ARYABHATA PROPERTIES LTD, MUMBAI v. ACIT 8(1), MUMBAI

ITA 6928/MUM/2011 | 2007-2008
Pronouncement Date: 31-07-2013 | Result: Allowed

Appeal Details

RSA Number 692819914 RSA 2011
Assessee PAN EMBER2006A
Bench Mumbai
Appeal Number ITA 6928/MUM/2011
Duration Of Justice 1 year(s) 9 month(s) 19 day(s)
Appellant ARYABHATA PROPERTIES LTD, MUMBAI
Respondent ACIT 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 31-07-2013
Date Of Final Hearing 27-06-2013
Next Hearing Date 27-06-2013
Assessment Year 2007-2008
Appeal Filed On 12-10-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI VIVEK VARMA JUDICIAL MEMBER ITA NO. 6928/MUM/2011 ASSESSMENT YEAR : 2007-08 M/S. ARYABHATA PROPERTIES LIMITED THE TIME OF INDIA BLDG. DR. D.N. ROAD MUMBAI-400 001. PAN NO. VS. ACIT 8(1) AAYAKAR BHAVAN MUMBAI-400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. VENKATARAMAN REVENUE BY : SHRI MANOJ KUMAR DATE OF H EARING : 27/06/2013 DATE OF PRONOUNCEMENT : 31 / 07/2013 O R D E R PER B. RAMAKOTAIAH AM: THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER OF CIT(A)-16 MUMBAI DATED 15/07/2011. THE ISSUE IN THIS APPEAL I S WITH REFERENCE TO THE ADOPTION OF ANNUAL LETTING VALUE (ALV) OF ASSE SSEE PROPERTY. 2. BRIEFLY STATED ASSESSEE ACQUIRED PROPERTY ON BO RROWED CAPITAL AND PURCHASED IN THE BUILDING TIMES TOWER AT KAMALA M ILLS COMPOUND LOWER PAREL MUMBAI. THERE IS NO DISPUTE WITH THE F ACT THAT THOUGH THE PROPERTY WAS PURCHASED IN MAY 2006 THE OCCUPANCY CERTIFICATE WAS ISSUED BY BMC IN DECEMBER 2006 AND THE ASSESSEE WAS IN POSSESSION OF ITA NO.6928/M/11 A.Y.07-08 M/S . ARYABHATA PROPERTIES LTD. 2 PROPERTY FROM JANUARY 2007. THE ASSESSEE CLAIMED NI L ANNUAL LETTING VALUE AS THE PROPERTY WAS VACANT AND FURTHER CLAIME D LOSS BY WAY OF INTEREST OF RS.86 05 179/-. ASSESSING OFFICER AFTER DISCUSSING THE PROVISIONS OF THE ACT AND CASE LAW ADOPTED 10% OF COST AS ALV AND DETERMINED THE ALV FOR THE THREE MONTHS AT RS.37 89 285/- THEREBY RESTRICTING LOSS TO RS.59 52 677/-. ASSESSEE WAS UN SUCCESSFUL BEFORE CIT(A). 3. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.37 89 285/- MADE BY THE LD. ASSESSING OFFICER BY TAKING 10% OF THE COST OF INVESTMENT AS ANNUAL VALUE (ALV) OF THE PROPERTY U/S. 23(1)(A) OF THE INCOME TAX ACT 1961(THE ACT). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT SINC E THE ASSESSEE HAD TAKEN STEPS TO LET OUT THE PROPERTY THE ANNUAL VALU E IS TO BE COMPUTED U/S. 23(1)(C) OF THE INCOME TAX ACT 1961 (THE ACT) AT NIL. 3. WITHOUT PREJUDICE TO THE ABOVE ASSUMING WITHOUT ADMITTING THAT THE ALV IS TO BE COMPUTED U/S. 2391)(A) OF THE ACT THEN THE ANNUAL VALUE SHOULD BE COMPUTED AT RS.5 52 000/- FO R THREE MONTHS NAMELY JANUARY 2007 TO MARCH 2007 BASED ON THE M UNICIPAL TAXES DETERMINED AS PAYABLE BY THE MUNICIPALITY. ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND AS UNDER :- 1. ASSUMING WITHOUT ADMITTING THAT THE ALV IS TO BE COMPUTED U/S. 23(1)(A) OF THE ACT THEN THE ANNUAL VALUE SHO ULD BE TAKEN AT RS.NIL. THE ADDITIONAL GROUND IS NOT ADMITTED AS THERE IS N O PROVISION TO CONSIDER ALV AT NIL AND THE GROUND IS MISCONCEIVED. THE SAME WAS REJECTED. ITA NO.6928/M/11 A.Y.07-08 M/S . ARYABHATA PROPERTIES LTD. 3 4. WE HAVE HEARD THE LD. COUNSEL AND THE LD. DR AND PERUSED THE PAPER BOOK PLACED ON RECORD ALONG WITH THE COPIES O F RELEVANT CASE LAW RELIED ON BY PARTIES. THE ACTION OF ASSESSING OFFIC ER IN DETERMINING THE ALV AT 10% OF THE COST OF PROPERTY CANNOT BE APPROV ED AS THERE ARE CATENA OF DECISIONS THAT THE ALV HAS TO BE DETERMIN ED BASED ON THE ANNUAL RATABLE VALUE DETERMINED BY MUNICIPAL AUTHOR ITIES. THE PRINCIPLE WAS HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE O F M.V. SONAVALAE VS. CIT (177 ITR 246) LONG BACK WHICH WAS BEING FOLLOWED IN NUMBER OF LATER DECISIONS. EVEN FOR WEALTH TAX PURPOSES THE S AME DECISION WAS RELIED UPON IN THE CASE OF SMT. SMITABEN N. AMBANI VS. CWT (323 ITR 104) (BOM.). THEREFORE ACTION OF ASSESSING OFFICER IN DETERMINING THE ALV ON THE BASIS OF COST OF THE PROPERTY CAN NOT BE UPHELD. 5. LD. CIT(A) DISMISSED THE CONTENTIONS OF THE ASSE SSEE ON THE REASON THAT ASSESSEE HAS NOT FURNISHED THE MUNICIPAL RATAB LE VALUE TO AO IN THE PROCEEDINGS. THIS OBSERVATION OF CIT(A) IS FACTUALL Y NOT CORRECT AS THE ASSESSEE VIDE LETTER DATED 07.12.2009 TO AO (AT PAG E-4 OF THE LETTER) CLEARLY STATED THE MUNICIPAL RATABLE VALUE AT RS.10 PER SQ.FT. AND ENCLOSED THE WORKING AS ANNEXURE-5 AND 6 TO THE LE TTER. THESE CONTENTIONS WERE HOWEVER IGNORED BY ASSESSING OFFI CER. 6. IT WAS THE CONTENTION THAT PROVISIONS OF SECTION 23(1)(C) WILL APPLY AS THE PROPERTY IS HELD WITH AN INTENTION TO LET OU T WHICH WAS IN FACT LET OUT IN LATER YEAR AND EFFORTS ARE MADE TO LET OUT D URING THE YEAR. IN ORDER TO SUPPORT THAT ASSESSEE MADE EFFORTS IT RELIED ON LETTER ADDRESSED TO A REAL ESTATE BROKER OFFERING PROPERTY FOR LEASE PLA CED IN PAPER BOOK. ASSESSEE RELIED ON THE DECISION OF CO-ORDINATE BENC H AT MUMBAI IN THE CASE OF P REMSUDHA EXPORTS P. LTD. VS. ACIT (110 ITD 158)(MUM ) . IN THAT CASE IT WAS HELD :- ITA NO.6928/M/11 A.Y.07-08 M/S . ARYABHATA PROPERTIES LTD. 4 IT WAS THE CASE OF THE REVENUE THAT CLAUSE (C) OF SECTION 23(1) CAN ONLY BE INVOKED IN THOSE CASES WHERE THE PROPERTY W AS LET OUT IN EARLIER YEARS OR IN THE PRESENT YEAR. THE ASSESSEE ON THE OTHER HAND CONTENDED THAT THE INTENTION OF LETTING OUT T HE PROPERTY WAS TO BE SEEN FOR INVOKING CLAUSE (C) OF SECTION 23(1) FO R COMPUTING THE ANNUAL LETTING VALUE OF THE PROPERTY AND IT WAS IRR ELEVANT WHETHER THE PROPERTY IS/WAS LET OUT. [PARA 11] THEREFORE THE SOLE DISPUTE IN THE INSTANT CASE W AS REGARDING THE INTERPRETATION OF THE WORDS PROPERTY IS LET IN CL AUSE (C) OF SECTION 23(1). ONE INTERPRETATION SUGGESTED BY THE REVENUE WAS THAT THE PROPERTY SHOULD BE ACTUALLY LET OUT IN THE RELEVANT PREVIOUS YEAR. THIS INTERPRETATION WAS NOT CORRECT BECAUSE AS PER CLAUSE (C) OF SECTION 23(1) THE PROPERTY CAN BE VACANT DURING WH OLE OF THE RELEVANT PREVIOUS YEAR. HENCE BOTH THESE SITUATION S CANNOT COEXIST THAT THE PROPERTY IS ACTUALLY LET OUT ALSO IN THE R ELEVANT PREVIOUS YEAR AND THAT THE PROPERTY IN THE SAME YEAR IS VAC ANT ALSO DURING WHOLE OF THE SAME YEAR. [PARA 12] THE SECOND INTERPRETATION SUGGESTED BY THE REVENUE WAS THAT THE PROPERTY SHOULD BE ACTUALLY LET OUT DURING ANY TIME PRIOR TO THE RELEVANT PREVIOUS YEAR AND THEN ONLY IT COULD BE S AID THAT THE PROPERTY IS LET OUT AND CLAUSE (C) WOULD BE APPLICA BLE. THE TENSE OF THE VERB USED PRIOR TO THE WORD LET IS PRESENT TE NSE AND NOT PAST TENSE. IT MEANS THAT THE PROVISIONS OF CLAUSE (C) T ALK REGARDING THE RELEVANT PREVIOUS YEAR AND NOT OF ANY EARLIER PERIO D AND IF THAT BE SO THE CONTENTION OF THE REVENUE WAS NOT ACCEPTABL E. [PARA 13] NOW THE QUESTION AROSE AS TO WHAT WOULD BE THE CORR ECT AND WORKABLE INTERPRETATION OF THE WORDS PROPERTY IS L ET IN CLAUSE (C) OF SECTION 23(1). FOR THIS IT IS TO BE DETERMINED AS TO WHETHER ACTUAL LETTING OUT IS A MUST FOR A PROPERTY TO FALL WITHIN THE PURVIEW OF CLAUSE (C) OF SECTION 23(1). [PARA 15] FROM A READING OF THE PROVISIONS OF SUB-SECTION (3) OF SECTION 23 IT APPEARS THAT THE LEGISLATURES IN THEIR WISDOM HAVE USED THE WORDS HOUSE IS ACTUALLY LET. THIS SHOWS THAT THE WORDS PROPERTY IS LET CANNOT MEAN ACTUAL LETTING OUT OF THE PROPERTY BECA USE HAD IT BEEN SO THERE WAS BE NO NEED TO USE THE WORD ACTUALLY IN SUBSECTION (3) OF SECTION 23. REGARDING THE SCOPE OF REFERRING TO ACTUAL LETTING OUT IN ITA NO.6928/M/11 A.Y.07-08 M/S . ARYABHATA PROPERTIES LTD. 5 PRECEDING PERIOD THERE WAS NO FORCE IN THE CONTENT ION OF THE REVENUE AS THE LEGISLATURE HAS USED THE PRESENT TENSE. EVEN IF IT IS INTERPRETED SO IT MAY LEAD TO UNDESIRABLE RESULT B ECAUSE IN SOME CASES IF THE OWNER HAS LET OUT A PROPERTY FOR ONE MONTH OR FOR EVEN ONE DAY THAT PROPERTY WOULD ACQUIRE THE STATUS OF LET OUT PROPERTY FOR THE PURPOSE OF CLAUSE (C) OF SECTION 23(1) FOR THE ENTIRE LIFE OF THE PROPERTY EVEN WITHOUT ANY INTENTION TO LET IT OUT IN THE RELEVANT YEAR. NOT ONLY THAT EVEN IF THE PROPERTY WAS LET OUT AT ANY POINT OF TIME EVEN BY ANY PREVIOUS OWNER IT COULD BE CLAIMED THA T THE PROPERTY IS LET OUT PROPERTY BECAUSE THE CLAUSE TALKS ABOUT THE PROPERTY AND NOT ABOUT THE PRESENT OWNER AND SINCE THE PROPERTY WAS LET OUT IN PAST IT IS A LET OUT PROPERTY ALTHOUGH THE PRESENT OWNE R NEVER INTENDED TO LET OUT THE SAME. THEREFORE IT IS NOT AT ALL RELEV ANT AS TO WHETHER THE PROPERTY WAS LET OUT IN PAST OR NOT. THESE WORDS DO NOT TALK OF ACTUAL LET OUT ALSO BUT TALK ABOUT THE INTENTION TO LET OU T. IF THE PROPERTY IS HELD BY THE OWNER FOR LETTING OUT AND EFFORTS ARE M ADE TO LET IT OUT THAT PROPERTY IS COVERED BY CLAUSE (C) AND THIS REQ UIREMENT HAS TO BE SATISFIED IN EACH YEAR THAT THE PROPERTY WAS BEING HELD TO LET OUT BUT REMAINED VACANT FOR WHOLE OR PART OF THE YEAR. ABOV E DISCUSSION SHOWS THAT MEANING AND INTERPRETATION OF THE WORDS PROPERTY IS LET CANNOT BE PROPERTY ACTUALLY LET OUT. THUS IF A PROPERTY IS HELD WITH AN INTENTION TO LET OUT IN THE RELEVANT YEAR COUPLE D WITH EFFORTS MADE FOR LETTING IT OUT IT COULD BE SAID THAT SUCH A PR OPERTY IS A LET OUT PROPERTY AND THE SAME WOULD FALL WITHIN THE PURVIEW OF CLAUSE (C) OF SECTION 23(1). PARA 16] IN THE INSTANT CASE THE ASSESSEE-COMPANY WAS ENTIT LED TO PURCHASE THE PROPERTY FOR ITS LET OUT AND TO EARN RENTAL INC OME. COPY RESOLUTION OF BOARD OF DIRECTORS WAS ALSO PLACED ON RECORD WH ERE FROM IT WAS EVIDENT THAT ONE OF THE DIRECTORS WAS AUTHORIZED TA KE NECESSARY STEPS TO LET OUT THE PROPERTY IN QUESTION. THE ASSE SSEE HAD ALSO FIXED THE MONTHLY RENT AND THE SECURITY DEPOSITS OF THE PROPERTY. CONSEQUENT TO THE RESOLUTION THE ASSESSEE HAD APPR OACHED VARIOUS ESTATE AND FINANCE CONSULTANTS FOR LETTING OUT THE PROPERTY AND THE REQUEST WAS ALSO DULY ACKNOWLEDGED BY THE ESTATE AN D FINANCE CONSULTANTS. UNFORTUNATELY DURING THE YEAR UNDER A PPEAL THE ASSESSEE COULD NOT GET THE SUITABLE TENANT ACCOUNT OF HEFTY RENT AND SECURITY DEPOSITS. THUS DURING THE WHOLE YEAR THE ASSESSEE MADE CONTINUOUS EFFORTS TO LET OUT THE PROPERTY AND UNDE R THESE CIRCUMSTANCES THIS PROPERTY COULD BE CALLED TO BE LET OUT PROPERTY IN ITA NO.6928/M/11 A.Y.07-08 M/S . ARYABHATA PROPERTIES LTD. 6 TERMS OF OBSERVATIONS MADE IN FOREGOING PARAS. SINC E THE PROPERTY HAD BEEN HELD TO BE LET OUT PROPERTY ITS ANNUAL LE TTING VALUE COULD ONLY BE WORKED OUT AS PER CLAUSE (C) OF SECTION 23( 1) AND SINCE THE RENT RECEIVED OR RECEIVABLE FROM THE SAID PROPERTY DURING THE YEAR WAS NIL THE SAME WAS TO BE TAKEN AS THE ANNUAL VALU E OF THE PROPERTY IN ORDER TO COMPUTE THE INCOME FROM HOUSE PROPERTY. [PARA 18] 7. RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT TH E ASSESSEE IS ENTITLED TO VALUE PROPERTY AT NIL DURING THE YEAR U /S. 23(1)(C). THEREFORE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE ALV AT NIL AND WORK OUT THE LOSS UNDER THE HEAD HOUSE PROPERTY ACCORDINGLY. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY 2013. SD/- SD/- (VIVEK VARMA ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI DATED: 31/07/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.