DCIT ( OSD) I C.R-7, MUMBAI v. RAMRIKHDAS BALKISION & SONS P. LTD, MUMBAI

ITA 5515/MUM/2010 | 2007-2008
Pronouncement Date: 21-09-2011 | Result: Dismissed

Appeal Details

RSA Number 551519914 RSA 2010
Assessee PAN AAECR3690L
Bench Mumbai
Appeal Number ITA 5515/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 14 day(s)
Appellant DCIT ( OSD) I C.R-7, MUMBAI
Respondent RAMRIKHDAS BALKISION & SONS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 21-09-2011
Assessment Year 2007-2008
Appeal Filed On 07-07-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOOD (A. M) ITA NO.5515/MUM/2010(A.Y. 2007-08) THE DCIT (OSD)-1 C.R.7 ROOM NO.413 4 TH FLOOR AAYKAR BHAVAN MK ROAD MUMBAI 20. (APPELLANT) VS. M/S.RAMRIKHDAS BALKISON & SONS PVT. LTD. PLOT NO.7 CHANDIVALI FARM ROAD CHANDIVALI MUMBAI 72. (RESPONSENT) PAN:AAECR 3690L ITA NO.5516/MUM/2010(A.Y. 2007-08) THE DCIT (OSD)-1 C.R.7 ROOM NO.413 4 TH FLOOR AAYKAR BHAVAN MK ROAD MUMBAI 20. (APPELLANT) VS. M/S. RAMGOPAL GANPATRAI & SONS PVT. LTD. 219 @B SANJAY MITTAL INDL. EST. A.K.ROAD MAROL MUMBAI -59. PAN:AAACR 7642G (RESPONDENT) APPELLANT BY : SHRI C.G.K.NAIR RESPONDENT BY : SHRI PRAMOD D. RASSAM DATE OF HEARING : 15/09/2011 DATE OF PRONOUNCEMENT : /09/2011 ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST TWO ORDE RS BOTH DATED 23/4/2010 OF CIT(A)-40 MUMBAI RELATING TO ASSESSME NT YEAR 2007-08. BOTH THE APPEALS INVOLVE IDENTICAL ISSUE AND WERE HEARD TOGETHER. WE DEEM IT CONVENIENT TO PASS A CONSOLIDATED ORDER. ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 2 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO.5515/MUM/2010 READS AS FOLLOWS: A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.26 62 176/- RELYING ON THE TRIBUNAL DECISION FOR A.Y 2005-06 WITHOUT CONSI DERING THE FACTS THAT THE ADDITION FOR A.Y 2005-06 WAS CONFIRMED BY THE CIT(A) AND DECISION OF THE TRIBUNAL HAS NOT BEEN ACCEPTED BY T HE REVENUE. B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF THE TRIBUNAL WHERE IT WAS HELD THAT THE TENANT IS PROTECTED TENANT AND THAT M AHARASHTRA RENT CONTROL ACT 1999 IS APPLICABLE TO THE PROPERTY WIT HOUT APPRECIATING FACTS THAT ASSESSEE IS RECEIVING RENT MORE THAN THE STANDARD RENT FIXED BY THE MUNICIPAL CORPORATION AND THEREFORE THE PRO PERTY IS OUTSIDE THE PURVIEW OF MAHARASHTRA RENT CONTROL ACT 1999. C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RELYING ON THE TRIBUNAL DECISIO N WHERE THE ACTS THAT THE TRANSACTION BETWEEN ASSESSEE AND TENANTS IS INF LACTED BY THE REASON OF EXTRANEOUS CONSIDERATION AN ALV FIXED BY THE MUNICIPAL LIMIT IS NOT BINDING UPON THE ASSESSING OFFICER IN DETERM INING THE ALV OF THE PROPERTY. 3. GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO.5516/MUM/201 READS AS FOLLOWS: A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.54 29 952/- RELYING ON THE TRIBUNAL DECISION FOR A.Y 2005-06 WITHOUT CONSI DERING THE FACTS THAT THE ADDITION FOR A.Y 2005-06 WAS CONFIRMED BY THE CIT(A) AND DECISION OF THE TRIBUNAL HAS NOT BEEN ACCEPTED BY T HE REVENUE. B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF THE TRIBUNAL WHERE IT WAS HELD THAT THE TENANT IS PROTECTED TENANT AND THAT M AHARASHTRA RENT CONTROL ACT 1999 IS APPLICABLE TO THE PROPERTY WIT HOUT APPRECIATING FACTS THAT ASSESSEE IS RECEIVING RENT MORE THAN THE STANDARD RENT FIXED BY THE MUNICIPAL CORPORATION AND THEREFORE THE PRO PERTY IS OUTSIDE THE PURVIEW OF MAHARASHTRA RENT CONTROL ACT 1999. C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RELYING ON THE TRIBUNAL DECISIO N WHERE THE ACTS THAT THE TRANSACTION BETWEEN ASSESSEE AND TENANTS IS INF LACTED BY THE ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 3 REASON OF EXTRANEOUS CONSIDERATION AN ALV FIXED BY THE MUNICIPAL LIMIT IS NOT BINDING UPON THE ASSESSING OFFICER IN DETERM INING THE ALV OF THE PROPERTY. 4. THE FACTS OF THE CASE IN ITA NO.5515/MUM/2010 A RE AS FOLLOWS: THE ASSESSEE IS A COMPANY. IT OWNED ONE FLAT IN TH E 3 RD & 4 TH F FLOOR ADMEASURING 2521 SQ. FTS. IN THE PREMISES KNOWN AS SAMUDRA GAURAV APARTMENT WORLI MUMBAI . THESE FLAT WAS ACQUIRE D BY THE ASSESSEE IN 1980. THEY HAD BEEN RENTED OUT TO SHRI T.B.RUIA T HE ASSESSEES DIRECTOR FOR A MONTHLY RENT OF RS. 2500/- PER FLAT UNDER AN AGR EEMENT DATED 14/8/200. UNDER THE AGREEMENT THE ASSESSEE WAS GIVEN THE RIGH T TO USE THE FLAT TOGETHER WITH TWO COVERED GARAGES AND EXCLUSIVE US E OF GARDEN SPACE IN THE PREMISES. LATER ON THE RIGHTS IN THE SAID FLAT WER E TRANSFERRED TO SMT. ASHA T.RUIA WHO WAS ALSO THE DIRECTOR OF THE ASSESSEE. 5. THE ASSESSEE DECLARED INCOME FROM HOUSE PROPERT Y IN RESPECT OF THE AFORESAID FLAT AS FOLLOWS: PARTICULARS RENT INCOME(RS) RENT RECEIVED FROM SMT. ASHA T.RUA FOR FLAT AT SAMUDRA GAURAV APTS. WORLI SEAFACE. 30 000 THE ASSESSEE CLAIMED STATUTORY DEDUCTION U/S. 24 A T RS. 1 50 277/- AND ESTABLISHMENT EXPENSES OF RS. 17 904/-. THE AO WA S OF THE VIEW THAT CONSIDERING SIZE OF THE FLAT AND THE AREA WHERE THE FLAT WAS LOCATED THE RENT DECLARED BY THE ASSESSEE WAS VERY LOW. IN REPLY TH E ASSESSEE POINTED OUT THAT UNDER SECTION 23(1)(A) OF THE ACT ANNUAL VAL UE HAS TO BE DETERMINED EITHER AS PER MUNICIPAL VALUATION OR FAIR RENT/ STA NDARD RENT. THE ASSESSEE POINTED OUT THAT THE ANNUAL VALUE OF THE PROPERTY A S PER MUNICIPAL VALUATION WAS RS. 11 082/- AND THE STANDARD RENT WAS ALSO 11 082/- AS PER THE MAHARASHTRA RENT CONTROL ACT. THE ASSESSEE POINTED OUT THAT SINCE ACTUAL ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 4 RENT RECEIVED WAS MUCH HIGHER THAN THE ANNUAL VALUE AS PER SECTION 23(1)(A) OF THE ACT THE ACTUAL RENT RECEIVED SHOULD BE BASIS FOR DETERMINING THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1)(B) OF THE ACT. THE AO HOWEVER FOLLOWING HIS OWN ORDER IN A.Y 2005-06 AND FOR THE REASONS GIVEN IN THAT ORDER DETERMINED THE ANNUAL VALUE OF THE PROPE RTY AT A SUM OF RS. 26 62 176/-. 6. THE FACTS OF THE CASE IN ITA NO.5516/MUM/2010 A RE AS FOLLOWS: THE ASSESSEE IS A COMPANY. IT OWNED TWO FLATS ADME ASURING 5142 SQ. FTS. IN THE PREMISES KNOWN AS SAMUDRA GAURAV APARTM ENT WORLI MUMBAI . THESE FLATS WERE ACQUIRED BY THE ASSESSEE IN 1980. THEY HAD BEEN RENTED OUT TO SHRI B.R.RUIA THE ASSESSEES DIRECTOR FOR A MONTHLY RENT OF RS. 2500/- PER FLAT UNDER AN AGREEMENT DATED 14/8/200. UNDER THE AGREEMENT THE ASSESSEE WAS GIVEN THE RIGHT TO USE THE TWO FLATS T OGETHER WITH FOUR COVERED GARAGES AND EXCLUSIVE USE OF GARDEN SPACE IN THE P REMISES. SHRI B.R.RUIA DIED AND ON HIS DEATH THE LEASE HOLD RIGHTS OVER TH E TWO FLATS VESTED IN HIS TWO DAUGHTERS SMT. ASHA T.RUIA AND MRS. VIDHI D.RU IA WHO WERE ALSO THE DIRECTORS OF THE ASSESSEE. THE ASSESSEE DECLARED I NCOME FROM HOUSE PROPERTY IN RESPECT OF THE AFORESAID TWO FLATS AS F OLLOWS: PARTICULARS RENT INCOME(RS) RENT RECEIVED FROM SMT. ASHA T.RUA FOR FLAT AT SAMUDRA GAURAV APTS. WORLI SEAFACE. 30 000 RENT RECEIVED FROM SMT. VIDHI D.RUA FOR FLAT AT SAMUDRA GAURAV APTS. WORLI SEAFACE. 30 000 TOTAL 60 000 7. THE ASSESSEE CLAIMED STATUTORY DEDUCTION U/S. 2 4 AT RS. 12 557/- AND ESTABLISHMENT EXPENSES OF RS. 16 878/-. THE AO WAS OF THE VIEW THAT CONSIDERING SIZE OF THE FLAT AND THE AREA WHERE THE FLAT WAS LOCATED THE RENT DECLARED BY THE ASSESSEE WAS VERY LOW. IN REPLY TH E ASSESSEE POINTED OUT ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 5 THAT UNDER SECTION 23(1)(A) OF THE ACT ANNUAL VALU E HAS TO BE DETERMINED EITHER AS PER MUNICIPAL VALUATION OR FAIR RENT/ STA NDARD RENT. THE ASSESSEE POINTED OUT THAT THE ANNUAL VALUE OF THE PROPERTY A S PER MUNICIPAL VALUATION WAS RS. 24 288/- AND THE STANDARD RENT WAS ALSO 24 288/- AS PER THE MAHARASHTRA RENT CONTROL ACT. THE ASSESSEE POINTED OUT THAT SINCE ACTUAL RENT RECEIVED WAS MUCH HIGHER THAN THE ANNUAL VALUE AS PER SECTION 23(1)(A) OF THE ACT THE ACTUAL RENT RECEIVED SHOULD BE BASI S FOR DETERMINING THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1)(B) OF THE ACT. THE AO HOWEVER FOLLOWING HIS OWN ORDER IN A.Y 2005-06 AND FOR THE REASONS GIVEN IN THAT ORDER DETERMINED THE ANNUAL VALUE OF THE PROPE RTY AT A SUM OF RS. 54 29 952/-. 8. ON APPEALS BY BOTH THE ASSESSES THE CIT(A) NOTI CED THAT IN A.Y 2005- 06 THE TRIBUNAL IN ITA NO. 696 & 697/M/09 HELD THAT THE ALV AS DECLARED BY THE ASSESSEES BASED ON ACTUAL RENT RECEIVED SHOU LD BE ACCEPTED. 9. AGGRIEVED BY THE ORDERS OF THE CIT(A) THE REVEN UE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 10. AT THE TIME OF HEARING OF THE APPEALS IT WAS AC CEPTED BY THE PARTIES THAT THE BASIS ON WHICH THE AO MADE THE ADDITION IN THE PRESENT A.Y. AND AY 05-06 WAS THE SAME. THE TRIBUNAL HAS ALREADY CONSI DERED THE ISSUE IN ITA NO. 696 & 697/M/09 FOR AY 05-06 BY ITS ORDER DATED 26.3.2010 HELD AS FOLLOWS: 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE PAPERS AVAILABLE IN THE PAPER BOOK THE ASSESSEE HAS GIVEN THE PROPERTY ON RENT BY MR. T.B. RUIA LONG BACK AND ON HIS DEATH MRS. ASHA RUIA BECA ME THE TENANT AND THERE WAS A REVISED AGREEMENT DATED 14.08.2000. IN ALL THE YEARS THE A.O. HAS BEEN ACCEPTING THE RENT RECEIVED FROM THE ASSES SEE COMPANY AND IN FACT THE ASSESSMENT ORDERS FOR A.Y. 2004-05 PLACED ON RECORD ALSO INDICATE THAT THE RENT RECEIVED AT RS.30 000/- WAS ACCEPTED AS SUCH IN ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 6 THE ORDER UNDER SECTION 143(3) AND INCOME FROM HOUS E PROPERTY WAS DETERMINED AT RS.5 040/-. FURTHER ESTABLISHMENT AND STATUTORY EXPENSES ARE ALSO ALLOWED CONTESTED IN GROUND NO. 2. IT IS A LREADY ESTABLISHED BY VARIOUS PRINCIPLES THAT WHILE INVOKING THE PROVISIO NS OF SECTION 23 THE A.O. HAS TO CONSIDER THE MUNICIPAL RATEABLE VALUE O R STANDARD RENT OR ACTUAL RENT RECEIVED WHICHEVER IS HIGHER. THE EXIS TING CASE LAW ON THIS ISSUE HAS BEEN ELABORATELY DISCUSSED BY THE COORDIN ATE BENCH IN THE CASE OF ITO VS. MAKRUPA CHEMICALS (P) LTD. 108 ITD 95 (B OM) WHEREIN METHODOLOGY WAS GIVEN IN ARRIVING AT THE ANNUAL VAL UE OF PROPERTY UNDER THE PROVISIONS OF SECTION 23(1). 11. LET US NOW EXAMINE AND ANALYSE THE LEGAL POSI TION AS LAID DOWN BY THE HONBLE HIGH COURTS AS WELL AS THE TRIB UNAL. IT WOULD BE APPROPRIATE AT THIS STAGE TO REPRODUCE THE RELEVANT PROVISIONS. SEC. 23(1) AS ORIGINALLY ENACTED READ AS UNDER : '23. (1) FOR THE PURPOSES OF S. 22 THE ANNUAL VALU E OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHICH THE PROPERT Y MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR.' THE AFORESAID PROVISIONS WERE AMENDED BY THE PARLIA MENT EFFECTIVE FROM 1ST APRIL 1976. THE RELEVANT PORTION OF THE A MENDED PROVISIONS READS AS UNDER : 'ANNUAL VALUE HOW DETERMINED : (1) FOR THE PURPOSE OF S. 22 THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE : (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABL Y BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EX CESS OF THE SUM REFERRED TO IN CLAUSE (A) THE AMOUNT SO RECEIV ED OR RECEIVABLE.' 12. THE EXPRESSION 'THE GROSS ANNUAL RENT AT WHICH SUCH HOUSE OR BUILDING... MAY REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR' AS CONTAINED IN S. 127(A) OF THE CALCUTTA MUNICIPAL AC T 1923 WHICH IS ANALOGOUS TO THE EXPRESSION IN S. 23 OF THE ACT WAS CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CORPORATION OF CALCUTTA VS. SMT. PADMA DEVI AIR 1962 SC 151. THEIR LORDSHIPS AT P. 1 53 OBSERVED AS UNDER : 'A BARGAIN BETWEEN A WILLING LESSOR AND A WILLING L ESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES MAY AF FORD A GUIDING TEST OF REASONABLENESS. AN INFLATED OR DEFL ATED RATE OF RENT BASED UPON FRAUD EMERGENCY RELATIONSHIP AND SUCH OTHER ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 7 CONSIDERATIONS MAY TAKE IT OUT OF THE BOUNDS OF REASONABLENESS.' ON THE SAME PAGE IT WAS FURTHER OBSERVED AS UNDER : 'A COMBINED READING OF THE SAID PROVISIONS LEAVES N O ROOM FOR DOUBT THAT A CONTRACT FOR A RENT AT A RATE HIGHER T HAN THE STANDARD RENT IS NOT ONLY NOT ENFORCEABLE BUT ALSO THAT THE LANDLORD WOULD BE COMMITTING AN OFFENCE IF HE COLLE CTED A RENT ABOVE THE RATE OF THE STANDARD RENT. ONE MAY LEGITI MATELY SAY UNDER THOSE CIRCUMSTANCES THAT A LANDLORD CANNOT RE ASONABLY BE EXPECTED TO LET A BUILDING FOR A RENT HIGHER THA N THE STANDARD RENT. A LAW OF THE LAND WITH ITS PENAL CONSEQUENCES CANNOT BE IGNORED IN ASCERTAINING THE REASONABLE EXPECTATIONS OF A LANDLORD IN THE MATTER OF RENT. IN THIS VIEW THE L AW OF THE LAND MUST NECESSARILY BE TAKEN AS ONE OF THE CIRCUMSTANC ES OBTAINING IN THE OPEN MARKET PLACING AN UPPER LIMIT ON THE RATE OF RENT FOR WHICH A BUILDING CAN REASONABLY BE EXPE CTED TO LET.' FROM THE ABOVE OBSERVATIONS IT IS CLEAR THAT THE M UNICIPAL COMMITTEE COULD NOT DETERMINE THE ANNUAL VALUE OVER AND ABOVE THE STANDARD RENT. SIMILAR VIEW WAS TAKEN IN THE SUBSEQUENT JUDG MENT IN THE CASE OF CORPORATION OF CALCUTTA VS. LIFE INSURANCE CORPO RATION AIR 1970 SC 1417. HOWEVER THIS PRINCIPLE WAS FURTHER EXTENDED BY THE HON BLE SUPREME COURT IN THE CASE OF GUNTOOR MUNICIPAL COUN CIL VS. GUNTOOR TOWN RATE PAYERS ASSOCIATION AIR 1971 SC 353 BY HOLDING THAT WHERE THE STANDARD RENT IS NOT FIXED BY THE RENT CO NTROLLER THEN THE ASSESSING AUTHORITY UNDER THE MUNICIPAL ENACTMENT S HOULD DETERMINE THE STANDARD RENT IN ACCORDANCE WITH THE RENT CONTR OL LEGISLATION. THIS IS APPARENT FROM THE FOLLOWING OBSERVATIONS OF THEI R LORDSHIPS AT P. 355 : 'IT IS PERFECTLY CLEAR THAT THE LANDLORD CANNOT LAW FULLY EXPECT TO GET MORE RENT THAN THE FAIR RENT WHICH IS PAYABLE I N ACCORDANCE WITH THE PRINCIPLES LAID DOWN IN THE ACT. THE ASSES SMENT OF VALUATION MUST TAKE INTO ACCOUNT THE MEASURE OF FAI R RENT AS DETERMINABLE UNDER THE ACT. IT MAY BE THAT WHERE TH E CONTROLLER HAS NOT FIXED THE FAIR RENT THE MUNICIPAL AUTHORI TIES WILL HAVE TO ARRIVE AT THEIR OWN FIGURE OF FAIR RENT BUT THAT CAN BE DONE WITHOUT ANY DIFFICULTY BY KEEPING IN VIEW THE PRINC IPLES LAID DOWN IN S. 4 OF THE ACT FOR DETERMINATION OF FAIR R ENT.' 13. THE ABOVE DECISIONS WERE CONSIDERED AND FOLLOWE D BY THE APEX COURT IN THE CASE OF DEWAN DAULAT RAI KAPOOR VS. ND MC (SUPRA). THE DISCUSSION ON THIS SUBJECT WOULD NOT BE COMPLETE WI THOUT REFERRING TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF DR. B ALBIR SINGH VS. ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 8 MCD (SUPRA) WHEREIN IT WAS HELD THAT IN A GIVEN CAS E THE RATEABLE VALUE DETERMINED BY THE MUNICIPAL AUTHORITY MAY BE LESS THAN THE STANDARD RENT HAVING REGARD TO VARIOUS ATTENDANT CI RCUMSTANCES AND CONSIDERATION. IN SUCH CASES THE COURT OPINED THAT IT IS THE RATEABLE VALUE SO DETERMINED WHICH SHALL BE TAKEN FOR TAX PU RPOSES AND NOT THE STANDARD RENT. IT WAS HELD THAT THE STANDARD RE NT WAS THE UPPER LIMIT WHICH CANNOT BE EXCEEDED IN ANY CASE. 14. ALL THE DECISIONS MENTIONED ABOVE WERE RENDERED IN CONNECTION WITH THE DETERMINATION OF RATEABLE VALUE UNDER MUNI CIPAL LAWS. THE RATIO LAID DOWN IN THE ABOVE DECISIONS HAS BEEN APP LIED BY THE APEX COURT FOR DETERMINING THE ALV UNDER S. 23 OF THE AC T IN THE CASE OF MRS. SHIELA KAUSHISH (SUPRA) ON ACCOUNT OF SIMILARI TY IN THE PROVISIONS UNDER THE MUNICIPAL ENACTMENTS AND S. 23 OF IT ACT 1961. THUS THE RATEABLE VALUE IF CORRECTLY DETERMINED UNDER THE MUNICIPAL LAWS CAN BE TAKEN AS ALV UNDER S. 23(1)(A) OF THE ACT. TO TH AT EXTENT WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL OF THE A SSESSEE. HOWEVER WE MAKE IT CLEAR THAT RATEABLE VALUE IS NOT BINDING ON THE AO. IF THE AO CAN SHOW THAT RATEABLE VALUE UNDER MUNICIPAL LAW S DOES NOT REPRESENT THE CORRECT FAIR RENT THEN HE MAY DETERM INE THE SAME ON THE BASIS OF MATERIAL/EVIDENCE PLACED ON RECORD. THIS V IEW IS FORTIFIED BY THE DECISION OF PATNA HIGH COURT IN THE CASE OF KAS HI PRASAD KATARUKA VS. CIT 1976 CTR (PAT) 95 : (1975) 101 ITR 810 (PAT). 15. THE ABOVE DISCUSSION LEADS TO THE CONCLUSIONS T HAT : (I) ALV WOULD BE THE SUM AT WHICH THE PROPERTY MAY BE REASONABLY LET OUT BY A WILLING LESSOR TO A WILLING LESSEE UNINFLUENCED BY ANY EXTRANEOUS CIRCUMSTANCES (II) AN INFLATED OR DEFLATED RENT BA SED ON EXTRANEOUS CONSIDERATION MAY TAKE IT OUT OF THE BOUNDS OF REAS ONABLENESS (III) ACTUAL RENT RECEIVED IN NORMAL CIRCUMSTANCES WOUL D BE A RELIABLE EVIDENCE UNLESS THE RENT IS INFLATED/DEFLATED BY RE ASON OF EXTRANEOUS CONSIDERATION (IV) SUCH ALV HOWEVER CANNOT EXCEE D THE STANDARD RENT AS PER THE RENT CONTROL LEGISLATION APPLICABLE TO THE PROPERTY (V) IF STANDARD RENT HAS NOT BEEN FIXED BY THE RENT CONTRO LLER THEN IT IS THE DUTY OF THE AO TO DETERMINE THE STANDARD RENT AS PE R THE PROVISIONS OF RENT CONTROL ENACTMENT (VI) THE STANDARD RENT IS T HE UPPER LIMIT IF THE FAIR RENT IS LESS THAN THE STANDARD RENT THEN IT I S THE FAIR RENT WHICH SHALL BE TAKEN AS ALV AND NOT THE STANDARD RENT. 16. STILL THE QUESTION REMAINS TO BE DECIDED IS HOW TO DETERMINE THE REASONABLE/FAIR RENT. THE APEX COURT HAS INDICATED IN THE ABOVE JUDGMENTS THAT EXTRANEOUS CIRCUMSTANCES MAY INFLATE /DEFLATE THE FAIR RENT. SO THE QUESTION ARISES AS TO WHAT MAY THE CI RCUMSTANCES WHICH MAY BE TAKEN INTO CONSIDERATION WHILE DETERMINING T HE FAIR RENT. IN OUR OPINION NO PARTICULAR TEST CAN BE LAID DOWN SINCE IT WOULD DEPEND ON ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 9 THE FACTS OF EACH CASE. HOWEVER WE FIND THAT HONB LE SUPREME COURT HAD TO CONSIDER THIS QUESTION IN THE CASE OF MOTICH AND HIRACHAND VS. BOMBAY MUNICIPAL CORPN. AIR 1968 SC 441 WHEREIN IT WAS OBSERVED AS UNDER : 'IT IS WELL RECOGNIZED PRINCIPLE IN RATING THAT BOT H GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFERENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FR OM YEAR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN O RDER TO ARRIVE AT SUCH HYPOTHETICAL RENT FOR INSTANCE BY REFEREN CE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHERE THERE ARE NO RENTS BY REFERENCE TO THE ASSESSMENTS OF COMPARABLE PROPERTIES OR TO THE PROFITS CARRIED FROM THE PROPE RTY OR TO THE COST OF CONSTRUCTION.' EVEN THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J .K. INVESTORS (BOMBAY) LTD. (SUPRA) HAS HELD THAT UNDER S. 23(1)( A) OF THE ACT THE AO CAN TAKE INTO CONSIDERATION VARIOUS FACTORS LIKE CONTRACTORS METHOD AS IS APPARENT FROM THE FOLLOWING OBSERVATIO NS : 'AT THE COST OF REPETITION IT MAY BE MENTIONED THA T UNDER S. 23(1)(A) THE AO HAS TO DECIDE THE FAIR RENT OF THE PROPERTY. WHILE DECIDING THE FAIR RENT VARIOUS FACTORS COULD BE TA KEN INTO ACCOUNT. IN SUCH CASES VARIOUS METHODS LIKE CONTRA CTORS METHOD COULD BE TAKEN INTO ACCOUNT.' 17. THE CIRCUMSTANCES MENTIONED ABOVE ARE ONLY ILL USTRATIVE AND NOT EXHAUSTIVE. THEREFORE IN OUR OPINION THE AO CAN T AKE INTO CONSIDERATION ANY CIRCUMSTANCE WHICH MAY INFLATE/DE FLATE THE FAIR RENT UNDER S. 23(1)(A) OF THE ACT. IF SUCH RENT IS LESS THAN THE STANDARD RENT THEN THE SAME SHALL BE TAKEN AS FAIR RENT OT HERWISE THE STANDARD RENT SHALL BE CONSIDERED AS FAIR RENT UNDE R S. 23(1)(A) OF THE ACT. ONCE THE FAIR RENT IS SO DETERMINED THEN THE APPLICABILITY OF S. 23(1)(B) WOULD HAVE TO BE CONSIDERED. IF THE ACTUAL RENT RECEIVED/RECEIVABLE IS HIGHER THAN THE FAIR RENT T HEN THE ACTUAL RENT WOULD BE TREATED AS ALV OTHERWISE THE FAIR RENT SO DETERMINED SHALL BE TAKEN AS ALV. 6. IN THIS CASE IT IS ALSO ON RECORD THAT THE PROP ERTY IS A TENANTED PROPERTY AND THE TENANT IS A PROTECTED TENANT AS PE R THE ORDERS OF THE COURT. SINCE THE RENT RECEIVED BY THE ASSESSEE IS M ORE THAN THE STANDARD RENT/MUNICIPAL RATEABLE VALUE THE A.O. HAS NO OPTIO N THAN TO ACCEPT THE RENT RECEIVED AS PER THE EXISTING JUDICIAL PRINCIPL E ON THIS ISSUE. IN VIEW OF THIS WE ARE NOT IN AGREEMENT WITH THE ORDERS OF THE A.O. AND CIT(A) AND ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 10 DIRECT HIM TO ACCEPT THE RENT OFFERED BY THE ASSESS EE. IN VIEW OF THIS GROUND NO.1 IS ALLOWED. 9. SIMILAR FACTS EXIST IN ITA NO. 696/MUM/2009 AND HERE ALSO THE TWO PROPERTIES OWNED BY THE ASSESSEE COMPANY ARE SUBJEC TED TO PROTECTED TENANCY UNDER THE MAHARASHTRA RENT CONTROL ACT 199 9 BEING DEVOLVED ON MR. T.B. RUIA AND MRS. ASHA RUIA AND MRS. VIDHI D. RUIA AFTER THE DEATH OF MR. T.B. RUIA. HERE ALSO THE PROPERTY WAS LET OUT F ROM 01.10.1987 AND THE DEPARTMENT HAS BEEN ACCEPTING THE SAME IN ALL THE E ARLIER YEARS. FOR THE REASONS DISCUSSED IN ITA NO. 697/MUM/2009 WE DIRECT THE A.O. TO ACCEPT THE RENT RECEIVED UNDER THE PROVISIONS OF SECTION 2 3(1) AND REDETERMINE THE HOUSE PROPERTY INCOME ACCORDINGLY. A.O. ALSO IS DIR ECTED TO ALLOW THE ESTABLISHMENT AND STATUTORY EXPENSES WHICH ARE BEIN G ALLOWED IN EARLIER YEARS. ACCORDINGLY THE GROUNDS ARE CONSIDERED ALLOW ED. 11. IN VIEW OF THE AFORESAID ORDER OF THE TRIBUNAL IN ASSESSES OWN CASE WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THESE APP EALS BY THE REVENUE. CONSEQUENTLY WE CONFIRM THE ORDERS OF THE CIT(A) A ND DISMISS THE APPEALS BY THE REVENUE. 12. IN THE RESULT THE APPEALS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21ST DAY OF SEPT. 2011. SD/- SD/- (T.R.SOOD ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 21 ST SEPT.2011 ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 11 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RD BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.5515&5516/MUM/2010(A.Y. 2007-08) 12 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 16/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER