RAMKUMAR DAGA, MUMBAI v. ITO 14(1)(1), MUMBAI

ITA 3128/MUM/2009 | 2004-2005
Pronouncement Date: 21-05-2010

Appeal Details

RSA Number 312819914 RSA 2009
Assessee PAN AEWPD7828K
Bench Mumbai
Appeal Number ITA 3128/MUM/2009
Duration Of Justice 1 year(s) 8 day(s)
Appellant RAMKUMAR DAGA, MUMBAI
Respondent ITO 14(1)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Assessee
Bench Allotted D
Tribunal Order Date 21-05-2010
Date Of Final Hearing 09-04-2010
Next Hearing Date 09-04-2010
Assessment Year 2004-2005
Appeal Filed On 13-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE S/SHRI N.V. VASUDEVAN (JM) & T.R. SOOD (AM) I.T.A.NO. 3128/MUM/09 (ASSESSMENT YEAR : 2004-05) I.T.A.NO. 3129/MUM/09 (ASSESSMENT YEAR : 2005-06) SHRI RAMKUMAR DAGA 5 TH FLOOR 18/22 SHEIKH MEMON STREET MUMBAI-400 002. VS. ITO WARD 14(1)(1) ROOM NO. 204 2 ND FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. APPELLANT RESPONDENT I.T.A.NO. 3012/MUM/09 (ASSESSMENT YEAR : 2004-05) I.T.A.NO. 3011/MUM/09 (ASSESSMENT YEAR : 2005-06) ITO WARD 14(1)(1) ROOM NO. 204 2 ND FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. VS. SHRI RAMKUMAR DAGA 5 TH FLOOR 18/22 SHEIKH MEMON STREET MUMBAI-400 002. APPELLANT RESPONDENT PAN/GIR NO. : AEWPD7828K ASSESSEE BY : SHRI VIJAY MEHTA DEPARTMENT BY : SHRI AARSI PRASAD ORDER PER N.V. VASUDEVAN JM :- ITA NO. 3128/MUM/2009 IS AN APPEAL BY THE ASSESSEE WHILE ITA NO. 3012/MUM/2009 IS AN APPEAL BY THE REVENUE. BOTH THESE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 19.2.2009 OF L EARNED CIT(A)-XIV MUMBAI RELATING TO A.Y. 2004-05. ITA NO. 3129/MUM/2009 IS AN APPEAL BY THE ASSESSEE WHILE ITA NO. 3011/MUM/2009 IS AN APPEAL BY THE REVENUE. BOT H THESE APPEALS SHRI RAMKUMAR DAGA 2 ARE DIRECTED AGAINST THE ORDER DATED 19.2.2009 OF L EARNED CIT(A)-XIV MUMBAI RELATING TO A.Y. 2005-06. 2. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE JOIN TLY OWNED WITH HIS WIFE A DUPLEX RESIDENTIAL FLAT ON 13 TH AND 14 TH FLOOR OF THE BUILDING KNOWN AS SURAJ APARTMENT MILLENNIUM TOWER 71 BHULABHAI DESAI ROAD MUMBAI ALONG WITH TWO RESERVED CAR PARKING SPACE. D URING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N THE FLAT WAS LEASED TO M/S. LOREAL INDIA PVT. LTD. UNDER A LEAVE AND LI CENCE AGREEMENT DATED 20.5.2002. THE FLAT WAS LEASED OUT AT A MONTHLY REN T OF RS. 60 000/-; ASSESSEES SHARE BEING RS. 30 000/- AND THE ASSESSE E OFFERED A SUM OF RS. 52 000/- BY WAY OF RENTAL INCOME BEING RENT FOR THE PART PERIOD FOR THE MONTH OF FEBRUARY AND FULL MONTH OF MARCH 2003. BESIDES THE RENT AN INTEREST FREE SECURITY DEPOSIT OF RS. 1.50 CRORE S WAS PAID TO THE ASSESSEE BY THE LESSEE. THE ASSESSING OFFICER WAS O F THE VIEW THAT THE LICENCE FEE CHARGED BY ASSESSEE APPEARED TO BE VERY LOW COMPARED TO THE PRIME AREA IN WHICH THE PROPERTY WAS LOCATED AND IT S SIZE (5000 SQ.FT.). ACCORDING TO THE ASSESSING OFFICER THE LOW RENT HA D BEEN CONVENIENTLY COMPENSATED BY GIVING HUGE INTEREST FREE LOAN OF RS . 1.5 CRORES. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE WORDS US ED IN SECTION 23(1)(A) WAS MIGHT AND NOT CAN OR IS AND THUS THE NOTI ONAL INCOME WAS TO BE GATHERED FROM WHAT A HYPOTHETICAL TENANT WOULD PAY WHICH WAS TO BE OBJECTIVELY ASCERTAINED ON A REASONABLE BASIS IRRES PECTIVE OF THE FACT WHETHER THE PROPERTY WAS LET OUT OR NOT. RELIANCE W AS PLACED BY THE ASSESSING OFFICER ON THE JUDGEMENT OF HON'BLE APEX COURT IN THE CASE OF SULTAN BROTHERS VS. CIT (1964) 51 ITR 353. THE ASSE SSING OFFICER DREW FURTHER SUPPORT FROM THE JUDGMENT IN THE CASE OF J. K. INVESTORS (BOM) LTD. 248 ITR 723. THE ASSESSING OFFICER ALSO PLACE D RELIANCE ON THE MADRAS HIGH COURT JUDGMENT IN THE CASE OF N. NATRAJ VS. DCIT 266 ITR 277. IT WAS HELD BY THE ASSESSING OFFICER THAT NOTI ONAL INTEREST ON SECURITY DEPOSIT HAD A DEFINITE ROLE IN DETERMINING THE SUM OF RENT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR IN ACCORDANCE WITH THE PROVISIONS U/S. 23(1)(A). TH US THE ASSESSING SHRI RAMKUMAR DAGA 3 OFFICER WORKED OUT THE NOTIONAL INTEREST ON THE DEP OSIT OF RS. 1.50 CRORES @ 12% AT RS. 18 LAKHS PER ANNUM. SINCE THE PROPERT Y HAD BEEN LET OUT FOR ABOUT TWO MONTHS DURING THE SUBJECT YEAR; THE N OTIONAL INTEREST FOR TWO MONTHS WAS WORKED OUT AT RS. 3 60 000/- WHICH W AS ALSO TAKEN INTO CONSIDERATION TO DETERMINE THE ANNUAL RATEABLE VALU E OF THE PROPERTY IN ADDITION TO THE RENT RECEIVED. LEARNED CIT(A) CONF IRMED THE ORDER OF THE ASSESSING OFFICER. 3. LEARNED CIT(A) HOWEVER REDUCED THE PERCENTAGE OF NOTIONAL INTEREST FROM 12% TO 7% FOR THE REASONS GIVEN IN PA RA 7.1 & 7.2 OF HIS ORDER. AGGRIEVED BY THE ORDER OF LEARNED CIT(A) IN NOT DELETING ENTIRE ADDITION OF NOTIONAL INTEREST MADE BY THE ASSESSING OFFICER BY ASSESSING OFFICER THE ASSESSEE HAS RAISED GROUND NO. 1 IN IT A NO.3128/MUM/09 AND THE ONLY GROUND IN ITA NO.3129/MUM/09 BEFORE TH E TRIBUNAL. AGGRIEVED BY THE ACTION OF THE LEARNED CIT(A) IN RE DUCING THE PERCENTAGE OF NOTIONAL INTEREST FROM 12% TO 7% THE REVENUE HA S RAISED GROUND NO. 1 TO 6 IN THEIR APPEALS. 4. FIRST WE SHALL DEAL WITH THE APPEALS OF THE ASS ESSEE. 5. AT THE TIME OF HEARING IT WAS BROUGHT TO OUR NO TICE THAT IN THE CASE OF THE ASSESSEE SIMILAR ADDITION HAD BEEN MAD E BY THE ASSESSING OFFICER IN A.Y. 2003-04 AND CONFIRMED BY LEARNED CI T(A). THE ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN TH E CASE OF THE ASSESSEE IN ITA NO. 796/MUM/08 AND THIS TRIBUNAL HELD AS FOL LOWS :- THE LEARNED COUNSEL FOR THE ASSESSEE SHRI VIJAY M EHTA SUBMITTED BEFORE US THAT A SIMILAR ISSUE WAS DECIDED IN THE C ASE OF ITO VS. PUSHYA PROPERTIES PVT. LTD. 30 SOT 219 (MUM) AND A LSO IN THE CASE OF ACIT VS. SHRI VIJAY J. LAZARUS IN ITAT MUMB AI F BENCH IN ITA NO. 6751 & 6752/M/07 VIDE ORDER DATED 25.3.2 009 IN WHICH IT HAS BEEN HELD AS FOLLOWS :- UNDISPUTED FACTUAL POSITION IS THAT ACTUAL RENT OF RS. 1 00 000/- RECEIVED BY THE ASSESSEE WAS MUCH HIGHER THAN THE A NNUAL VALUE AS WORKED OUT IN TERMS OF SECTION 23(1)(A) OF THE ACT. THUS ANNUAL VALUE IN THE CASE OF THE ASSESSEE WAS TO BE DETERMINED IN TERMS OF SECTION SHRI RAMKUMAR DAGA 4 23(1)(A) OF THE ACT VIZ. ACTUAL RENT RECEIVED. HON 'BLE BOMBAY HIGH COURT IN THE CASE OF J.K. INVESTORS (BOM) LTD. HAS HELD THAT FOR THE PURPOSE OF SECTION 23(1)(B) IT IS THE ACTUAL RENT RECEIVED THAT HAS TO BE CONSIDERED AS NOTIONAL INTEREST ON SECURITY DEPO SIT CANNOT BE ADDED TO THE ACTUAL RENT RECEIVED. IN VIEW OF THIS AND PARTICULARLY FOLLOWING THE JURISDICTIONAL HIGH COURT ADDITION O F NOTIONAL INTEREST TO THE ACTUAL RENT RECEIPT IS NOT CORRECT. IN THE PRESENT CASE ALSO IT IS NOT DISPUTED THAT AC TUAL RENT RECEIVED IS MORE THAN ANNUAL RATEABLE VALUE BEING RS. 1 40 6 40/-AS PER CERTIFICATE DATED 1.3.2005 OF BRUHAN MUMBAI MUNICIP AL CORPORATION. THEREFORE RESPECTFULLY FOLLOWING THE D ECISION OF THE CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL WE ALLOW ASSESSEES APPEAL ON THIS ISSUE. 6. IN VIEW OF THE ABOVE DECISION IN THE CASE OF THE ASSESSEE WE HOLD THAT NOTIONAL INTEREST ON INTEREST FREE SECURITY DE POSIT CANNOT BE ADDED TO THE ANNUAL LETTING VALUE. IN VIEW OF THE DECISION I N THE APPEALS OF THE ASSESSEE ON GROUND NO. 1 GROUNDS RAISED BY THE REV ENUE IN ITS APPEALS DO NOT REQUIRE ANY CONSIDERATION. APPEALS BY THE R EVENUE ARE THEREFORE DISMISSED. 7. GROUND NO. 2 RAISED BY THE ASSESSEE IN ITA NO. 3 128/MUM/2009 WAS NOT PRESSED AND THEREFORE THE SAME IS DISMISSE D. 8. IN THE RESULT ITA NO. 3011 & 3012/MUM/2009 BEIN G APPEALS BY THE REVENUE ARE DISMISSED. ITA NO. 3128/MUM/2009 IS PARTLY ALLOWED. ITA NO. 3129/MUM/2009 IS ALLOWED. ORDER HAS BEEN PRONOUNCED ON 21 ST DAY OF MAY 2010. SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 21 ST MAY 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE SHRI RAMKUMAR DAGA 5 BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS