BAKHTAWAR CONSTRUCTION CO. P. LTD, MUMBAI v. ACIT CIR 2(1),

ITA 7061/MUM/2008 | 2005-2006
Pronouncement Date: 12-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 706119914 RSA 2008
Bench Mumbai
Appeal Number ITA 7061/MUM/2008
Duration Of Justice 1 year(s) 1 month(s)
Appellant BAKHTAWAR CONSTRUCTION CO. P. LTD, MUMBAI
Respondent ACIT CIR 2(1),
Appeal Type Income Tax Appeal
Pronouncement Date 12-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 12-01-2010
Date Of Final Hearing 26-01-2010
Next Hearing Date 26-01-2010
Assessment Year 2005-2006
Appeal Filed On 12-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.7061/MUM/2008 ASSESSMENT YEAR : 2005-06 BAKHTAWAR CONSTRUCTION CO. PVT. LTD. MEHER HOUSE 1 ST FLOOR 15 CAWASJI PATEL STREET FORT MUMBAI-400 001. ..( APPELLANT ) P.A. NO. (AAACB 4942 P) VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-2(1) AAYAKAR BHAVAN MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI AMO GH M. GHAISAS RESPONDENT BY : SHR I VIRENDRA OJHA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 31.10.2008 PASSED BY THE LEARNED. CIT(A) FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IT FILED R ETURN DECLARING AN INCOME OF RS.26 30 530/- . DURING THE COURSE OF ASSE SSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT THE COMPANY RECEI VED A MAJOR ITA NO.7061/M/08 A.Y: 05-06 2 PART OF ITS INCOME FROM RENT WHICH HAS BEEN OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS RECEIVED RE NT RS.49 80 000/- FROM KOTAK MAHINDRA BANK AND AGAINST THE SAME APART FROM MUNICIPAL TAX AND REPAIRS THE ASSESSEE HAS DE DUCTED NON OCCUPANCY CHARGES AMOUNTING TO RS.3 20 000/- FROM THE RE NT RECEIVED. ACCORDING TO THE AO MUNICIPAL TAXES LEVIED B Y THE LOCAL AUTHORITY 30% OF THE ANNUAL VALUE AND INTEREST PAID ON CAPITAL BORROWED ARE DEDUCTIBLE AND NO FURTHER DEDUCTION IS AL LOWABLE AS PER PROVISIONS OF THE ACT. ACCORDINGLY THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY NON-OCCUPANCY CHARGES OF RS.3 20 000/- SHOULD BE ALLOWED. IT WAS SUBMITTED BY THE ASSESSEE THAT THE TRIBUNAL IN IT S SISTER CONCERN HAS ALLOWED THE SAME DEDUCTION FROM HOUSE PROPERT Y. HOWEVER THE AO IN VIEW OF THE PROVISIONS OF THE ACT WAS OF THE VIEW THAT NO OTHER DEDUCTION APART FROM THE AFORESAID THRE E DEDUCTIONS ARE ALLOWABLE DISALLOWED THE NON OCCUPANCY CHARGES CLAIMED BY THE ASSESSEE COMPANY AND ADDED TO THE TOTAL INCOME OF THE ASSE SSEE. THE AO AFTER MAKING SOME OTHER ADDITIONS COMPLETED THE ASSESSM ENT AT AN INCOME OF RS.29 97 212/- VIDE ORDER DATED 31.12.2007 PASSED U/S.143(3) OF THE IT ACT 1961 (THE ACT). ON APPEAL THE LEARNED. CIT(A) OBSERVED THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF MAZDA CONSTRUCTION COMPANY RELIED ON BY THE ASSESSEE WAS FOR ASSE SSMENT YEAR 1999-00 AND 2001-02 AND THEREAFTER THERE HAS B EEN A DRASTIC ITA NO.7061/M/08 A.Y: 05-06 3 CHANGE IN THE METHOD OF COMPUTATION OF PROPERTY INCOME FROM ASSESSMENT YEAR 2002-03 AS A RESULT OF SUBSTITUTION OF SE C. 23 AND 24 BY THE FINANCE ACT 2001 W.E.F. ASSESSMENT YEAR 2002-03 THE CONCEPT OF ANNUAL RENT HAS BEEN SUBSTITUTED BY THE ACTUAL RENT AND ONLY TWO DEDUCTION ARE AVAILABLE I.E. 30% OF ANNUAL VALUE AND INTEREST. ACCORDINGLY HE HELD THAT THE CLAIM OF DEDUCTION OF NON OCCUPANCY CHARGES IS NOT ALLOWABLE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A) THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING THE SUSTENANCE OF DISA LLOWANCE OF DEDUCTION OF NON-OCCUPANCY CHARGES. 4. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR TH E ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE TH E AO AND THE CIT(A) RELIED ON THE FOLLOWING TWO ORDERS OF THE TRI BUNAL: 1) MAZDA CONSTRUCTION CO. VS. ITO IN ITA NOS.6872/M/02 & 3358/M/03 FOR ASSESSMENT YEARS 1999-00 AND 2001-02 DATED 17 TH JANUARY 2006. 2) SHARMILA TAGORE VS. JT. COMMISSIONER OF INCOME TA X (2005)93 TTJ (MUM.) 483 HE THEREFORE SUBMITS THAT THE DISALLOWANCE MADE BY THE A O AND SUSTAINED BY THE LD. CIT(A) BE DELETED. ITA NO.7061/M/08 A.Y: 05-06 4 5. ON THE OTHER HAND THE LEARNED. DR WHILE RELYING ON THE ORDER OF THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT IN VIE W OF THE AMENDMENT MADE U/S.23(1)(B) THE WORD ANNUAL RENT HAS BEEN SUBSTITUTED BY ACTUAL RENT THEREFORE EXCEPT THE DE DUCTION PROVIDED UNDER SECTIONS 23 AND 24 NO OTHER DEDUCTION IS ALLOWABL E FROM THE ACTUAL RENT RECEIVED BY THE ASSESSEE. SINCE DEDUCTION OF NON- OCCUPANCY CHARGES IS NOT PROVIDED UNDER THE ACT THE SAME I S NOT ALLOWABLE. WITH REGARD TO THE TWO DECISIONS OF THE TR IBUNAL RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE HE SUBMITS THAT IN BOTH THE DECISIONS THE TRIBUNAL HAS CONSIDERED THE ANNUAL LETTIN G VALUE AND NOT ACTUAL RENT AS THE CASES ARE PERTAINING TO THE ASSESSMENT YEARS 1997-98 1999-00 AND 2001-02 I.E. PRIOR TO THE AMEN DMENT MADE BY THE ACT THEREFORE BOTH THE DECISIONS ARE DISTINGUISHABL E AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE THEREFOR E SUBMITS THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LE ARNED CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BY THE FINANCE ACT 2001 W.E.F. 1.4.2002 SECTION 23 HAS NEWLY BEEN SUBSTI TUTED. IT HAS BEEN ELABORATED IN THE DEPARTMENT CIRCULAR NO.14 OF 2001. THE RELEVANT PORTION READS AS UNDER : ITA NO.7061/M/08 A.Y: 05-06 5 29.2 THE SUBSTITUTED SECTION 23 RETAINS THE EXISTING CONCEPT OF ANNUAL VALUE AS BEING THE SUM F OR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR I.E. ANNUAL LETTING VALUE (ALV). HOWEVER IN CASE OF LET OUT PROPERTY THE CONCEPT OF ANNUAL RENT HAS BEEN REMOVED. THE NEW SECTION PROVIDES THAT WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR REC EIVABLE IS IN EXCESS OF THE ALV THE AMOUNT SO RECEIVED OR RECEIVABLE SHALL BE THE ANNUAL VALUE. THIS WILL B E THE CASE EVEN IF THE PROPERTY (OR PART OF THE PROPERTY) WAS VACANT FOR A PART OF THE YEAR BUT THE ACTUAL RECEI VED OR RECEIVABLE DURING THE YEAR IS STILL HIGHER THAN THE ALV. WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS L ET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREV IOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT REC EIVED OR RECEIVABLE IS LESS THAN THE ALV THE SUM SO RECE IVED OR RECEIVABLE SHALL BE THE ANNUAL VALUE. IN CASE THE ACTUAL RENT RECEIVED OR RECEIVABLE DURING THE YEAR IS LESS THAN THE ALV BUT NOT BECAUSE OF VACANCY IT IS THE ALV WHICH SHALL BE TAKEN TO BE THE ANNUAL VALUE. HOWEVER IN THE CASE BEFORE US THE AMOUNT OF ACTUAL RENT RECEIVED IS NOT IN DISPUTE INASMUCH AS THE ACTUAL RENT RECEIVED BY T HE ASSESSEE HAS BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER. THE D ISPUTE IS WITH REGARD TO DEDUCTION OF NON-OCCUPANCY CHARGES. ACCORDING TO THE ASSESSEE THE CLAIM OF NON-OCCUPANCY CHARGES SHOULD BE ALLOWED IN VIEW OF THE DECISION OF THE TRIBUNAL SUPRA. PER CONTRA ACCORDING TO THE REVENUE THE SAME IS NOT ALLOWABLE. 7. IN THE CASE OF MAZDA CONSTRUCTION CO. (SUPRA) THE T RIBUNAL HAS CONSIDERED THE BYE-LAWS OF THE CO-OPERATIVE HSG. SOCIETY AND IN THE CASE OF SHARMILA TAGORE (SUPRA) THE RESOLUTION PASSED AT THE AGM OF THE MEMBERS OF THE HSG. SOCIETY HELD ON 8 TH AUG. 1999 WAS CONSIDERED ITA NO.7061/M/08 A.Y: 05-06 6 AND THEN THE CLAIM OF THE ASSESSEE WAS ALLOWED. WHEREAS I N THE CASE BEFORE US NO SUCH MATERIAL IS AVAILABLE ON RECORD TO EX AMINE THE ISSUE IN THE LIGHT OF THE RELEVANT BYE-LAWS OF THE CO-OPER ATIVE HSG. SOCIETY OR RESOLUTION. IT IS FURTHER OBSERVED THAT THE REVENU E AUTHORITIES HAVE NOT EXAMINED THE ISSUE IN THE LIGHT OF THE SAID BYE-L AWS OR RESOLUTION. THERE IS ALSO NO MATERIAL ON RECORD TO SHOW AS TO ON WHA T DATE THE SAID PAYMENT WAS MADE BY THE ASSESSEE. SINCE THE AO HAS NOT EXAMINED THE ISSUE IN THE LIGHT OF THE AFORESAID MATER IALS THEREFORE WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE MA TTER SHOULD GO BACK TO THE FILE OF THE AO AND ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK THE MATTER TO THE FILE OF THE AO WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOVE AND ACCORDINGLY TO LAW AFTER P ROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. T HE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12.01.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED:12.01.2010. JV. ITA NO.7061/M/08 A.Y: 05-06 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.7061/M/08 A.Y: 05-06 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 6.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7.1.10 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 12-01-10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 03-02-10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER