Zen Industries Pvt.Ltd.,, Ahmedabad v. The Income tax Officer,Ward-8(4),, Ahmedabad

ITA 377/AHD/2010 | 2006-2007
Pronouncement Date: 07-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 37720514 RSA 2010
Assessee PAN LVFOR9000S
Bench Ahmedabad
Appeal Number ITA 377/AHD/2010
Duration Of Justice 5 month(s) 1 day(s)
Appellant Zen Industries Pvt.Ltd.,, Ahmedabad
Respondent The Income tax Officer,Ward-8(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 07-07-2010
Date Of Final Hearing 07-07-2010
Next Hearing Date 07-07-2010
Assessment Year 2006-2007
Appeal Filed On 05-02-2010
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.C.AGRAWAL ACCOUNTANT MEMBER ZEN INDUSTRIES (P) LTD. 8 TH FLOOR THE CHAMBERS OPP. GURUDWARA S.G. HIGHWAY AHMEDABAD. VS. INCOME-TAX OFFICER WARD 8(4) AHMEDABAD. (APPELLANT) .. (RESPONDENT) REVENUE BY :- SHRI BANDISH SOPARKAR AR ASSESSEE BY:- SHRI P. R. GHOSH DR O R D E R PER D. C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THE LD.CIT(A) XIV AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER U/S 250 OF THE IT ACT FOR ASST. YEAR 2006-07 ON 04.01.2010. (2) THE LD. CIT(A) XIV AHMEDABAD HAS ERRED IN SUSTAINI NG ADDITION OF RS.19 50 000/- CONSIDERING BUSINESS INC OME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. (3) THE LD. CIT(A) XIV AHMEDABAD HAS ERRED IN ENHANCING THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. (4) THE LD. CIT(A) AHMEDABAD HAS ERRED IN CONFIRMING TH E 60% DISALLOWANCE OF EXPENSES. (5) THE LD. CIT(A) XIV AHMEDABAD HAS ERRED IN CONFIRMI NG THE DISALLOWANCE OF DEPRECIATION ON BUILDING. ITA NO.377/AHD/2010 ASST. YEAR :2006-07 2 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MOUTH FRESHNERS AFTER MINTS ETC. IT IS DERIVING RENT INCOME FROM LETTING OUT OF FACTORY BUILDING. THIS YEAR ALSO AS IN THE P RECEDING YEAR THE ASSESSEE CLAIMED LEASE RENTAL INCOME UNDER THE HEAD BUSINESS AND AO SOUGHT TO TAX THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ISSUE IN ASST. YEAR 2005-06 TRAVELED TO THE TRIBUNA L (SMC) WHICH DECIDED THE MATTER AGAINST THE ASSESSEE IN ITA NO.2 067/AHD/2008 DATED 19.12.2008. THE TRIBUNAL IN THIS REGARD HELD AS UND ER :- 8. HAVING HEARD BOTH THE SIDES I HAVE CAREFULLY GO NE THROUGH ORDERS OF THE AUTHORITIES BELOW AND PERUSED THE MATERIAL P LACE. IT IS THE CLAIM OF THE ASSESSEE THAT SIMILAR INCOME WAS ASSESSED AS INCOME FROM OTHER SOURCES IN THE EARLIER YEAR THEREFORE IN TH E PRESENT YEAR UNDER CONSIDERATION ALSO IT SHOULD BE TREATED ACCORDINGLY . IT IS PERTINENT TO NOTE THAT IT IS WELL SETTLED LAW THAT DECISION IN O NE YEAR WILL NOT OPERATE AS RES JUDICATA IN SUBSEQUENT YEAR. AN ASSE SSMENT YEAR UNDER THE ACT IS A SELF-CONTAINED ASSESSMENT PERIOD AND A DECISION IN ONE ASSESSMENT YEAR DOES NOT ORDINARILY OPERATE AS RES JUDICATA IN RESPECT OF THE MATTER DECIDED IN ANY SUBSEQUENT YEAR FOR T HE AO IS NOT A COURT AND HE IS NOT PRECLUDED FROM ARRIVING AT A CONCLUSI ON INCONSISTENT WITH HIS CONCLUSION IN ANOTHER YEAR (PLEASE REFER J OINT FAMILY OF UDAYAN CHINUBHAI VS. CIT (1967) 63 ITR 416 (SC) DW ARKADAS KESARDEO MORARKA VS. CIT (1962) 44 ITR 529 (SC). FO R THE YEAR UNDER CONSIDERATION THE AGREED PORTION OF THE PREMI SES WAS GIVEN ON RENT WHICH IS CLEARLY EVIDENT FROM THE RENT AGREEM ENT PLACED ON PAGES 1 TO 5 OF THE PAPER BOOK FILED BY THE ASSESSEE. HOW EVER IN THE ASSESSMENT ORDER AO HAS STATED THAT RENT AGREEMENT FROM VISION STATIONERY WAS NOT PLACED ON RECORD. THE HON. SUPRE ME COURT IN THE CASE OF CIT VS. CHUGANDAS & CO. (1965) THAT IF AN A SSESSEE CARRIES ON BUSINESS OF PURCHASING AND SELLING BUILDINGS INCOME RECEIVED FROM THE BUILDINGS SO LONG AS THEY ARE OWNED BY THE ASSESSEE WILL BE SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. IT IS PERTINENT TO NOTE THAT IN THE PRESENT CASE ASSESSEE IS OWNER AND LETTING OUT OF PREMISES IS NOT THE BUSINESS OF ASSESSEE. AS A MATTER OF FACT DURING THE COURSE OF HEARING LD. COUNSEL OF THE ASSESSEE HERSELF STATED PART OF PREM ISES WERE GIVEN ON LEASE ONLY FOR A PERIOD OF THREE YEARS. THE HON. BO MBAY HIGH COURT IN THE CASE OF PAREKH TRADERS VS. CIT 150 ITR 310 ( BOM) HELD THAT INCOME FROM GODOWN INITIALLY SELF USED BUT LATER LE T OUT IS ASSESSABLE 3 AS PROPERTY INCOME. HON. SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENT (P) LTD. VS. CIT (2003) 263 ITR 143 (SC) ALSO HELD THAT WHERE A PORTION OF THE PREMISES IS LET OUT THE INCO ME IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCO ME. IN VIEW OF THIS THE LD. AO IS PERFECTLY JUSTIFIED IN TREATING THE INCOME IN QUESTION AS INCOME FROM HOUSE PROPERTY AND THE LD. CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN UPHOLDING THE ASSESSMENT AND A S SUCH WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THIS YEAR ASSESSEE RECEIVED FOLLOWING LEASE RENTAL INCOME :- I) ALV FOR 9000 SQ.FT. LET OUT BY APPELLANT TO M/S VIS ION STATIONERY (P) LTD. WILL BE RS.9 00 000 (RS.100 X 9000) II) ALV FOR 12600 SQ.FT. LET OUT BY APPELLANT TO M/S ZE N TOBACCO (P) LTD. WILL BE RS.12 60 000 (RS.100 X 12600) III) ALV FOR TERRACE @ 50000 P.M. FOR THREE MONTHS LET O UT TO M/S ZEN TOBACCO (P) LTD. TOTAL ALV FOR LEASED PROPERTY IS R S.23 10 000/- (9 00 000 + 12 60 000 + 1 50 000). THE ASSESSEE CLAIMED THAT IS TAXABLE UNDER THE HEAD BUSINESS. THE AO TAXED IT UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND LD. CIT(A) CONFIRMED HIS ORDER. 3. THE FIRST AND SECOND GROUNDS RAISED BY THE ASSES SEE RELATE TO THIS ISSUE. AFTER HEARING THE PARTIES I RESPECTFULLY FOL LOW THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASST. YEAR 2 005-06 AND CONFIRM THE ORDER OF LD. CIT(A) IN TAXING THE LEASE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THESE TWO GROUNDS ARE ACCORDINGLY REJECTED. 4. THE THIRD GROUND RELATES TO ENHANCING INCOME UND ER THE HEAD INCOME FROM HOUSE PROPERTY. THE FACTS RELATING TO THIS ISSUE ARE THAT AO ACCEPTED THE LEASE RENTAL SHOWN BY THE ASSESSEE AND COMPUTED INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS UNDE R :- 4 INCOME FROM HOUSE PROPERTY RENTAL INCOME 1950000 LESS: 30% STATUTORY DEDUCTION. U/S 24 585000 RS.1365000 5. THE LD. CIT(A) HOWEVER FOUND THAT LEASE RENTAL S SHOWN TO HAVE BEEN RECEIVED BY THE ASSESSEE THIS YEAR FROM M/S VI SION STATIONERY (P) LTD. ARE LESSER AS COMPARED TO WHAT ASSESSEE HAS RE CEIVED FROM THE SAME COMPANY IN ASST. YEAR 2004-05. THE LD. CIT(A) NOTED THAT M/S VISION STATIONERY (P) LTD. SISTER CONCERN OF THE ASSESSEE WAS GIVEN AN AREA OF 6000 SFT. @ RS.100/- PER SFT. FOR TOTAL LEASE RENT OF RS.6 LACS IN FY 2003- 04 BUT IN FY 2004-05 AN AREA OF 9 000 SFT. WAS GIVE N FOR THE SAME LEASE RENTAL OF RS.6 LACS WHICH GAVE A RATE OF RS.66.67 PER SFT. THIS YEAR ALSO THE ASSESSEE CHARGED RS.6 LACS FOR SPACE OF 9000 SF T. GIVING AGAIN THE RATE OF RS.66.67 PER SFT. ON THE OTHER HAND ASSESSEE HA S GIVEN 12 600 SFT. OF AREA TO M/S JAIN TOBACCO (P) LTD. AN ANOTHER SISTER CONCERN OF THE ASSESSEE @ RS.107 PER SFT. THUS THE SPACE WERE GIVE N TO M/S VISION STATIONERY (P) LTD. AT MUCH LOWER RATE IN THE SAME BUILDING. ACCORDING TO THE LD. CIT(A) PREMISES OCCUPIED BY THE TWO CONCERN S IS THE SAME BOTH THESE PARTIES ARE GROUP COMPANIES WHERE THERE ARE C OMMON DIRECTORS THEN SIMILAR RATES SHOULD HAVE BEEN CHARGED FROM M/ S VISION STATIONERY (P) LTD. HE ACCORDINGLY ADOPTED A RATE OF RS.100 PE R SFT. WHICH WAS CHARGED FOR THE PERIOD FROM 1.4.2003 TO 31.3.2004 W ITHOUT ELECTRICITY CHARGES. IT WAS CONSIDERED BY HIM AS REASONABLE AND FAIR LEASE RENT FOR THE PREMISES FOR WORKING OUT ALV YEARLY. ACCORDING TO H IM THIS IS THE ALV AS PER SEC.23 OF THE ACT AND WILL DETERMINE THE ANN UAL LETTING OUT VALUE ON THE BASIS OF AREA LET OUT BY THE ASSESSEE. ACCORDIN GLY LD. CIT(A) WORKED OUT INCOME FROM HOUSE PROPERTY AS UNDER BY TAKING R S.100 PER SFT. AS LEASE RENT FROM M/S VISION STATIONERY (P) LTD.:- 5 ALV AS PER SEC.23 OF THE ACT FOR LEASED FACTORY PREMISES RS.23 10 000 LESS: MUNICIPAL TAX LEVIED AND PAID NIL ----------------- ANNUAL VALUE RS.23 10 000 LESS: DEDUCTION U/S 24(1) OF THE ACT @ 30% OF ANNUAL VALUE IN RESPECT OF REPAIR AND MAINTENANCE(30% OF 23 10 000) RS. 6 93 000 ---------------- INCOME FROM HOUSE PROPERTY RS.16 17 000 IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY LD. CIT( A) FOR ENHANCING THE ASSESSEE FURNISHED FOLLOWING EXPLANATIONS :- (A) AS REGARD TO RENT RECEIVED FROM TWO TENANT IT I S CLARIFIED THAT ACTUAL RENT RECEIVED FROM BOTH THE TENANTS IS FAIR AND REA SONABLE HAVING REGARDS TO THE DEMAND AND SUPPLY COST OF THE PROPERTY LOC ATION OF THE PROPERTY ETC. ONE TENANT NAMELY ZEN TOBACCO (P) LTD. PAYS COMPOSI TE RENT OF PROPERTY AS WELL AS ELECTRICITY CHARGES WHICH IS SUBSTANTIAL LY CONSUMED BY THEM CONSIDERING NATURE OF THEIR BUSINESS ETC. ETC. WHEREAS VISION STATIONERY (P) LTD. PAYS FOR THE PRO PERTY ONLY AND NOT FOR ELECTRICITY CHARGES. TO DETERMINE RENT RECEIVED CO MPOSITE RENT MUST BE DISINTEGRATED AND IT IS ONLY THAT PART OF IT ATTRIB UTABLE TO THE LET OUT PROPERTY WHICH WOULD FORM THE BASIS FOR COMPARISON. ON RATIONAL BASIS IF THE AMOUNT OF ELECTRICITY CHAR GES IS EXCLUDED THEN RENT AMOUNT WOULD BE MORE OR LESS SAME TOWARDS THE PROPERTY OCCUPIED BY BOTH THE TENANTS AND THEREFORE CONSIDER FACTS AN D CIRCUMSTANCES OF THE CASE AND PECULIAR CASE OF LETTING OF PROPERTY RENT ACTUALLY RECEIVED MAY KINDLY BE ACCEPTED AS FAIR RATABLE VALUE AND OBLIGE . (B) AS REGARD TO DETAILS OF SECURITY EXPENSES ALON G-WITH SUPPORTING AND INSURANCE CHARGES COPIES OF ACCOUNTS ARE APPENDED HEREWITH. DATE 28.10.2009 IN CONTINUATION TO OUR LAST SUBMISSION DATED 28.10. 2009 WE FURTHER CLARIFIED AS UNDER :- 6 (A) M/S ZEN TOBACCO (P) LTD. IS OCCUPYING SUBSTANTIAL O PEN PLOTS IN FORM OF PARKING OF VEHICLES AND OTHER UTILITY AS CO MPARED TO VISION STATIONERY (P) LTD. (B) AS REGARD TO TOTAL RENT OF RS.13 50 000/- F ROM ZEN TOBACCO (P) LTD. AN ADDITIONAL DOCUMENT FOR USAGE OF TERRACE WA S EXECUTED WHICH HAS BEEN GIVEN ON RENT @ RS.50 000/- P.M. FROM JAN UARY 2006. THEREFORE RS.1 50 000/- RENT HAS BEEN RECEIVED TOWA RDS TERRACE USAGE. A COPY OF SAID DOCUMENT IS APPENDED. THE LD. CIT(A) WAS APPARENTLY NOT SATISFIED AND ENH ANCED THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROP ERTY ACCORDINGLY. 6. BEFORE ME LD. AR FOR THE ASSESSEE SUBMITTED THA T NO COMPARISON OF RENT RECEIPT FROM JAIN TOBACCO (P) LTD. CAN BE MADE AS FLOOR OCCUPIED BY VISION STATIONERY (P) LTD. AND JAIN TOBACCO (P) LTD . ARE DIFFERENT AND WOULD FETCH DIFFERENT RATES. FURTHER PREMISES GIVEN TO JAIN TOBACCO ARE INCLUSIVE OF ELECTRICITY CHARGES WHEREAS THE PREMIS ES GIVEN TO VISION STATIONERY (P) LTD. IS EXCLUSIVE OF ELECTRICITY CHA RGES. THE THIRD ARGUMENT TAKEN BY LD. AR WAS THAT IT IS THE BUSINESS DECISIO N OF THE PARTIES TO CHARGE HIGHER RENT OR LOWER RENT. THERE MAY BE ADJU STMENT IN RENT IF RENT CHARGED IN AN EARLIER YEAR IS ARTIFICIALLY HIGHER. IN ORDER TO AVOID KEEPING THE PREMISES VACANT AND WHEN THERE IS A THREAT OF T HE TENANT VACATING THE PREMISES ASSESSEE MAY CHOSE TO REDUCE THE RENT ENAB LING THE SAME TENANT TO CONTINUE IN ITS PREMISES. THE ASSESSEE HAS GIVEN MORE SPACE TO VISION STATIONERY (P) LTD. AS ADDITIONAL SPACE WAS LYING W ITH THE ASSESSEE AND TO MAINTAIN GOOD WILL OF THE BUSINESS THE ADDITIONAL S PACE WAS GIVEN TO VISION STATIONERY (P) LTD. WITHOUT CHARGING ADDITIO NAL RENT. IN FACT THERE IS NO REDUCTION IN LEASE RENTAL RECEIVED BY THE ASS ESSEE BUT ONLY MORE SPACE HAS BEEN GIVEN TO M/S VISION STATIONERY (P) L TD. AS THAT SPACE WAS OF NO USE TO THE ASSESSEE. IN ANY CASE LD. CIT(A) H AS NOT DETERMINED THE ALV OF THE HOUSE PROPERTY AND THEREFORE HE COULD NOT ADOPT ANY 7 ARTIFICIAL RENT WHICH IS ACTUALLY NOT RECEIVED BY T HE ASSESSEE. HE DREW OUR ATTENTION TO SECTION 23 ACCORDING TO WHICH EITHER T HE ACTUAL RENT OR THE ALV DETERMINED BY THE AO WOULD BE CONSIDERED FOR DE TERMINING INCOME UNDER THE HEAD HOUSE PROPERTY. THERE IS NO ROOM F OR ASSUMING RENTALS AND USE THEM AS ALV. IT HAS TO BE DETERMINED ONLY I N ACCORDANCE WITH SECTION 23 WHICH READS AS UNDER :- SEC.23 (1) FOR THE PURPOSES OF SECTION 22 THE ANNUAL VALU E 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 L ET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS (2) WHERE THE PROPERTY CONSISTS OF A HOUSE OR PART OF A HOUSE WHICH- (A) IS IN THE OCCUPATION OF THE OWNER FOR THE PURPOSES OF HIS OWN RESIDENCE; OR (B) CANNOT ACTUALLY BE OCCUPIED BY THE OWNER BY REASON OF THE FACT THAT OWING TO HIS EMPLOYMENT BUSINESS OR PROFESSIO N CARRIED ON AT ANY OTHER PLACE HE HAS TO RESIDE AT THAT OTHER PLA CE IN A BUILDING NOT BELONGING TO HIM THE ANNUAL VALUE OF SUCH HOUSE OR PART OF THE HOUSE SHALL BE TAKEN TO BE NIL (3) THE PROVISIONS OF SUB-SECTION (2) SHALL NOT AP PLY IF - (A) THE HOUSE OR PART OF THE HOUSE IS ACTUALLY LET DURI NG THE WHOLE OR ANY PART OF THE PREVIOUS YEAR; OR (B) ANY OTHER BENEFIT THEREFROM IS DERIVED BY THE OWNER (4) WHERE THE PROPERTY REFERRED TO IN SUB-SECTION ( 2) CONSISTS OF MORE THAN ONE HOUSE - 8 (A) THE PROVISIONS OF THAT SUB-SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES WHICH THE ASSESSEE MAY AT HIS OPTI ON SPECIFY IN THIS BEHALF; (B) THE ANNUAL VALUE OF THE HOUSE OR HOUSES OTHER THAN THE HOUSE IN RESPECT OF WHICH THE ASSESSEE HAS EXERCISED AN OPTI ON UNDER CLAUSE (A) SHALL BE DETERMINED UNDER SUB-SECTION (1) AS I F SUCH HOUSE OR HOUSES HAD BEEN LET. THE LD. CIT(A) HAS NOT CONSIDERED THE REASONS WHY R ATE PER SFT. HAD ACTUALLY GONE DOWN IN ASST. YEAR 2005-06 AND 2006-0 7. 7. THE LD. DR ON THE OTHER HAND SUBMITTED THAT ASS ESSEE HAS NOT GIVEN REASONS WHY LEASE RENTAL PER SFT. HAS BEEN REDUCED SUBSTANTIALLY THIS YEAR AS COMPARED TO THE LEASE RENTAL RATE IN ASST. YEAR 2004-05. IN FACT LEASE RENTAL SHOULD HAVE INCREASED AS IT WAS THE HISTORY OF THE ASSESSEE. THE LD. DR REFERRED TO PAGE 15 OF ASSESSEES PAPER BOOK AND SHOWED LEASE RENTAL FROM VISION STATIONERY (P) LTD. IN ASST. YEAR 2002- 03 WAS RS.17.5 PER SFT IN ASST. YEAR 2003-04 IT WAS INCREASED TO RS.6 0 PER SFT AND IN ASST. YEAR 2004-05 IT WAS INCREASED TO RS.100 PER SFT. B UT SUDDENTLY IN ASST. YEAR 2005-06 ONWARDS LEASE RENTAL RATE IS REDUCED T O RS.66.67 PER SFT. FURTHER LD. CIT(A) HAS CLEARLY HELD THAT HIGHER AMO UNT IS THE ALV OF THE PREMISES GIVEN TO M/S VISION STATIONERY (P) LTD. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IN MY CONSIDERED VIEW THE AO SHOULD HAVE BE EN GIVEN AN OPPORTUNITY TO INVESTIGATE AS TO WHY M/S VISION STA TIONERY (P) LTD. WAS GIVEN MORE SPACE. EARLIER SPACE GIVEN WAS 6000 SFT AND IN ASST. YEAR 2005-06 SPACE GIVEN IS 9000 SFT. BUT LEASE RENTAL R ENAUBED FIXED AT RS.6 LACS. SO THERE IS NO VARIATION IN GROSS LEASE RENTA L RECEIVED/RECEIVABLE FROM M/S VISION STATIONERY (P) LTD.. IT IS ONLY TH E ADDITIONAL AREA OF 3000 SFT. FURTHER GIVEN TO THEM IN ASST. YEAR 2005-06 ON WARDS. ASSESSEE HAS 9 NOT ACTUALLY SPELT OUT ANY REASON WHY ADDITIONAL SP ACE HAS BEEN GIVEN WITHOUT CHARGING ANY LEASE RENTAL OR UNDER WHAT CIR CUMSTANCES ADDITIONAL SPACE WAS COVERED UNDER GROSS LEASE RENTAL OF RS. 6 LACS. FURTHER THE AO IS REQUIRED TO DETERMINE THE ALV OF THIS PREMISES I N ACCORDANCE WITH SECTION 23. SECTION 23 PROVIDES THAT ALV SHALL BE ( A) THE SUM FOR WHICH THE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET OU T FROM YEAR TO YEAR (B) WHERE THE PROPERTY IS LET AND THE ACTUAL RENT RECEI VED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM RE FERRED TO IN CLAUSE (A). THUS HIGHER AMOUNT SO RECEIVED OR RECEIVABLE WOULD BE ALV. THE LD. AR HAS SOUGHT TO ARGUE THAT WHERE PROPERTY IS LET OUT THEN CLAUSE (A) OF SECTION 23 WILL NOT HAVE ANY APPLICATION AND IT IS ONLY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER WOULD HAVE TO B E CONSIDERED FOR DETERMINING ALV. THE LD. CIT(A) HAS SOUGHT TO INVOK E ONLY CLAUSE (A) OF SECTION 23(1) AS ACCORDING TO HIM PROPERTY IS REASO NABLY BE EXPECTED TO LET OUT AT THE RATE OF RS.100 PER SFT. AND THE ACTU AL RENT RECEIVED BY THE ASSESSEE @ RS.66.67 PER SFT. IS LOWER THAN THE EXPE CTED RENT. IN MY CONSIDERED VIEW IT IS LEGALLY NOT CORRECT TO DISSEC T CLAUSE (A) AND (B) OF SECTION 23 AND MAKE THEM APPLICABLE TO DIFFERENT SI TUATIONS AS SUITED TO AO OR TO ASSESSEE AND ACCORDINGLY CONFINE TO CLAUSE (A) OR CLAUSE (B) ONLY. IN FACT SECTION 23 CREATES A DEEMING SECTION AND FULL EFFECT TO ENTIRE SUB-SECTION HAS TO BE GIVEN UNLESS IT IS CLEARLY D ISCERNIBLE THAT CLAUSE (A) AND CLAUSE (B) WOULD BE APPLICABLE TO DIFFERENT SIT UATIONS. IN FACT PROPERTY WHICH IS NOT LET OUT IS NOT COVERED UNDER CLAUSE (C ) AND THEREFORE CLAUSE (A) AND CLAUSE (B) BOTH CAN BE SIMULTANEOUSLY APPLI ED TO A LET OUT PROPERTY. IN FACT LANGUAGE OF CLAUSE (B) ALSO MAKES IT CLEAR THAT A COMPARISON HAS TO BE MADE BETWEEN THE REASONABLY EX PECTED RENT AND ACTUAL RENT RECEIVED OR RECEIVABLE; AND ACTUAL RENT RECEIVED OR RECEIVABLE WOULD BE ADOPTED AS THE BASIS FOR ALV IN CASE IT IS HIGHER THAN EXPECTED RENT. THEREFORE IN ANY CASE AO HAS TO WORK OUT THE EXPECTED RENT OF THE 10 PROPERTY AND WHICH IS ALSO CALLED STANDARD RENT AND COMPARE IT WITH ACTUAL RENT RECEIVED OR RECEIVABLE AND WHICHEVER IS HIGHE R HAS TO BE ADOPTED FOR COMPUTING ALV. SECTION 23(1) ENVISAGES THAT WHERE T HE PROPERTY IS LET OUT AND AO ACCEPTED THE CLAIM OF THE SUM OF RENT RE CEIVED OR RECEIVABLE BY OWNER AND THIS ACTUAL RENT IS HIGHER THAN THE ST ANDARD RENT I.E. THE SUM FOR WHICH THE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET OUT THEN THE ACTUAL RENT WOULD CONSTITUTE THE BASIS FOR COMPUTAT ION OF INCOME FROM HOUSE PROPERTY. WHERE THE PROPERTY HAS NOT BEEN LET OUT OR WHERE THE RENT STATED BY THE ASSESSEE IS FOUND NOT TO BE ACTUAL RE NT THEN THE AO WOULD WORK OUT THE STANDARD RENT. IN FACT THE AO IS DUTY BOUND TO CALCULATE THE STANDARD RENT OF THE PROPERTY UNDER SECTION 23 AND FOR THIS PURPOSE ASSESSEE IS REQUIRED TO PROVIDE ALL INFORMATION TO THE AO SO THAT HE CAN DISCHARGE HIS OBLIGATION. 9. IN FACT SECTION 23(1) WAS AMENDED BY THE FINANCE ACT 2001 WITH EFFECT FROM APRIL 2002. IT PROVIDES THREE CLAUSES DEALING WITH DIFFERENT SITUATIONS TO COMPUTE THE ALV OF ANY PROPERTY. CLAU SE (A) AND (B) ARE SIMILAR TO THE OLD PROVISIONS WHICH DID NOT DEAL WI TH THE SITUATION WHERE PROPERTY REMAINED VACANT DURING THE WHOLE OR ANY PA RT OF THE YEAR. FOR THIS PURPOSE CLAUSE (C) WAS ENACTED FOR DETERMINING THE ALV OF THE PROPERTY WHICH IS PARTLY OR WHOLLY REMAINED VACANT. 10. IN VIEW OF ABOVE THE AO IS REQUIRED TO DETERMI NE STANDARD RENT AND COMPARE IT WITH ACTUAL RENT RECEIVED BY THE ASSESSE E AND THEREAFTER DETERMINE THE ALV. HE WILL TAKE INTO ACCOUNT THE RE ASON FOR GIVING MORE SPACE TO M/S VISION STATIONERY (P) LTD. FOR ARRIVIN G AT THE STANDARD RENT AND THEREFORE ALV FOR THE SPACE GIVEN TO THEM. FO R THIS PURPOSE I RESTORE THIS ISSUE TO THE FILE OF AO. THE APPEAL FI LED BY THE ASSESSEE IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. 11 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 7/7/2010 SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER AHMEDABAD DATED : 7/7/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD