALLY FOR DETERMINING T HE TAX LIABILITY OF AN ASSESSEE MATERIAL AVAILABLE ON RECORD IS CONSIDERED BUT IN CERTAIN SITUATIONS O THER FACTORS CAN ALSO BE CONSIDERED.HONBLE APEX COURT HAS IN THE CASES OF DURGA PRASAD MORE (82 ITR 540) AND OF SUMATI DAYAL (214 ITR 801) HELD THAT ONE OF THE FACTORS TO BE CONSIDERED IN SPECIAL CIRCUMSTANCES IS HUMAN PROBABILITY.HERE WE WOULD LIKE TO RE-PRODUCE THE RELEVANT PORTION OF TH E JUDGMENT DELIVERED IN THE CASE OF DRUGA PRASAD MORE(SUPRA): 'NOW COMING TO THE QUESTION OF ONUS THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS ON A PARTICULAR CASE HAS BEEN DISC HARGED OR NOT. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN SOME CASES THE ONUS MAY BE HEAVY WHEREAS IN OTHERS IT MAY BE NOMINAL. THERE IS NOTHING RIGID ABOUT IT. . .SCIENC E HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT O R TRIBUNAL. THEREFORE THE COURTS AND TRIBUNALS HAV E TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE T EST OF HUMAN PROBABILITIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PIECE OR EVIDENCE .' SIMILARLY IN THE CASE OF SUMATI DAYAL(SUPRA)HONBLE COURT HAD REITERATED THE NECESSITY OF TEST OF HUMAN PROBABILITY. 2.3.A. IN OUR OPINION FACTS OF THE CASE HAVE TO BE ANALYSE D AFTER CONSIDERING THE ABOVE PRINCIPLES. UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD LET OUT A HOUSE PROPERTY AT NAPEAN SEA ROAD MUMBAI FOR MONTHLY RENT OF 6000/-(I.E.@ 9 RS.PER SQ .FT.) THAT IN THE SAME BUILDING ANOTHER PROPERTY FETCHED RENT @59 RS.PER SQ.FT. THAT IN THE CASE OF OTHER PROPERTY TENANT HAD TO PAY DEPOSIT OF RS.2 LACS BESIDES PAYING RENT @59/-RS. THAT THE TENANT H IRING THE PROPERTY OF THE ASSESSEE WAS NOT A THIRD PARTY THAT WHEN AO CONFRONTED THE ASSESSEE WITH THE RESULT OF HIS INVESTIGATION IT AGREED FOR ENHANC -EMENT OF RENTAL INCOME THAT BEFORE THE FAA ASSESSE E REQUESTED THAT RENT SHOULD BE ADOPTED @42 RS.PER SQ.FT.FOR THE YEAR UNDER CONSIDERATION.AO H AD MENTIONED THAT TENANT SH. DINESH SHAH WAS NOT ONLY FAMILY FRIEND OF THE DIRECTORS OF THE COMP ANY HE WAS ALSO POWER OF ATTORNEY HOLDER OF THE COMPANY TO LET OUT OTHER PROPERTY.NEITHER BEFORE FA A NOR BEFORE US ASSESSEE HAS CHALLENGED THE SAID FINDING OF FACT.IN THESE CIRCUMSTANCES IF AO D ECIDED TO ADOPT REASONABLE RENT FOR THE YEAR UNDER CONSIDERATION THEN IN OUR OPINION HE WAS JUSTIFIED. TO OBLIGE NEAR AND DEAR ONES IS A COMMON HUMAN BEHAVIOUR.ASSESSEE ALSO TRIED TO DO THE SAME.IT WAS THE RESULT OF THE SUSTAINED INVESTIGATION OF THE AO THAT ALL THE FACTS CAME ON RECORD.SURROUNDING CI RCUMSTANCES;HIGHER RENT OF A FLAT OF THE SAME SOCIETY FOR THE SAME PERIOD PAYMENT OF DEPOSITS BES IDES THE HIGHER MONTHLY RENT OF THE OTHER PROPERTY CLOSE BUSINESS RELATION OF THE TENANT WITH THE ASSESSEE-COMPANY CONSENT OF THE ASSESSEE TO ADOPT HIGHER RENT;CLEARLY PROVE THAT FAA HAD RIGHTY CONFIRMED THE ORDERS OF THE AO.WE ARE OF THE OPINION THAT RENT RECEIVED BY THE ASSESSEE IN THE A Y UNDER CONSIDERATION WAS ABNORMALLY LOW AS COMPARED TO THE FAIR MARKET RENT THAT IT HAD DECID ED TO CHARGE LESS RENT BECAUSE OF SOME EXTRANEOUS REASONS. 2.3.B. NOW WE WOULD LIKE TO DISCUSS THE CASES RELIED UPON BY THE AR.WE FIND THAT DECISIONS GIVEN BY THE TRIBUNAL IN THE CASES OF J.P.INVESTMENT PVT. LTD. AND GAGAN TRADING COMPANY (SUPRA) ARE BASED ON THE ORDER OF THE RECLAMATION REALITY PVT. LTD.(SUPRA).IN THE CASE OF RECLAMATION REALITY INDIA PVT. LTD.EFFECTIVE GROUND OF APPEAL TO BE DEC IDED WAS NOTIONAL INTEREST ON ADVANCE RENT SECURITY DEPOSIT FOR DETERMINING THE ALV.IN THE CAS E UNDER CONSIDERATION ISSUE OF INTEREST RECEIVED ON ADVANCE-RENT/SECURITY-DEPOSIT IS NOT TO BE DECID ED FOR ARRIVING AT ALV.IN OUR OPINION CASES RELIED UPON BY THE ASSEESEE ARE OF NO HELP TO DECID E THE APPEAL BEFORE US. 5 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. 2.3.C. WE HAVE ALREADY DISCUSSED THE DECISION OF DURGA PR ASAD MORE AND SUMATI DAYAL (SUPRA) DELIVERED BY THE HONBLE SUPREME COURT.NO ASSESSEE WOULD AGREE FOR HIGHER TAXABLE INCOME TILL THE EVIDENCES GOING AGAINST HIM ARE COLLECTED AND CONFR ONTED TO HIM BY THE AO.WE FIND THAT IN THE PRESENT CASE ALSO SAME THING HAPPENED.THEREFORE CO NSIDERING THE PECULIAR FACTS OF THE CASE UNDER CONSIDERATION AND KEEPING IN MIND THE RATIO LAID DO WN BY THE HONBLE APEX COURT IN THE CASE OF DURGA PRASAD MORE MORE AND SUMATI DAYAL(SUPRA)WE AR E OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. THEREFORE UPHOLDING THE ORDER OF THE FAA WE DECIDE GROUND NO.1 AGAINST THE ASSESSEE. 3. NEXT GROUND OF APPEAL IS ABOUT DISALLOWANCE OF ELEC TRICITY EXPENDITURE AND SOCIETY MAINTENANCE CHARGES.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE-COMPANY HAD OFFERED INCOME AMOUNTING TO RS.2.94 LACS UNDER THE HEAD INC OME FROM BUSINESS AND PROFESSION FROM PREMISES AT 312 PANCHARATNA CO-OPRATIVE HOUSING LIM ITED (PCHSL) OPERA HOUSE MUMBAI.AO ALSO FOUND THAT THE ASSESSEE HAD LEASED THE PROPER TY TO FIVE PARTIES FOR A PERIOD RANGING BETWEEN 6 MONTHS TO 12 MONTHS FOR COMMERCIAL USE.HE WAS OF TH E OPINION THAT INCOME RECEIVED ON LEASING THE PROPERTY IN QUESTION WAS TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY (IFHP). ACCORDINGLY HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY RENT INCOME RECEIVED FROM ABOVE PREMISES SHOULD NOT BE TAXED UNDER THE HEAD IFHP AND THE EXP ENSES RELATED TO IT SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE H E HELD THAT THE CLAIM OF THE ASSESSEE THAT IT WAS A BUSINESS INCOME WAS NOT ACCEPTABLE.RELYING UPON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT DELIVERED IN THE CASE OF SMT.MEENAL RAMESHC HANDRA(167 ITR 507) HE HELD THAT FOR ANY ACTIVITY TO BE BUSINESS THERE MUST BE A RISK FACTOR UNCERTAINTY FORESIGHTEDNESS TO VISUALISE THE IMPONDERABLE AND CAPACITY TO OVERCOME THE UNFORESEE N HURDLES THAT IN THE PRESENT CASE A PROPERTY HAD BEEN LET OUT AND THE INTENTION OF THE ASSESSEE WAS TO RECEIVE A CONTINUOUS FLOW OF INCOME THAT THERE WAS NO ELEMENT OF RISK OR LOSS AS MIGHT HAPPE N IN CASE OF BUSINESS THAT FROM THE LEAVE AND LICENSE AGREEMENTS IT WAS CLEAR THAT THE ASSESSEE-C OMPANY WAS GETTING A FIXED AMOUNT OF MONEY PER MONTH AS RENT WITHOUT TAKING ANY RESPONSEBILITY .HE FURTHER RELIED UPON THE CASES OF SHAMBHU INVESTMENT P.LTD (263ITR143) AND BHAKTAWAR CONSTRU CTION PVT. LTD.(162 ITR 452). HE HELD THAT THE COURTS WERE OF THE OPINION THAT WHERE A BUILDIN G WAS LEASED OUT TO TENANTS AND AIR CONDITIONING FACILITY WAS ALSO PROVIDED UNDER SEPARATE AGREEMENT INCOME WAS HELD TO BE TAXABLE U/S.22 OF THE ACT UNDER THE HEAD IFHP THAT THE ASSESSEE WANTED THE RE NTAL INCOME TO BE TAXED UNDER THE HEAD BUSINESS INCOME TO AVAIL MUCH LARGER DEDUCTION THAN WHAT IT WOULD GET UNDER THE HEAD IFHP.WITH REGARD TO THE EXPENSES RELATED TO THE PROPERTY-IN-QUESTION HE HELD THAT THE ASSESSEE HAD CLAIMED EXPENSES LIKE PROFESSIONAL FEE ELECTRICITY EXPENSES SOCIETY CHAR GES SALARY MISCELLANE -OUS EXPENDITURE WHILE OFFERING INCOME FOR TAXATION.AS PER THEAO RECORDS R EVEALED THAT THE ASSESSEE WAS CARRYING OUT ITS BUSINESS FROM 535 PCHSL AND IT ALSO HAD A BRANCH AT SURAT.HE HELD THAT THE ASSESSEES PROPERTY AT312 PCHSLWAS BEING EXCLUSIVELY USED BY THE5 PARTI ES TO WHOM IT WAS LEASED THAT OF THE ABOVE EXPENSES ELECTRICITY CHARGES AND SOCIETY CHARGES W ERE DIRECTLY RELATED TO THE PROPERTY THAT IT WAS COMMON BUSINESS PRACTICE THAT SUCH EXPENSES WERE BO RNE BY THE PARTIES WHO WOULD USES THE PREMISES THAT ELECTRICITY BILLS SHOWED THAT THE BI LL AMOUNT WAS ALLOCATED TO VARIOUS CABINS THAT WERE RENTED OUT IN THAT MONTH.ACCORDINGLY THE EXPENSES C LAIMED UNDER THE HEADS ELECTRI -CITY AND SOCIETY CHARGES TOTALLING TO RS.2 61 977/-(1 50 024 +1 11 9 53) WERE DISALLOWED. 3.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R FAA HELD THAT EVEN IF THE PROPERTY WAS HELD AS BUSINESS ASSET THE RENTAL OR THE USER CHARGES FR OM THE OWNERSHIP OF THE SAID HOUSE PROPERTY HAD TO BE ASSESSED UNDER THE HEAD IFHP THAT SPECIFIC HEAD OF CHARGE WAS PROVIDED U/S. 22 OF THE ACT TO ASSESS THE INCOME FROM THE OWNERSHIP OF HOUSE PROPE RTIES THAT ASSESSMENT OF RENTAL INCOME U/S. 22 OF THE ACT WAS NOT ONLY PROPER BUT OBLIGATORY THE RENT RECEIVED BY THE ASSESSEE COULD NOT BE TAXED U/S. 28 OF THE ACT AS BUSINESS INCOME EVEN IF THE A SSESSEE WAS IN THE BUSINESS OF LETTING OUT THE ROOMS.HE RELIED UPON THE CASES OF BENGAL JUTE 17 IT R 308 INDIAN CITY PROPERTIES 55 ITR 262 PANDYAN BANK 71 ITR 707 EAST INDIA HOUSING AND LAN D DEVELOPMENT TRUST LTD. 42 ITR 41. HE CONFIRMED THE ACTION OF THE AO. HE FURTHER OBSERVED THAT ASSESSEE WAS SHOWING ITS REGISTERED OFFICE 6 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. AT 535 AND NOT AT 312 PCHSL THAT THE ASSESSEE WAS C ARRYING OUT ITS BUSINESS FROM 535.HE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT DELI VERED IN THE CASE OF SHAMBU INVESTMENT PVT. LTD.WITH REGARD TO DISALLOWANCE OF PROFESSIONAL FEE S ELECTRICITY EXPENSES SOCIETY CHARGES MISCELLANEOUS EXPENSES AND SALARY HE DIRECTED THE A O TO ALLOW STATUTORY DEDUCTION U/S. 24(A) OF THE ACT UNDER THE HEAD IFHP@ 30% OF THE ALV.HE FURTHE R DIRECTED THAT ONCE THE STANDARD DEDUCTION @30% WAS ALLOWED NO FURTHER DEDUCTION COULD BE ALLO WED UNLESS SAME WAS COVERED BY THE PROVISIONS OF SECTION 24(B) OF THE ACT.FINALLY HE C ONFIRMED THE DISALLOWANCE OF ELECTRICITY EXPENSES AND SOCIETY CHARGES. 3.2. BEFORE US AR SUBMITTED THAT ASSESSEE HAD PARTLY DIS ALLOWED THE EXPENSES AND HAD APPORTIONED THE EXPENSES IN THE RATIO OF 1/5 TH AND 5/6 TH THAT INCOME FROM THE PROPERTY WAS TO BE ASSESSED U/S. 28 OF THE ACT.DR SUBMITTED THAT ASSESSEE CARRYING OUT ITS BUSINESS FROM DIFFERENT CABIN THAT IT HAD LET OUT 5 CABINS THAT THE INCOME FROM CABINS WAS TO BE ASSESSED UNDER THE HEAD IFHP. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.ASSESSEE HAD RENTED OUT FIVE CABINS TO THE TENANTS AND IT WAS CARRYING OUT ITS OWN BUSINESS FROM A DIFFERENT BUSINESS PREMISES IN THE SAME BUILDING.WE ARE AWARE THAT COU RTS HAVE HELD THAT MERELY BECAUSE INCOME WAS ATTACHED TO ANY IMMOVABLE PROPERTY THAT COULD NOT BE THE SOLE FACTOR FOR ASSESSMENT OF SUCH INCOME AS INCOME FROM PROPERTY THAT IF THE MAIN INTENTION OF THE ASSESSEE WAS TO LET OUT THE PROPERTY OR ANY PORTION THEREOF THE INCOME MUST BE CONSIDERED AS RE NTAL INCOME OR INCOME FROM PROPERTY THAT IF THE PRIMARY OBJECT WAS TO EXPLOIT THE IMMOVABLE PROPERT Y BY WAY OF COMPLEX COMMERCIAL ACTIVITIES THAT IN SUCH AN EVENT IT WAS TO BE HELD BUSINESS IN COME.WE FIND THAT IN THE CASE UNDER CONSIDERATION NO COMMERCIAL ACTIVITY WAS CARRIED OUT BY THE ASS ESSEE.WHEN THE BASIC REQUIREMENT OF CARRYING OUT OF COMMERCIAL ACTIVITY ITSELF IS MISSING QUESTI ON OF COMPLEXITY OF SUCH ACTIVITIES DOES NOT ARISE.WE FIND THAT BILL AMOUNT OF ELECTRICITY EXPEN SES WAS ALLOCATED AMONG VARIOUS CABINS THAT WERE RENTED OUT IN A PARTICULAR MONTH.THUS IT IS A PLAIN AND SIMPLE CASE OF RECEIVING RENT FROM THE HOUSE PROPERTY OWNED BY THE ASSESSEE.AO HAS RIGHTLY HELD THAT BASIC INGREDIENTS OF BUSINESS WERE MISSING IN THE TRANSACTIONS CARRIED OUT BY THE ASSE SSEE WITH REGARD TO THE PROPERTY-IN-QUESTION. THEREFORE CONFIRMING THE ORDER OF THE FAA WE DECID E GROUND NO.2 AGAINST THE ASSESSEE. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. 3 '4 3/ 5 &6 . 1 '7 . '/ 8 . ORDER PRONOUNCED IN THE OP EN COURT ON 4 TH OCTOBER 2013.  . 0( # $ 9 4 -;< 2013 . 1 . SD/- SD/- ( . / D. MANMOHAN ) ( '#$% '#$% '#$% '#$% / RAJENDRA) / VICE-PRESIDENT # # # # &' &' &' &' /ACCOUNTANT MEMBER / MUMBAI =& /DATE: 04.10.2013 SK     . .. . +/> +/> +/> +/> ?#>(/ ?#>(/ ?#>(/ ?#>(/ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / )* 2. RESPONDENT / + )* 3. THE CONCERNED CIT(A)/ @ A 4. THE CONCERNED CIT / @ A 5. DR D BENCH ITAT MUMBAI / >B1 +/ . . . $ . 6. GUARD FILE/ 1 C 7 ITA NO.2928/MUM/2012 DINU JEWELLERY PVT. LTD. >/ +/ //TRUE COPY//  / BY ORDER / ' DY./ASST. REGISTRAR /ITAT MUMBAI