M/S. SHIVSHAKTI PROPERTIES (P) LTD, MUMBAI v. THE DY CIT CEN CIR -22, MUMBAI

ITA 6139/MUM/2007 | 2004-2005
Pronouncement Date: 30-04-2010 | Result: Allowed

Appeal Details

RSA Number 613919914 RSA 2007
Assessee PAN AAACT1588M
Bench Mumbai
Appeal Number ITA 6139/MUM/2007
Duration Of Justice 2 year(s) 6 month(s) 26 day(s)
Appellant M/S. SHIVSHAKTI PROPERTIES (P) LTD, MUMBAI
Respondent THE DY CIT CEN CIR -22, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 30-04-2010
Date Of Final Hearing 26-04-2010
Next Hearing Date 26-04-2010
Assessment Year 2004-2005
Appeal Filed On 04-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI. N.V. VASUDEVAN (J.M.) AND SHRI. PRAMOD KUMAR (A.M) ITA NO. 6139 / MUM/ 200 7 ASSESSMENT YEAR: 2004 - 2005 SHIVSHAKTI PROPERTY (P) LTD. C/O.ARVIND H. SHAH & ASSOCIATES C.A. 512/513 JOLLY BHAVAN NO.1 10 NEW MARINE LINES MUMBAI 400 026. PAN : AAACT1588M VS . DY CIT CEN CIR 22 403 AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HIRO RAI RESPONDENT BY : O R D E R PER N.V. VASUDEVAN J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 08 .08.2007 OF LEARNED CIT(A) - I V MUMBAI RELATING TO ASSESSMENT YEAR 2004 - 05. GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER : 1. UNDER THE FACTS AND CIRCUMSTANCES OF YOUR APPELLANT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ANNUAL LETTING VALUE OF PROPERTY ESTIMATED BY THE ASSESSING OFFICER AT RS.7 20 000/ - (P.A.) AS AGAINST ACTUAL RENT RECEIVED RS.2 00 000/ - P.A. 2. WITHOUT PREJUDICE TO GROUND NO.1 THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE DIFFERENCE BETWEEN ESTIMATED ALV (7 20 000/ - ) AND ACTUAL RENT RECEIVED FOR RS.2 00 000/ - AS BUSINESS EXPENDITURE AS MUCH AS THE PROPERTY IS LET OUT TO THE DIRECTOR OF THE COMPANY. 2. THE ASSESSEE HAD PURCHASED A RESIDENTIAL FLAT NO.A - 2 22 ND FLR. PRITHVI APTS. 21 ALTAMOUNT RD. MUMBAI 26. THIS FLAT WAS RENTED OUT T O ONE OF THE ASSESSEE S DIRECTORS MRS. LARA S. MORAKIA . T HE ANNUAL RENT PAID BY THE DIREC TOR WAS RS.2 00 000/ - . THE ASSESSING OFFICER WHILE DETERMIN IN G INCOME FROM HOUSE PROPERTY ADOPTED THE ANNUAL VALUE OF THE FLAT AT ITA NO.6139/MUM/2007 A . Y . : 2004 - 2005 2 RS.7 20 000/ - P.A. ACCORDING TO THE ASSESSING OFFICER THE FLAT WAS LOCATED IN THE PRIME LOCALITY AND THE RENT CHARGED BY T HE ASSESSEE FROM ITS DIRECTOR WAS VERY LOW. THE ASSESSEE SUBMITTED THAT THE MUNICIPAL VALUE OF THE PROPERTY WAS RS.6 174/ - . THE ASSESSEE HA D TAKEN THE RENT RECEIVED AS THE ANNUAL VALUE IN TERMS OF SEC 23(1)(B) OF THE ACT AND ACCORDINGLY COMPUTED INCOM E FROM HOUSE PROPERTY. THE ASSESSING OFFICER WAS HOWEVER OF THE VIEW THAT U/S.23(1)(A) OF THE ACT THE CRITERIA FOR DETERMINING THE ANNUAL VALUE WAS THE S UM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THE ASSESSING OF FICER FOUND THAT THE SIMILAR FLAT LOCATED IN THE SAME BUILDING OWNED BY THE ASSESSEE F ETCHED A MONTHLY RENTAL AT RS.60 000/ - AND THE ANNUAL RENTAL RS.7 20 000/ - . THE ASSESSING OFFICER ADOPTED THE ABOVE VALUE AS THE ANNUAL VALUE IN THE CASE OF ASSESSEE FO R DETERMINING INCOME FROM HOUSE PROPERTY. THE CIT(A) CONFIRM ED THE ORDER OF THE ASSESSING OFFICER GIVING RISE TO THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING OF THIS APPEAL IT WAS NOTICED THAT IDENTICAL ISSUE CAME FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE IN ITA NO.3837/MUM/06 FOR ASSESSMENT YEAR 2003 - 04. THIS TRIBUNAL ON THE VERY SAME ISSUE HELD AS FOLLOWS: 8. IN THE PRESENT CASE THERE IS NO DISPUTE ABO UT THE FACTS THAT THE FLAT IS LET OUT HENCE SECTION 23(1)(B) IS APPLICABLE. IT IS ALSO NOT DISPUTED THAT THERE IS NO WRITTEN AGREEMENT BETWEEN THE ASSESSEE COMPANY AND ITS DIRECTOR ;BUT STILL THE QUESTION REMAINS FOR DETERMINATION WHETHER THE RENT DECL ARED BY THE ASSESSEE CAN SAID TO BE CORRECT RENT OR FAIR RENT FOR TREATING THE SAME AS THE ANNUAL VALUE. IF THE PROPERTIES IS LET OUT THEN AS PER THE PROVISION OF SECTION 23(1)(B) ANNUAL RENT RECEIVED OR RECEIVABLE SHOULD BE TAKEN AS ANNUAL VALUE SUBJECT TO THE CONDITION THAT THE SAME IS NOT LESSER THAN THE HYPOTHETICAL RENT CONTEMPLATED U/S.23(1)(A) OF THE ACT. 9. IN OUR OPINION DECISION OF THE HON BLE SUPREM COURT IN THE CASE OF MS. SHEILA KAUSHISH (SUPRA) IS MORE RELEVANT TO PRESENT ISSUE AS IN THE SA ID DECISION THEIR LORDSHIPS HAVE CONSIDERED IMPACT OF AMENDMENT TO SEC.23(1) BY THE FINANCE (AMENDMENT) ACT 1975. IT IS TO NOTE THAT PRIOR TO IT S AMENDMENT SEC 23(1) WAS LIKE PRESENT SEC.23(1)(A). IN THAT CONTEXT IT IS HELD AS UNDER: THE COURT ON THI S VIEW NEGATIVED THE ATTEMPT OF THE MUNICIPAL AUTHORITIES IN EACH OF THE CASES TO DETERMINE THE ANNUAL VALUE OF THE BUILDING ON THE BASIS OF THE ACTUAL RENT RECEIVED BY THE LANDLORD AND OBSERVED THAT THE ANNUAL VALUE OF THE BUILDING MUST ITA NO.6139/MUM/2007 A . Y . : 2004 - 2005 3 BE HELD TO BE LIM ITED BY THE MEASURE OF THE STANDARD RENT DETERMINABLE ON THE PRINCIPLES LAID DOWN IN THE RENT ACT AND IT COULD NOT EXCEED SUCH MEASURE OF THE STANDARD RENT. NOW THIS WAS A DECISION GIVEN ON THE INTERPRETATION OF THE DEFINITION OF ANNUAL VALUE IN THE DE LHI MUNICIPAL CORPORATION ACT 1957 AND THE PUNJAB MUNICIPAL ACT 1911 FOR THE PURPOSE OF LEVY OF HOUSE TAX BUT IT WOU LD BE EQUALLY APPLICABLE IN INTERPRETING THE DEFINITION OF ANNUAL VALUE IN SUB - S(1) OF S.23 OF THE I.T. ACT 1961 FROM THE DEFINITI ON OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND PUNJAB 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 COMPETENT TO THE TENANT TO HAVE THE STANDARD RENT OF THE BUILDING FIXED THE ANNUAL VALUE O F THE BUILDING ACCORDING TO THE DEFINITION GIVEN IN SUB - S.(1) OF S.23 OF THE I.T. ACT 1961 MUST BE HELD TO BE THE STANDARD RENT DETERMINABLE UNDER THE PROVISION OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE TENANT. THIS INTER PRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB - S.(1) OF S.23 OF THE I.T. ACT 1961 MAY BE REGARDED AS HAVING RECEIVED LEGISLATIVE APPROVAL FOR WE FIND THAT BY S.6 OF THE TAXATION LAWS (AMENDED) ACT 1975 SUB - S.(1) OF S.23 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 SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BY EXPECTED TO LET FROM YEAR TO YEAR THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE DEEMED TO BE THE ANNUAL VALUE OF THE PROPERTY. THE NEWLY ADDED CL.(B) CLEARLY POSTULATES THAT THE SUM FOR WHICH A BUILDING MIGHT REASONABLE BE EXPECTED TO LET FROM YEAR TO YEAR MAY BE LESS THAN THE ACTUAL AMOUNT RECEIVED BY THE LANDLORD FROM THE TENANT. 10. IN OUR OPINION AS THE PROPERTY IS GOVERNED UNDER THE BOMBAY RENT CONTROL ACT THE ASSESSING OFFICER SHOULD HAVE DETERMINED THE STANDARD RENT AND THE SAME SHOULD HAVE BEEN COMPA RED AND SHOULD HAVE DETERMINED THE STANDARD WITHIN THE MEANING OF SECTION 23(1)(A) AND THE SAID SHOULD HAVE BEEN COMPARED WITH THE ANNUAL RENT OF RS.2 00 000/ - DECLARED BY THE ASSESSEE. THE RELIANCE PLACED BY THE LEARNED COUNSEL IN THE CASE OF M/S. PARK PAPER INDUSTRIES P. LTD. (SUPRA) IS ALSO NOT HELPFUL TO THE ASSESSEE. IN THE SAID CASE THOUGH THE ASSESSEE COMPANY WAS OWNING THE FLAT BUT THE SAME WAS NOT LET OUT OR GIVEN ON RENT AND HENCE THE ISSUE BEFORE THE TRIBUNAL WAS IN RESPECTS OF INTERPRETAT ION OF SECTION 23(1)(A) AND NOT SECTION 23(1)(B) AND IN THAT CONTEXT CERTAIN OBSERVATIONS ARE MADE. AFTER GIVING THOUGHTFUL CONSIDERATION TO THE ENTIRE ISSUE AS WELL AS THE FACTS IN OUR OPINION THERE IS O JUSTIFICATION ON THE PART OF THE ASSESSING OFFI CER TAKING THE ANNUAL VALUE WHICH IS BASED ON ONE OF THE RENTAL AGREEMENT IN RESPECT OF THE FLAT IN THE SAME BUILDING AS THE SAME CAN NOT BE SAID TO BE STANDARD RENT AS CONTEMPLATED UNDER BOMBAY RENT CONTROL ACT. IF THE ASSESSING OFFICER WAS NOT AGREEING TO THE RENT DECLARED BY THE ASSESSEE AS FAIR ANNUAL VALUE THAT HE SHOULD HAVE PUT SOME EFFORTS TO FIND OUT CORRECT STANDARD RENT OF THE FLAT LET OUT. AT THE SAME TIME WE DO NOT ACCEPT THE ARGUMENT OF THE LEARNED COUNSEL THAT THE MUNICIPAL RATEABLE ITA NO.6139/MUM/2007 A . Y . : 2004 - 2005 4 VALUATION SHOULD ONLY BE CONSIDERED FOR THE PURPOSE OF SECTION 23(1)(A) FOR DETERMINING AN ANNUAL VALUE AS FOR DETERMINING SAID VALUATION BY MUNICIPAL AUTHORITIES DIFFERENT PARAMETERS OR TESTS ARE APPLIED WHICH CAN NOT BE SAID TO BE CONTEMPLATED U NDER SEC.23(1)(A) OF THE ACT IN VIEW OF THE FACT THAT ORIGINAL SEC.23(1) IS REPLACED BY NEW SEC.23(1) AND CLAUSE (B) IS INTRODUCED WHEREIN IF ACTUAL RENT RECEIVED OR RECEIVABLE IS MORE THAN THAT OF FAIR RENT DETERMINED UNDER SEC.23(1)(A) THEN SAME IS TO BE TAKEN AS ANNUAL V A LUE FOR THE PURPOSE OF SEC.22 OF THE ACT. WE THEREFORE DIRECT THE ASSESSING OFFICER TO ACCEPT RENT DECLARED BY THE ASSESSEE AS RECEIVED PER MONTH FOR DETERMINING ANNUAL VALUE UNDER SEC.22 OF THE ACT. HENCE THE ASSESSEE SUCCEEDS O N GROUNDS 1 & 4. 5. THE TRIBUNAL THUS DIRECTED THE ASSESSING OFFICER TO ACCEPT THE RENT RECEIVED BY THE ASSESSEE FOR THE DETERMINING ANNUAL VALUE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL WE DIRECT THE ASSESSING OFFICER T O ACCEPT THE INCOME FROM HOUSE PROPERTY AS DECLARED BY THE ASSESSEE. 6 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 3 0 TH DAY OF APRIL 2010. SD/ - (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/ - (N.V. VASUDEVAN) (JUDICIAL MEMBER) MUMBAI DATED 3 0 TH APRIL 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) - IV MUMBAI 4. COMMISSIONER OF INCOME TAX CITY - IV MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH J MUMBAI // TRUE COPY // BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.6139/MUM/2007 A . Y . : 2004 - 2005 5 DATE INITIALS 1. DRAFT DICTATED ON 27.04.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 28.04.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM /JM 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER