M/s. PRAMILA ESTATES P. LTD., MUMBAI v. ITO Wd. - 9(2)(4), MUMBAI

ITA 6435/MUM/2006 | 2003-2004
Pronouncement Date: 12-01-2010 | Result: Allowed

Appeal Details

RSA Number 643519914 RSA 2006
Assessee PAN AAACP2285R
Bench Mumbai
Appeal Number ITA 6435/MUM/2006
Duration Of Justice 3 year(s) 1 month(s) 11 day(s)
Appellant M/s. PRAMILA ESTATES P. LTD., MUMBAI
Respondent ITO Wd. - 9(2)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 12-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year 2003-2004
Appeal Filed On 01-12-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 6435/MUM/2006 (ASSESSMENT YEAR: 2003-04) M/S. PRAMILA ESTATES P. LTD. INCOME TAX OFFICER 9(2 )(4) HAPPY HOME 244 WATERFIELD MUMBAI ROAD BANDRA (W) VS. MUMBAI 400050 PAN - AAACP 2285 R APPELLANT RESPONDENT APPELLANT BY: SHRI NITESH JOSHI RESPONDENT BY: SHRI K.K. MAHAJAN O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- IX MUMBAI DATED 08.08.2006. 2. ASSESSEE HAS RAISED 6 GROUNDS OUT OF WHICH GROUND N OS. 1 TO 5 PERTAIN TO THE ISSUE OF VALUATION OF PROPERTY AT RS.18 97 4 82/- AND NOT ALLOWING THE EXPENDITURE INCURRED BY THE COMPANY WHILE ASSESSING THE INCOME FROM HOUSE PROPERTY. THESE CONTENTIONS IN GROUND NOS. 1 TO 5 ARE WITHOUT PREJUDICE TO EACH OTHER. GROUND NO. 6 IS WITH REFER ENCE TO ASSESSING THE INTEREST INCOME OF RS.62 684/- UNDER THE HEAD INCO ME FROM OTHER SOURCES. DURING THE COURSE OF HEARING THE LEARNED COUNSEL SUBMITTED THAT INTEREST WAS EARNED ON INCOME TAX REFUND AND ACCORD INGLY THEY ARE NOT PRESSING GROUND NO. 6. 3. WITH REFERENCE TO THE MAIN CONTENTION THE ASSESSEE OWNED A PROPERTY UNIT NO. 2 GROUND FLOOR AND FLAT NO. 12 ON THE FIR ST FLOOR OF HARIKESH AT BANDRA (WEST) MUMBAI. UPTO A.Y. 2002-03 THE PROPER TY WAS LET OUT TO THE SPOUSE OF ONE OF THE DIRECTORS AT A NOMINAL RENT WH ICH WAS FURTHER LET OUT TO ONE M/S. ANGEL SECURITIES LTD. ON A MONTHLY COMPENS ATION OF RS.1 28 000/-. THE PROPERTY WAS VALUED ON THE RENT RECEIVED FROM M /S. ANGEL SECURITIES LTD. IN EARLIER YEARS AND THE SAME WERE ALSO CONFIR MED IN THE APPELLATE ITA NO. 6435/MUM/2006 M/S. PRAMILA ESTATES P. LTD. 2 PROCEEDINGS. THE A.O. ON THE BASIS OF THE RENT REC EIVED IN EARLIER YEARS HAS DETERMINED THE INCOME FROM HOUSE PROPERTY AT RS.20 88 592/- FOR THIS YEAR ALSO. THE CIT(A) GAVE PARTIAL RELIEF IN EXCLUDING T HE ADDITION ON ACCOUNT OF NOTIONAL INTEREST ON INTEREST FREE DEPOSIT BUT CONF IRMED THE VALUATION HOLDING THAT THE PREMISES WAS STILL UNDER OCCUPATION OF THE ULTIMATE TENANT AND FURTHER THE BMC HAS ALSO REVISED THE STANDARD RENT TO RS.8 28 700/- PER MONTH AND ACCORDINGLY THE ASSESSING OFFICERS VALUA TION OF ANNUAL LETTING VALUE WAS UPHELD. 4. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS NOT LET OUT THE PROPERTY DURING THE YEAR AND THE EARLIER AGREEMENTS WERE CANCELLED AND THESE FACTS WERE INFORMED TO THE BMC ALSO AND REFER RED TO THE CORRESPONDENCE PLACED IN THE PAPER BOOK. HE ALSO RE FERRED TO THE VALUATION OF THE BMC DATED 30.12.2005 WHEREIN THE BMC HAS VAL UED THE RATEABLE VALUE AT RS.6 90 325/- FROM THE PERIOD 01.04.2000 T O 28.09.2001 AND RS.1 86 170/- FOR THE PERIOD 29.09.2001 ONWARDS. IT WAS THE SUBMISSION THAT THE CIT(A) HAS NOT CONSIDERED THE CORRECT STAN DARD RENT FIXED BY THE BMC. IT IS ALSO FURTHER SUBMITTED THAT THE SAID ANG EL SECURITIES LTD. HAS INTIMATED TO THE A.O. THAT THEY HAVE VACATED THE PR EMISES AND THESE FACTS WERE AVAILABLE THE ASSESSMENT RECORD BUT THE SAME W ERE NOT CONSIDERED BY THE A.O. OR THE CIT(A). IT WAS HIS SUBMISSION THAT THE PROPERTY WAS USED AS BUSINESS PREMISES AND NO INCOME CAN BE ASSESSED UND ER HOUSE PROPERTY INCOME. WITHOUT PREJUDICE IF ANY HOUSE PROPERTY IN COME IS TO BE ASSESSED THE SAME CAN ONLY BE ASSESSED ON STANDARD RENT BASI S ACCORDING TO THE MUNICIPAL VALUATION AND NOR MORE. IT WAS FURTHER CO NTENDED THAT WHILE VALUING THE HOUSE PROPERTY INCOME THE EXPENDITURE C LAIMED BY THE ASSESSEE IN THE COMPANYS P & L ACCOUNT AND LISTED IN GROUND NO. 4 SHOULD BE ALLOWED. 5. THE LEARNED D.R. WHILE ACCEPTING THAT THE SAID M/S . ANGEL SECURITIES LTD. HAS COMMUNICATED TO THE A.O. THAT THEY HAVE VA CATED THE PREMISES BUT ARE STILL HOLDING A PART OF THE PREMISES FOR KEEPIN G THE RECORDS AND FURTHER TAKEN ON LEASE W.E.F. 01.04.2004 (I.E A.Y. 2005-06 ). HE ALSO REFERRED TO THE FINDINGS OF THE CIT(A) THAT THE PREMISES WERE STILL OCCUPIED BY THE SAID ANGEL SECURITIES LTD. AND ESTIMATION OF INCOME UNDER HOUS E PROPERTY UNDER HOUSE ITA NO. 6435/MUM/2006 M/S. PRAMILA ESTATES P. LTD. 3 PROPERTY IS CORRECT. WITH REFERENCE TO THE CLAIM OF EXPENDITURE THE LEARNED D.R. SUBMITTED THAT THE SAID EXPENDITURE CANNOT BE ALLOWED WHILE ASSESSING INCOME UN HOUSE PROPERTY AND REFERRED TO THE FINDIN GS OF THE A.O. THAT THE ASSESSEE HAS NOT BEEN IN BUSINESS DURING THE YEAR A ND ACCORDINGLY THE EXPENDITURE CANNOT BE ALLOWED. 6. IN REPLY THE LEARNED COUNSEL SUBMITTED THAT THE PR OPERTY WAS BEING USED FOR ASSESSEES BUSINESS PURPOSE AND THE EXPEND ITURE IS REQUIRED TO BE SPENT IN MAINTAINING THE CORPORATE STRUCTURE OF THE COMPANY EVEN THOUGH THERE IS NO BUSINESS DONE. IT WAS FURTHER HIS CONTE NTION THAT THE ASSESSEE BEING A DEVELOPER IS PURSUING SOME PROJECTS EVEN TH OUGH THEY WERE NOT MATERIALISED BUT THE EXPENDITURE IS TO BE ALLOWED. 7. WE HAVE CONSIDERED THE ISSUE. IT A FACT THAT THE AS SESSEE HAS NOT DONE ANY BUSINESS DURING THE YEAR AND IN EARLIER YEARS T HE PROPERTY WAS OWNED BY THE ASSESSEE WAS LET OUT TO THE SPOUSE OF THE DIREC TOR MRS. RESHAM WADHWA AT A NOMINAL PRICE WHICH IN TURN WAS LET OUT TO M/S ANGEL SECURITIES LTD. AT A HIGHER RENT AND THE HIGHER RENT WAS ADOPTED IN TH E ASSESSMENT OF THIS COMPANY UNDER THE HEAD HOUSE PROPERTY INCOME. IT IS THE CONTENTION OF THE ASSESSEE THAT THE PROPERTY WAS NOT LET OUT DURING T HE YEAR AND SO THE PROVISIONS OF SECTION 23(1) DOES NOT APPLY. THE CO RRESPONDENCE WITH BMC AND THE LETTERS PLACED IN THE PAPER BOOK DO INDICAT E THAT THE LEASE WAS TERMINATED W.E.F. 22.08.2001 AND ON THAT BASIS THE BMC HAS REFIXED THE STANDARD RENT VIDE ORDER DATED 30.02.2005. THESE DO CUMENTS WERE NOT AVAILABLE TO THE A.O. OR THE CIT(A) AND IT WAS SUBM ITTED AS ADDITIONAL EVIDENCES BEFORE THE ITAT WITH A PRAYER TO ADMIT TH E ADDITIONAL EVIDENCES. SINCE THE ISSUE WHETHER THE PROPERTY WAS LET OUT DU RING YEAR OR USED BY THE ASSESSEE FOR THEIR BUSINESS PREMISES HAS NOT BEEN E XAMINED BY THE A.O. AT ALL AND FURTHER THERE IS NO BASIS FOR THE FINDINGS OF THE CIT(A) THAT MUNICIPAL RATEABLE VALUE WAS REVISED TO RS.8 28 700/- FOR THE PERIOD 2000-01 WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE THE MATTER HAS TO BE RE- EXAMINED BY THE A.O. IT IS ALSO ON RECORD THAT THE SAID M/S. ANGEL SECURITIES LTD. HAD INDICATED THE A.O. THAT THEY HAVE VACATED THE PREMISES EXCEPT A SMALL PORTION FOR KEEPING THEIR RECORDS WHICH ALSO WAS NOT CONSIDERED BY THE A.O. IN CASE THE PROPERTY WAS VACATED AND HAS NOT B EEN LET OUT TO ANYBODY ITA NO. 6435/MUM/2006 M/S. PRAMILA ESTATES P. LTD. 4 THE QUESTION OF TREATING THE HOUSE PROPERTY INCOME DOES NOT ARISE IN CASE THE ASSESSEE USED THE PREMISES FOR BUSINESS PURPOSE S. HOWEVER THIS ASPECT ALSO REQUIRE EXAMINATION BY THE A.O. WHETHER THE PR OPERTY WAS USED BY THE ASSESSEE FOR BUSINESS PURPOSE OR ALLOWED TO BE OCCU PIED BY THE SAID ANGEL SECURITIES LTD. DURING THE PERIOD UNDER CONSIDERATI ON AS THE PROPERTY WAS AGAIN TAKEN ON RENT AT A LATER PERIOD. IT IS TO BE SEEN WHETHER THE ELECTRICITY AND MAINTENANCE EXPENSES AND OTHER EXPENSES WERE BO RNE BY THE SAID ANGEL SECURITIES DURING THE INTERIM PERIOD AS THERE ARE N O CHARGES PAID. SINCE THE FACTS ARE NOT EXAMINED BY THE A.O. AND ONLY MADE AD DITION ON THE BASIS OF THE FINDINGS GIVEN IN EARLIER YEARS THE MATTER IS R ESTORED BACK TO THE A.O. TO EXAMINE WHETHER THE PROPERTY WAS LET OUT DURING THE YEAR OR THE PROPERTY WAS USED BY THE ASSESSEE FOR BUSINESS PURPOSES. WIT H REFERENCE TO THE CLAIM OF EXPENDITURE THE NECESSARY EXPENDITURE FOR MAINTA INING THE CORPORATE STRUCTURE SHOULD BE ALLOWED TO THE ASSESSEE. WITH T HESE DIRECTIONS THE ISSUE IN GROUND NOS. 1 TO 5 ARE RESTORED TO THE FILE OF T HE A.O. TO EXAMINE AFRESH AND DECIDE ACCORDINGLY. 8. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 12 TH JANUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX MUMBAI 4. THE CIT IX MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P. ITA NO. 6435/MUM/2006 M/S. PRAMILA ESTATES P. LTD. 5 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 07.01.10 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 08.01.10 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/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