ACIT CEN CIR-20, MUMBAI v. SUMAN PREMKUMAR KHURANA, MUMBAI

ITA 61/MUM/2009 | 2005-2006
Pronouncement Date: 31-03-2010 | Result: Allowed

Appeal Details

RSA Number 6119914 RSA 2009
Assessee PAN AAHPK0190Q
Bench Mumbai
Appeal Number ITA 61/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 25 day(s)
Appellant ACIT CEN CIR-20, MUMBAI
Respondent SUMAN PREMKUMAR KHURANA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 31-03-2010
Date Of Final Hearing 08-01-2010
Next Hearing Date 08-01-2010
Assessment Year 2005-2006
Appeal Filed On 05-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI N.V. VASUDEVAN JM AND SHRI T.R. SOOD AM I.T.A.NOS. 6O 61 AND 62/MUM/2009 ASSESSMENT YEARS :2004-05 2005-06 AND 2006-07 THE ASST. COMMISSIONER OF INCOME- TAX CENTRAL CIRCLE 20 ROOM NO.402 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. VS. MS. SUMAN PREM KUMAR KHURANA 501 RAHEJA CHAMBERS FREE PRESS JOURNAL MARG NARIMAN POINT MUMBAI 400 021. PAN: AAHPK 0190 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HEMANT J. LAL RESPONDENT BY : NONE O R D E R PER T.R. SOOD AM: THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-IV MU MBAI DATED 13.10.2008 AND THEY RELATE TO THE ASSESSMENT YEARS 2004-05 2005-0 6 AND 2006-07. 2. AN ADJOURNMENT APPLICATION DATED 22.03.2010 WAS MOVED ON BEHALF OF THE ASSESSEE WHICH WAS REJECTED BY US BECAUSE THE ISSUE S RAISED IN ALL THE APPEALS ARE COVERED IN FAVOUR OF THE ASSESSEE. NONE APPEARED ON BEHALF OF THE ASSESSEE. 3. FIRST COMMON ISSUE IN ALL THESE APPEALS IS REGAR DING DELETION OF ADDITION MADE ON ACCOUNT OF ANNUAL VALUE. 4. THE REVENUE WAS HEARD. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND RELEVANT MATERIAL ON RECORD WE FIND THAT IN ALL THE YEARS ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER B Y REJECTING THE RENTAL INCOME RECEIVED AND AS RETURNED UNDER SECTION 23(1)(B) OF THE ACT AS ACCORDING TO THE ASSESSING OFFICER EITHER FAIR RENT WAS MORE BECAUSE IN EARLIER YEARS THE ASSESSEE HAD RECEIVED MORE RENT OR BECAUSE OF OTHER CIRCUMST ANCES. 6. LEARNED CIT(A) HAS DELETED THE ADDITION VIDE PAR A 9 WHICH READS AS UNDER: ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 2 I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE L D. COUNSEL AS WELL AS THE ORDER OF THE ASSESSING OFFICER. I FIND CONSIDER ABLE MERIT IN THE ARGUMENT OF THE COUNSEL. SECTION 23(1)(A) CLEARLY P OSTULATES THAT RENT RECEIVED OR RECEIVABLE SHOULD BE THE BASIS FOR ADOP TING INCOME FROM HOUSE PROPERTY. THE AO HAS ADOPTED THE RENT OF RS.2 785680/- ON THE SOLE PREMISE THAT PROPERTY PRICES IN NARIMAN POINT SHOULD FETCH MORE RENT THAT WHAT WAS BEING SHOWN BY THE APPELLANT. IT IS A WELL KNOW PRECEPT OF INCOME TAX ACT THAT NO INCOME CAN BE ESTIMATED ON T HE BASIS OF SURMISES AND CONJECTURES ONLY. THE AO HAS DISBELIEV ED THE CONTENTION OF THE APPELLANT AND HAS SUBSTITUTED IT WITH HIS OWN P REMISE WITHOUT STATING WHY HE IS NOT WILLING TO ACCEPT THE RENT RECEIVED B Y THE APPELLANT AS TRUE AND FAIR. LOOKING AT THE TOTALITY OF FACTS THE ADD ITION MADE BY THE AO CANNOT BE SUSTAINED. THE GROUND OF APPEAL SUCCEEDS. : 7. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WE FIND THAT ONCE THE ASSESSEE HAS D ECLARED THE RENT RECEIVED AS ANNUAL VALUE UNDER SECTION 23(1)(B) THEN AO THOUGH HAD THE POWER TO COMPARE THE FAIR MARKET RENT UNDER SECTION 23(1)(A) BUT SUC H FAIR MARKET RENT WOULD BE RESTRICTED ONLY TO MUNICIPAL VALUE. SAME VIEW HAS BEEN TAKEN BY US IN THE CASE OF M/S. TIP TOP TYPOGRAPHY V. ITO (ITA NO. 1280/M/2009 A.Y. 2005-06) THE RELEVANT PARAS I.E. FROM 11 TO 14 ARE AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS THE JUDGMENTS CITED B Y THE PARTIES. SECTION 23 READS AS UNDER: 23. (1) FOR THE PURPOSES OF SECTION 22 THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEM ED 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 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) . PROVIDED THAT THE TAXES LEVIED 21 BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHIC H THE LIABILITY TO PAY SUCH TAXES WAS INCURRED BY THE OWNER ACCORDING TO THE METHOD OF AC COUNTING REGULARLY EMPLOYED BY HIM) IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY OF THAT PREVIOUS YEAR IN WHICH SUCH TAXES ARE ACTUALLY PAID BY HIM. EXPLANATION.FOR THE PURPOSES OF CLAUSE (B) OR CLAU SE (C) OF THIS SUB-SECTION THE AMOUNT OF ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER SHALL NOT INCLUDE SUBJECT TO SUCH RULES 22 AS MAY BE MADE IN THIS BEHALF THE AMOUNT OF RENT WHICH THE OWNER CANNOT REALISE. 12. THE LEGISLATIVE HISTORY SHOWS THAT UPTO 31 ST MARCH 1976 THERE WAS ONLY ONE CLAUSE FOR DETERMINATION OF ANNUAL VALUE. WHEN THE GOVERNMENT REALIZED THAT IN SOME CASES THE ACTUAL RENT RECEIVED WAS MOR E THAN THE MUNICIPAL VALUE THEN SUCH RENT NEEDS TO BE CHARGED AND THAT IS WHY CLAUSE (1)(B) WAS BROUGHT ON THE STATUTE WITH EFFECT FROM THE ASSESSMENT YEAR 19 76-77. THEREFORE IT IS CLEAR ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 3 THAT ANNUAL VALUE WHICH IS HIGHER OF THE TWO THAT I S VALUE UNDER CLAUSE (1)(A) OR (1)(B) HAS TO BE ADOPTED AS THE ANNUAL VALUE AS PER SECTION 23 OF THE ACT. NOW THE QUESTION IS WHAT IS THE MEANING OF CLAUSE (A) I.E. THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLE BE EXPECTED TO LET FROM Y EAR TO YEAR. THIS ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF PARKPAPER IN DUSTRIES LTD. V. ITO (SUPRA). IN THIS CASE THE PROPERTY WAS NOT LET OUT AND THER EFORE ONLY SECTION 23(1)(A) WAS RELEVANT. THE RELEVANT PARAS OF THAT DECISION ARE REPRODUCED BELOW: 7 . IN THE PRESENT CASE THE PROPERTY IN QUESTION HAS NOT BEEN LET OUT; AND THEREFORE WHAT WOULD BE RELEVANT IS ONLY PROVISION S OF S. 23(1)(A) OF THE ACT. READING OF THE PROVISIONS OF S. 23(1)(A) WOULD SHOW THAT ONE HAS TO IMAGINE A SITUATION WHERE THE PROPERTY IN QUESTION IS LET OUT THOUGH IT IS SELF-OCCUPIED. ORIGINALLY PROVISIONS OF S. 23 OF THE ACT PROVIDED FOR DETERMINATION OF ANNUAL VALUE OF HOUSE PROPERTY ONLY ON THE BASIS OF SUM FOR WHIC H THE PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FROM YEAR TO YEAR. THE ACTUAL RECEIPT OF RENT WAS IRRELEVANT. BY THE TAXATION LAWS (AMENDMENT) ACT 1 975 W.E.F. 1ST APRIL 1976. SEC. 23(1)(B) WAS INTRODUCED WHEREBY IT WAS PROVID ED THAT IF THE ACTUAL RENT RECEIVED BY AN ASSESSEE IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR AN NUAL VALUE WILL BE THE RENT RECEIVED. WHILE EXPLAINING THE AFORESAID AMENDMENT CBDT IN CIRCULAR NO. 204 DT. 24TH JULY 1976 IN PARA 9 HAS STATED AS FOLLOWS : 'HITHERTO THE ANNUAL VALUE OF HOUSE PROPERTY CHAR GEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS DEEMED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM Y EAR-TO-YEAR. IN MANY CASES HOWEVER THE ACTUAL RENT RECEIVED OR RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERTY. SUB-S. (1) OF S. 23 HAS BEEN AMENDED TO PROVIDE THAT WHERE ANY PROPERTY IS IN OCCUPATION OF A TENANT AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS IN EXCESS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR TH E ANNUAL RENT RECEIVED OR RECEIVABLE SHALL BE TAKEN AS THE ANNUAL VALUE OF TH E PROPERTY.' (EMPHASIS ITALICIZED IN PRINT SUPPLIED) 8. FROM THE AFORESAID CIRCULAR IT IS CLEAR THAT TH E LAW PRIOR TO INTRODUCTION OF S. 23(1)(B) WAS THAT ANNUAL VALUE WAS EQUAL TO MUNICIP AL VALUATION OF THE PROPERTY. THE ABOVE CIRCULAR GIVES AN INDICATION AS TO HOW TH E EXPRESSION 'THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR' USED IN S. 23(1)(A) HAS TO BE INTERPRETED. 9. IN THE CASE OF DEWAN DAULAT RAI KAPOOR VS. NEW D ELHI MUNICIPAL COMMITTEE (1980) 122 ITR 700 (SC) THE QUESTION BEFORE THE HO NBLE SUPREME COURT WAS AS TO WHAT SHOULD BE THE BASIS OF DETERMINING THE ANNU AL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TAX. THE EXPRESSION 'ANNUAL VALUE' AS DEFINED IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND PUNJAB MUNICIPA L ACT 1911 WAS 'GROSS ANNUAL RENT AT WHICH SUCH HOUSE OF BUILDING MAY REA SONABLY BE EXPECTED TO LET FROM YEAR TO YEAR'. THE HONBLE SUPREME COURT HELD THAT THE ANNUAL VALUE IS ALWAYS RENT REALIZABLE BY LANDLORD AND THAT ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LANDLORD MIGHT REASONABLY EXPECT TO GET FROM A HYPOTHETICAL TENANT. THE HONBLE COURT FURTHER HELD THAT WHERE TENANCY IS SU BJECT TO RENT CONTROL LEGALIZATION STANDARD RENT WOULD BE A PROPER MEASU RE AND IN ANY EVENT ANNUAL VALUE CANNOT EXCEED SUCH STANDARD RENT. IN THE CASE OF SHIELA KAUSHISH VS. CIT (1981) 24 CTR (SC) 351 : (1981) 131 ITR 435 (SC) T HE QUESTION AROSE IN THE CONTEXT OF PROVISIONS OF S. 23 OF THE IT ACT. THE H ONBLE SUPREME COURT APPLYING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F DEWAN DAULAT RAI KAPOOR (SUPRA) OBSERVED AS FOLLOWS : 'NOW THIS WAS A DEFINITION GIVEN ON THE INTERPRETAT ION OF THE DEFINITION OF ANNUAL VALUE IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND THE PUNJAB MUNICIPAL ACT 1911 FOR THE PURPOSE OF LEVY OF HOUSE TAX BUT IT WOULD BE EQUAL LY APPLICABLE IN INTERPRETING THE ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 4 DEFINITION OF ANNUAL VALUE IN SUB-S. (1) OF S. 23 OF THE IT ACT 1961 BECAUSE THESE DEFINITIONS ARE IN IDENTICAL TERMS AND IT WAS IMPOS SIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE IN SUB-S. (1) OF S. 23 OF THE IT ACT 1961 FROM THE DEFINITION OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND THE P UNJAB MUNICIPAL ACT 1911. WE MUST THEREFORE HOLD ON AN IDENTICAL LINE OF REASONING THAT EVEN IF THE STANDARD RENT OF A BUILDING HAS NOT BEEN FIXED BY THE CONTROLLER UNDER S. 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY S. 12 OF THE RENT ACT FOR MAKING AN APPLICATION FOR FIXATION OF THE STANDARD RENT HAVING EXPIRED IT IS NO LONGER COMPE TENT TO THE TENANT TO HAVE THE STANDARD RENT OF THE BUILDING FIXED THE ANNUAL VALUE OF THE BUILDING ACCORDING TO THE DEFINITION GIVEN IN SUB-S. (1) OF S. 23 OF THE IT ACT 1961 MUST BE HELD TO BE THE STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT ACT A ND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE TENANT. THIS INTERPRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB- S. (1) OF S. 23 OF THE IT ACT 1961 MAY BE REGARDE D AS HAVING RECEIVED LEGISLATIVE APPROVAL FOR WE FIND THAT S. 6 OF THE TAXATION LA WS (AMENDMENT) ACT 1975 SUB-S. (1) HAS BEEN AMENDED AND IT HAS NOW BEEN MADE CLEAR BY THE INTRODUCTION OF CL. (B) IN THAT SUB-SECTION THAT WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SU M FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR TH E AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO THE ANNUAL VALUE OF THE PROPERTY . THE NEWLY ADDED CL. (B) CLEARLY POSTULATES THAT THE SUM FOR WHICH A BUILDING MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR MAY BE LESS THAN THE ACTUAL AMOUNT REC EIVED OR RECEIVABLE BY THE LANDLORD FROM THE TENANT.' 10. HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SMT. PRABHABATI BANSALI (1982) 29 CTR (CAL) 15 : (1983) 141 ITR 419 (CAL) H AD TO DEAL WITH A CASE OF A PROPERTY IN MUMBAI WHERE THE DISPUTE WAS WITH REGA RD TO DETERMINATION OF ITS ANNUAL VALUE UNDER S. 23 OF THE ACT. HONBLE CALCUT TA HIGH COURT AFTER MAKING REFERENCE THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DEWAN DAULAT RAI KAPOOR (SUPRA) AND SHIELA KAUSHISH (SUPRA) HELD AS FOLLOWS : 'THEREFORE IN CASE WHERE THE ACTUAL RENT RECEIVED IS HIGHER THAN THAT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FR OM YEAR-TO-YEAR IN RESPECT OF AN INCOME ACCRUING SUBSEQUENT TO THE AMENDMENT DIFF ERENT CONSIDERATIONS MIGHT ARISE. BUT WE ARE NOT CONCERNED WITH SUCH SITUATIO N IN THE INSTANT CASE. THEREFORE IN VIEW OF THAT POSITION AND THE MUNICIP AL LAW AND IN VIEW OF THE DECISION OF THE SUPREME COURT IT APPEARS TO US THA T THE INCOME FROM HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM W HICH MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR-TO-YEAR AND WITH THE ANNU AL MUNICIPAL VALUE PROVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVA BLE AND THAT WOULD BE THE SAFEST GUIDE FOR THIS PURPOSE AND THE RENT ACTUALLY RECEIVED WOULD NOT BE OF ANY RELEVANCE.' 11. THE COURT IN THE AFORESAID DECISION ALSO RELIED ON THE PROVISIONS OF S. 154 OF THE BOMBAY MUNICIPAL CORPORATION ACT WHEREIN THE M ANNER OF DETERMINATION OF RATEABLE VALUE HAS BEEN LAID DOWN. THE SAID PROVISI ONS ALSO SPEAK OF 'ANNUAL RENT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTE D TO LET FROM YEAR-TO-YEAR'. THUS THE COURT CONCLUDED THAT THE MUNICIPAL VALUAT ION AND THE ANNUAL VALUE UNDER S. 23(1)(A) ARE ONE OF THE SAME. THE DECISION OF HONBLE CALCUTTA HIGH COURT HAS BEEN FOLLOWED BY HONBLE BOMBAY HIGH COUR T IN THE CASE OF M.V. SONAVALA VS. CIT (1989) 75 CTR (BOM) 74 : (1989) 17 7 ITR 246 (BOM) WHEREIN HONBLE BOMBAY HIGH COURT HAS OBSERVED AS FOLLOWS : 'HOWEVER THE QUESTIONS POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF S. 23(1)(A) SHOULD BE TAKEN AT THE A CTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STANDARD RENT. THE QUESTION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKEN AT THE AMOUNT WHICH IS ACTUAL COMPENSATION RECEIVED OR AT THE AMOUNT FIXED AS MUNICIPAL RATEABLE VALUE. OBVIOUSLY MUNICIPAL RATEABLE VALUE CANNOT BE EQUATED TO STANDARD RENT. IN THIS CONTEXT IT MAY BE DESIRABLE TO REFER TO THE C ALCUTTA HIGH COURTS DECISION IN THE CASE OF CIT VS. SMT. PRABHABATI BANSALI (1982) 29 CTR (C AL) 15 : (1983) 141 ITR 419 (CAL). ONE OF THE QUESTIONS INVOLVED IN THAT CASE WAS WHET HER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE ITO TO REDETERMINE THE ANNUAL VALUE O F THE PROPERTY UNDER S. 23(1) AFRESH ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 5 WITH REFERENCE TO ITS RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPORATION. THE QUESTION WAS ANSWERED IN THE AFFIRMATIVE AND THE CO URT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR-TO-YEAR AND THE ANNUAL MUNICIPAL VALUE. FOLLOWING THE CALCUTTA HIGH COURT DECISION (1982) 2 9 CTR (CAL) 15 : (1983) 141 ITR 419 (CAL) WHICH WE THINK HAS TAKEN THE RIGHT VIEW WE ANSWER THE QUESTIONS IN THE NEGATIVE AND AGAINST THE DEPARTMENT WITH A DIRECTION THAT TH E ANNUAL VALUE OF DIFFERENT PROPERTIES WILL NOW BE DETERMINED BY THE TRIBUNAL IN ACCORDANC E WITH THE DIRECTIONS SET OUT ABOVE. NO ORDER AS TO COSTS.' 12. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SEVE RAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT TH E MUNICIPAL VALUE SHOULD BE THE BASIS OF DETERMINING THE ANNUAL VALUE. WE ARE N OT MAKING REFERENCE TO THOSE DECISIONS SINCE IN OUR OPINION THE AFORESAID PRON OUNCEMENT OF HONBLE BOMBAY HIGH COURT CONSIDERS THE DECISIONS OF HONBLE CALCU TTA HIGH COURT WHICH IN TURN HAS CONSIDERED THE LAW LAID DOWN BY THE HONBLE APE X COURT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHA RGE UNDER S. 22 IS NOT ON THE MARKET RENT; BUT IS ON THE ANNUAL VALUE AND IN THE CASE OF PROPERTY WHICH IS NOT LET OUT MUNICIPAL VALUE WOULD BE A PROPER YARDSTICK FO R DETERMINING THE ANNUAL VALUE. DECISION IN THE CASE OF SHIELA KAUSHISH (SUP RA) MENTIONS STANDARD RENT UNDER THE RENT CONTROL ACT AS ONE OF THE YARDSTICKS . THIS DOES NOT MEAN THAT STANDARD RENT ALONE IS TO BE CONSIDERED. IN THE PRE SENT CASE WE ALSO NOTICE THAT THE AO HAS NOT CHOSEN TO ADOPT THE STANDARD RENT AS PER THE RENT CONTROL ACT AS YARDSTICK FOR DETERMINING THE ANNUAL VALUE. WE ALSO FIND FROM THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRA BHABATI BANSALI (SUPRA) THAT STANDARD RENT IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE OF MUNICIPAL VALUATION. FOR ALL THE ABOVE REASONS WE HOLD THAT THE MUNICIPAL VALUATION SHOULD BE THE BASIS OF DETERMIN ING ANNUAL VALUE IN THE PRESENT CASE. ACTION OF THE REVENUE AUTHORITIES IN ADOPTING ANNUAL VALUE ON THE BASIS OF INQUIRIES CONDUCTED REGARDING MARKET RENT IN THE VICINITY OF THE PROPERTY IS NOT IN ACCORDANCE WITH LAW. THE AO IS DIRECTED TO A CCEPT THE INCOME FROM HOUSE PROPERTY ON THE BASIS OF MUNICIPAL VALUATION. 13. THE ABOVE PARAS CLEARLY SHOW THAT THE WHOLE LAW ON THE RELEVANT ISSUE WAS CONSIDERED AND ULTIMATELY IT WAS CONCLUDED THA T MUNICIPAL VALUATION IS TO BE TAKEN AS THE BASIS FOR DETERMINATION OF ANNUAL VALU E. WE FURTHER FIND THAT THE HONBLE BOMBAY HIGH COURT HAS AGAIN CONSIDERED SIMI LAR QUESTION IN THE CASE OF SMT. SMITABEN N. AMBANI VS. CWT (SUPRA) UNDER WEALT H TAX ACT AND ULTIMATELY IT WAS OBSERVED AS UNDER: IN OUR VIEW THE BASIS ON WHICH A SELF-OCCUPIED PR OPERTY IS VALUED UNDER RULE 1BB OF THE WEALTH-TAX ACT AND MUNICIPAL RATABLE VAL UE IS ARRIVED AT UNDER MUNICIPAL LAW IS THE SAME I.E. A REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FROM A HYPOTHETICAL TENANT. THAT WHIL E ARRIVING AT SUCH REASONABLE AMOUNT OF RENT THAT CAN BE EXPECTED BY THE OWNER FR OM A HYPOTHETICAL TENANT THE AMOUNT OF STATUTORY DEDUCTION IF ANY PERMISSI BLE UNDER THE LOCAL MUNICIPAL LAW MUST BE ADDED TO THE RATABLE VALUE. WE THUS AN SWER QUESTION NO. 3 AS FOLLOWS: THAT WHILE APPLYING PROVISIONS OF RULE 1BB FOR VAL UING THE SELF-OCCUPIED PROPERTY MUNICIPAL RATABLE VALUE WITH ADDITION OF STATUTORY DEDUCTIONS IF ANY MAY BE ADOPTED INSTEAD OF STANDARD RENT FOR ARRIVI NG AT THE GROSS MAINTAINABLE RENT. THOUGH THE DECISION WAS RENDERED UNDER THE WEALTH-T AX ACT BUT THE DEFINITION OF GROSS MUNICIPAL RENT GIVEN UNDER RULE 1BB(2)(A) REA DS AS UNDER: THE SUM FOR WHICH THE HOUSE MIGHT REASONABLE BE EX PECTED TO LET FROM YEAR TO YEAR ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 6 14. THUS IT IS CLEAR THAT THE DEFINITION IS ALMOST IDENTICAL WITH THE DEFINITION OF ANNUAL VALUE GIVEN IN SECTION 23(1)(A) OF THE INCOM E-TAX ACT. THEREFORE IN OUR OPINION THE VIEW THE AO HAS REFERRED TO SECTION 23( 1)(A) AND WAS RIGHT TO EXPLORE THE POSSIBILITY OF ASSESSING INCOME AT A HIGHER FI GURE BUT THE ANNUAL VALUE UNDER SECTION 23(1)(A) CANNOT GO BEYOND THE MUNICIPAL VAL UATION . 8. FROM THE ABOVE IT IS CLEAR THAT UNDER SECTION 23(1)(A) ANNUAL VALUE HAS TO BE RESTRICTED TO MUNICIPAL VALUE. SINCE THOSE D ETAILS HAVE NOT BEEN DISCUSSED BY THE ASSESSING OFFICER THEREFORE WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE MUNICIPAL VALUE AND IF THE SAME IS LESS THAN THE AC TUAL RENT RECEIVED BY THE ASSESSEE THEN THE SAME SHOULD BE TAKEN AS ANNUAL VA LUE OTHERWISE THE SAME MAY BE DECIDED IN ACCORDANCE WITH LAW. 9. THE SECOND ISSUE ARISES ONLY IN THE ASSESSMENT Y EAR 2004-05 (ITA NO.60/MUM/2009) WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING THE SHORT TERM CAPITAL LOS S AMOUNTING TO RS. 14.63 LACS CLAIMED BY THE ASSESSEE ON TRANSFER OF UNITS OF IL & FS (GROWTH AND VALUE FUND (BONUS PLAN) IGNORING THE FACT THAT ASSESSEE HAD EN TERED INTO A COLOURABLE TRANSACTION DESIGNED TO EVADE PAYMENT OF TAX BY CRE ATING ARTIFICIAL LOSS. 10. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESE NTATIVE. 11. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNE D DR AND RELEVANT MATERIAL ON RECORD WE FIND THAT THE CLAIM FOR SHORT-TERM CA PITAL LOSS WAS DENIED BY THE ASSESSING OFFICER AS PER THE FOLLOWING OBSERVATIONS : ON PERUSAL OF THE DETAILS IN RESPECT OF THIS SHOR T TERM CAPITAL LOSS IT IS NOTICED THAT THE ASSESSEE HAS PURCHASED IL & FS GRO WTH & VALUE FUND (BONUS PLAN) ON 23.3.2004 FOR AN AMOUNT OF RS. 25 0 0 000/- AND SOLD THE SAME ON 29.3.2004 FOR A SUM OF RS. 10 37 193/-. SI NCE THE ABOVE TRANSACTION CARRIED OUT BY THE ASSESSEE IS HIT BY S ECTION 94(7) OF THE I.T.ACT THE LOSS CLAIMED BY THE ASSESSEE IS DISALLOWED AND PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T.ACT FOR FURNISHING INACCUR ATE PARTICULARS TO THE EXTENT OF RS.14 62 807/- HAS BEEN INITIATED SEPARAT ELY. THE SHORT TERM CAPITAL LOSS IS WORKED AT RS. 45 96 142/- AS AGAINS T RS. 60 58 142/-. ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 7 12. WE FURTHER FIND THAT THE SAME WAS DELETED BY TH E LEARNED CIT(A) AFTER FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF WLLFORT SHARES & STOCK BROKERS LTD. (310 ITR 421). 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IN THIS CASE THE UNITS WERE NOT DIVIDEND BEARING AND THE SAME IS A CASE OF BONUS STRIPPING. WE FURTHER FIND THAT SECTION 94(8) OF THE ACT WAS INSERTED BY THE FINANCE (NO.2) 2004 WITH EFFECT FROM 1.4.2005 AND THEREFORE THE SAME IS AP PLICABLE ONLY FROM ASSESSMENT 2005-06. IN HE ABSENCE OF RELEVANT PROVISION FOR B ONUS STRIPPING THE PRINCIPLE LAID DOWN IN THE CASE OF WALLFORT SHARES & STOCK BROKERS LTD. (SUPRA) WOULD REMAIN APPLICABLE AND THEREFORE WE CONFIRM THE ORDER OF THE LEARNED CIT(A) IN THIS RESPECT. 14. IN THE RESULT APPEAL IN ITA NO. 60/M/2009 IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES WHILE THE APPEALS IN ITA NOS. 61 AND 62/MU M/2009 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH 2010. SD. SD. (N.V.VASUDEVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 31 ST MARCH 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CENTRAL RANGE II MUMBAI 4. THE CIT(A)-IV MUMBAI 5. THE DR E BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI ITA NOS. 60 61 & 62/MUM/2009 MRS. SUMAN KHURANA 8