Smt. SHAILAJA S. HEMDEV, MUMBAI v. ITO - 19(3)(2), MUMBAI

ITA 714/MUM/2007 | 2003-2004
Pronouncement Date: 27-07-2011 | Result: Dismissed

Appeal Details

RSA Number 71419914 RSA 2007
Assessee PAN ABBPH2668D
Bench Mumbai
Appeal Number ITA 714/MUM/2007
Duration Of Justice 4 year(s) 6 month(s) 5 day(s)
Appellant Smt. SHAILAJA S. HEMDEV, MUMBAI
Respondent ITO - 19(3)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 27-07-2011
Date Of Final Hearing 31-05-2011
Next Hearing Date 31-05-2011
Assessment Year 2003-2004
Appeal Filed On 22-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI P.M. JAGTAP A.M. AND SHRI V. DURGA RAO J.M. SL.N O. ITA NO AY APPELLANT RESPONDENT 1 714/M/07 2003-04 SHAILAJA S. HEMDEV 11/12 TH FLOOR BELAIR APARTMENT UNION PARK BANDRA (W) MUMBAI 400 050 (PAN ABBPH2668D) INCOME TAX OFFICER 19(3)-2 MUMBAI 2 1473/M/07 -DO- INCOME TAX OFFICER 19(3)-2 MUMBAI SHAILAJA S. HEMDEV 11/12 TH FLOOR BELAIR APARTMENT UNION PARK BANDRA (W) MUMBAI 400 050 (PAN ABBPH2668D 3 5820/M/08 2004-05 SHAILAJA S. HEMDEV 11/12 TH FLOOR BELAIR APARTMENT UNION PARK BANDRA (W) MUMBAI 400 050 (PAN ABBPH2668D INCOME TAX OFFICER 19(3)-2 MUMBAI 4 5753/M/08 2004-05 ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 19(3) ROOM NO. 305 3 RD FLOOR PIRAMAL CHAMBERS PAREL MUMBAI 400 012 SHAILAJA HEMDEV BHOJWANI 11/12 TH FLOOR BELAIR APARTMENT UNION PARK BANDRA (W) MUMBAI 400 050 (PAN ABBPH2668D ASSESSEE BY : MR. YOGESH A. THAR REVENUE BY : MR. G.P. TRIVEDI . ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 2 ORDER PER V. DURGA RAO J.M.: THESE ARE THE CROSS APPEALS FOR AY 2003-04 AND 200 4-05. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS THE Y WERE HEARD TOGETHER AND THEREFORE A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. ITA NO. 714/M/07 APPEAL BY THE ASSESSEE FOR AY 20 03-04 2. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A)-XIX MUMBAI PASSED ON 17/11/2006. 3. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF C IT(A) IN UPHOLDING THE ORDER OF AO IN CHARGING THE INCOME DE RIVED FROM COMPOSITE LETTING OUT OF FLATS FURNITURE AND FITTI NG ALONG WITH OTHER FACILITIES AS INCOME FROM HOUSE PROPERTY. 4. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE W AS THE OWNER OF VARIOUS HOUSES AND ALL OF THEM WERE GIVEN ON RENT T O DIFFERENT PEOPLE. ALL THE FLATS WERE GIVEN ON LEAVE & LICENSE BASIS A ND INCOME ARISEN ON LETTING OUT OF THE SAID FLATS HAD BEEN SHOWN AS BUS INESS INCOME. THE AO HAD OBSERVED THAT ON THE TDS CERTIFICATE THE NAT URE OF PAYMENT FOR WHICH TDS HAD BEEN DEDUCTED WAS SHOWN AS RENT. THE AO HAD CALLED FOR AN EXPLANATION OF THE ASSESSEE THAT WHY THE REN T RECEIVED FROM LETTING OUT OF RESIDENTIAL PREMISE SHOULD NOT BE TA XED. IN REPLY THE AR OF THE ASSESSEE HAD CONTENDED THAT THE INCOME EARNE D BY THE ASSESSEE ON LETTING OUT WAS TO BE ASSESSED AS BUSINESS INCOM E AND NOT U/S 22 OF THE ACT FOR WHICH HE RELIED ON THE DECISIONS OF VARIOUS HIGH COURTS AND THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF SULTAN BROTHERS V. CIT 51 ITR 353. IN VIEW OF THE ABOVE D ECISION IT WAS ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 3 STATED BEFORE THE AO THAT LETTING OF RESIDENTIAL FL ATS WAS A CONTINUOUS ACTIVITY INCOME FROM IT SHOULD BE TAXED AS BUSINES S INCOME AND NOT AS INCOME FROM HOUSE PROPERTY U/S 22 OF THE ACT. TH E AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT IN THE CASE OF SULTAN BROTHERS (SUPRA) THE ASSESSEE CONSTRUCTED TH E BUILDING WITH THE INTENTION OF RUNNING A HOTEL BECAUSE OF THAT TH E HOTEL BUILDING WAS FITTED WITH VARIOUS FURNITURE AND FIXTURES. IT WAS ALSO HELD BY THE SUPREME COURT THAT THE RENT FROM THE BUILDING WOULD BE COMPUTED SEPARATELY FROM THE INCOME FROM FURNITURE AND FIXTU RE AND IN THE CASE OF THE RENT FROM BUILDING THE ASSESSEE WOULD BE ENT ITLED TO THE ALLOWANCE MENTIONED U/S 12(3) OF THE ACT 1922. THE AO THEREFORE HELD THAT THE INCOME DERIVED BY THE ASSESSEE FROM L ETTING OF RESIDENTIAL FLAT IS THE INCOME FROM HOUSE PROPERTY AND IT IS TO BE TAXED U/S 22 OF THE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A) THE AR OF THE ASESSSEE MADE E LABORATE SUBMISSIONS AND RELIED ON THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF SULTAN BROS. PVT. LTD. VS. CIT 51 ITR 353. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. NATIONAL STORAGE PVT. LTD. 48 ITR 577 593 (BOM.) THE CIT(A) HELD AS UNDER:- APPLYING TO THE ABOVE TEST TO THE FACTS OF THE CASE OF THE ASSESSEE IT CAN BE SEEN THAT THE ASSESSEE IS MERELY AN OWNER OF THE PROPERTY AND IS NOT CARRYING ON BUSINESS OF TAK ING ON LEASE PROPERTIES AND HIRING IT OUT TO THE PROSPECTIVE CUS TOMERS. SHE IS RECEIVING RENTAL INCOME FROM MERE LETTING OUT OF PR OPERTY OWNED BY HER AND THIS INCOME HAS BEEN DERIVED BY THE ASSE SSEE BY EXERCISE OF HER PROPERTY RIGHTS AS OWNER OF THE PRO PERTY AND NOT ON ACCOUNT OF CARRYING ON ANY BUSINESS AS SUCH. THE ANDHRA PRADESH HIGH COURT IN THE CASE OF PHABIOMAL & SONS 158 ITR 773 HAS HELD THAT LETTING OUT OF A BUILDING AND REALIZI NG RENT THERE FROM DID NOT AMOUNT TO CARRYING ON ANY BUSINESS AND THE INCOME EARNED WAS INCIDENTAL TO OWNERSHIP. IT WAS HELD THA T THERE WAS NO BUSINESS IN THE ACT OF LETTING OUT OF BUILDING O F WHICH ONE IS AN OWNER. NO DOUBT SOME ADDITIONAL AMENITIES HAVE ALS O BEEN PROVIDED BY THE APPELLANT TO THE LESSEE ALONG WITH THE TENEMENTS ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 4 BUT LOOKING INTO THE FACTS OF THIS CASE IT IS CLEA R THAT PROVIDING OF THESE FACILITIES/SERVICES IS ONLY INCIDENTAL AND RE LATIVELY INSIGNIFICANT TO THE USE OF TENEMENTS. FURTHER ALTH OUGH TENEMENTS HAVE BEEN LET OUT ALONG WITH AMENITIES LOOKING INT O THE LOCALITY WHERE THE PROPERTY IS SITUATED PREVAILING RENT RAT E RENT RECEIVED AND AMENITIES GIVEN ALONG WITH THE HOUSE IT IS QUI TE OBVIOUS THAT INCOME BEING RECEIVED BY THE ASSESSEE FROM THE TENA NT IS ON ACCOUNT OF THE USE OF THE HOUSE. CONSIDERATION RECE IVED BY THE ASSESSEE FOR USE OF AMENITIES IF ANY AT ALL IS ON LY A SMALL PORTION OF THE TOTAL LEASE RENT RECEIVED. IT IS TH US CLEAR THAT THE INCOME HAS BEEN DERIVED BY THE ASSESSEE BY EXERCISE OF HER RIGHT IN THE PROPERTY AS OWNER OF THE PROPERTY AND NOT FO R CARRYING OF ANY BUSINESS THEREFORE INCOME DERIVED BY THE ASSE SSEE IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME. 6. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE I S IN APPEAL BEFORE US. 7. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PREMISES WERE GIVEN ON LEAVE AND LICENSE BASIS TO VARIOUS MULTINATIONAL COMPANIES AS THE PREMISES WERE FULLY FURNISHED ACCORDING TO THE SPECIFICATIONS OF THE TENANTS. IT IS SUBMITTED THAT THE FURNITURE AND FIXTURES INCLUDE ITEMS OF WARDROBES BEDS TELEVISIONS DISHWASHERS REFRIGERATORS AIR-CONDITIONERS WASHI NG MACHINES TELEPHONES COOKING RANGES ETC AS THE SAME WERE PAR T OF THE CONTRACT TO PROVIDE ALL FACILITIES. IT IS FURTHER SUBMITTED THAT IT IS BECAUSE OF THIS PROVISION OF AMENITIES THAT THE TENANTS WERE G IVING SUCH HIGH AMOUNT OF RENT. IT IS THEREFORE CONTENDED THAT L ETTING OF RESIDENTIAL FLATS WAS A CONTINUOUS ACTIVITY INCOME FROM THE SA ME SHOULD BE TAXED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PRO PERTY U/S 22 OF THE ACT. 8. ON THE OTHER AND THE LEARNED DR HAS RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 5 AUTHORITIES BELOW. THE ISSUE THAT ARISES FOR OUR CO NSIDERATION IS WHETHER THE INCOME RECEIVED BY THE ASSESSEE ON LETT ING OUT OF HER PROPERTIES IS THE INCOME FROM HOUSE PROPERTY OR INC OME CHARGEABLE UNDER THE HEAD INCOME FROM PROFITS AND GAINS OF BU SINESS. AS HAS BEEN HELD BY THE CIT(A) THE INCOME TAX IS A SINGLE TAX LEVIED ON THE TOTAL INCOME CLASSIFIED AND CHARGEABLE UNDER VARIO US HEADS. SECTION 14 OF THE ACT PROVIDES THAT ALL INCOME SHALL FOR TH E PURPOSE OF CHARGE OF INCOME TAX AND COMPUTATION OF TOTAL INCOME BE CL ASSIFIED INTO FIVE HEADS SPECIFIED THERE IN ARE I) SALARIES II) INCO ME FROM HOUSE PROPERTY III) PROFITS AND GAINS OF BUSINESS IV) C APITAL GAINS AND V) INCOME FROM OTHER SOURCES. SECTION 22 OF THE ACT PR OVIDES THAT ANNUAL VALUE OF THE PROPERTY CONSISTING OF BUILDING OR LET TING WHICH IS OWNED BY THE ASSESSEE SHALL BE CHARGEABLE TO INCOME TAX U NDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ONLY EXCEPTION PR OVIDED IS THAT IF SUCH PROPERTIES ARE USED FOR BUSINESS OR PROFESSION CARRIED ON BY THE ASESSSEE THE PROFITS OF WHICH ARE CHARGEABLE TO TAX AND THEN INCOME FROM SUCH PROPERTY WILL NOT BE CHARGEABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN THE CASE UNDER CONSIDERATIO N THE ASSESSEE LET OUT OF HER PROPERTIES THEREFORE THE RENT RECEIVED BY HER ON THE PROPERTIES CANNOT BE COMPUTED AS BUSINESS INCOME. MOREOVER THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DECISIO N OF ITAT MUMBAI BENCHES IN ITA NOS. 199 & 200/M/2010 FOR AY 2005-06 & 2006-07 IN THE OWN CASE OF THE ASSESSEE VIDE ORDER DATED 9 TH MAY 2011 WHEREIN THE ITAT DISMISSED THE GROUND OF APPEAL OF THE ASSE SSEE FOLLOWING THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAMBHU INVESTMENTS PVT LTD. VS. CIT (249 ITR 47). RESPECTF ULLY FOLLOWING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE(SUPRA) WE CONFIRM THE ACTION OF THE AO IN COMPUTING THE INCOME RECEIVED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFOR E WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 10. AS REGARDS GROUND NO. 2 REGARDING INCOME OUGHT TO BE CHARGED UNDER THE HEAD INCOME FROM OTHER SOURCES ACCORD ING TO THE ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 6 ASSESSEE IF ONE TAKES THE VIEW THAT THE LICENCE FEE S RECEIVED IS CHARGEABLE TO TAX UNDER THE HAD INCOME FROM HOUSE P ROPERTY SUCH A VIEW WOULD RENDER THE PROVISIONS OF SECTION 56(2) O F THE ACT AS NUGATORY. IT WAS STATED THAT INTERPRETATION THAT RE NDER SECTION OTIOSE SHOULD NOT BE PREFERRED BUT THE INTERPRETATION THAT MAKE THE SECTION WORKABLE SHOULD BE PREFERRED. THE ASSESSEE THEREFO RE ARGUED THAT UNDER THE CIRCUMSTANCES THE INCOME RECEIVED BY THE ASSESSEE FROM PROPERTY SHOULD BE TAXED AS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES. THE REVENUE AUTHORITIES HELD THAT IT IS CLEAR THAT INCOME DERIVED BY THE ASSESSEE FROM LETTING OUT OF THE PROPERTY OWNED BY HER IS TAXABLE UNDER THE INCOME FROM HOUSE PROPE RTY AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. WE UPHO LD THE VIEW OF THE REVENUE AUTHORITIES AND THIS GROUND IS ALSO REJ ECTED. 11. GROUND NO. 3 IS PERTAINING TO DISALLOWANCE OF D EPRECIATION ON BUILDING FURNITURE AND FIXTURES. THE CIT(A) HELD T HAT AS THE INCOME FROM BUILDING FURNITURE AND FIXTURE IS BEING TAXED AS INCOME FROM HOUSE PROPERTY THE ASSESSEE IS NOT SEPARATELY ENTI TLED TO DEPRECIATION. WE DO NOT FIND ANY GROUND TO INTERFER E IN THE ORDER OF CIT(A) AND THEREFORE THE ORDER OF CIT(A) IS CONFI RMED. 12. GROUND NO. 4 REGARDING CHARGING TO TAX THE INTE REST RECEIVED UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AND GROUND NO. 5 R EGARDING DISALLOWANCE OF INTEREST PAID HAVE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 13. GROUND NO. 6 REGARDING LEVY OF INTEREST U/S 234 B AND 234C. CHARGING INTEREST U/S 234B AND 234C IS CONSEQUENTIA L IN NATURE THEREFORE THE AO IS DIRECTED ACCORDINGLY. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 7 ITA NO. 1473/M/07 & ITA NO. 5753/M/08 -APPEALS BY THE REVENUE FOR AY 2003-04 & 2004-05. 15. SINCE IDENTICAL ISSUE IS INVOLVED IN BOTH THESE APPEALS WE DISPOSE OF THE SAME TOGETHER. TO DECIDE THESE APPEA LS WE REFER TO THE FACTS OF THE CASE IN AY 2003-04. 16. COMMON GROUND RAISED IN BOTH THE APPEALS WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN RELYING UPON THE DECISI ON OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. HEMRAJ MAHABIR PRASAD LTD. REPORTED IN 279 ITR 522 (CAL.) DECIDED ON 10/08/2005 IGNORING THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF BHAGWANDASS JAIN VS. UNION OF INDIA (1981) REPORTED IN 128 ITR 315. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 17. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD GI VEN ON LEAVE AND LICENSE BASIS FULLY FURNISHED RESIDENTIAL FLATS. UN DER THE LEAVE AND LICENSE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE RESPECTIVE LICENSEES THE ASSESSEE RECEIVES LICENSE FEE IN ACC ORDANCE WITH THE TERMS OF THE LEAVE AND LICENSE AGREEMENT I.E. EITHE R ON A MONTHLY BASIS OR IN ADVANCE. FURTHER THE ASSESSEE HAD A SE CURITY FOR DUE PERFORMANCE OF THE OBLIGATIONS OF THE LICENSEE UNDE R THE LEAVE AND LICENSE AGREEMENT RECEIVED FROM THE LICENSEE A REF UNDABLE NON- INTEREST BEARING SECURITY DEPOSIT. THIS AMOUNT IS R EFUNDABLE ON TERMINATION OF THE LEAVE AND LICENSE AGREEMENT. WH ILE COMPUTING ANNUAL VALUE OF THE RESIDENTIAL PROPERTIES U/S 23 O F THE ACT THE AO HAD CONSIDERED A SUM OF RS. 36 00 000/- BEING NOTIO NAL INTEREST @ 10% ON INTEREST FREE SECURITY DEPOSIT BY THE ASSESS E. ON BEING ASKED BY THE AO TO SHOW CAUSE AS TO WHY NOTIONAL INTEREST SHOULD NOT BE ADDED ON THE RENT DEPOSIT OF RS. 3.60 CRORE RECEIVE D FROM AVENTIS CROPS SCIENCE FOR LETTING OUT THE PROPERTY AT MEAGE R RENT OF RS. 3 ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 8 LAKHS PER ANNUM THE ASSESSEE VIDE ITS EXPLANATION DATED 24/03/06 HAD RELIED ON THE DECISION OF CIT VS. JK INVESTORS 248 ITR 723 AND ACCORDINGLY REQUESTED NOT TO MAKE ANY ADDITION ON A CCOUNT OF NOTIONAL INTEREST. THE ABOVE EXPLANATION SUBMITTED BY THE AS SESSEE WAS NOT ACCEPTED BY THE AO AND ADDED THE NOTIONAL INTEREST OF RS. 36 00 000/- TO ANNUAL LETTING VALUE. AGGRIEVED THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A) 17. BEFORE THE CIT(A) THE ASSESSEE PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF JK INVE STORS (SUPRA) AND FILED ADDITIONAL SUBMISSIONS WHEREIN RELIANCE IS PL ACED ON SEVERAL DECISIONS OF THE BOMBAY BENCH OF THE ITAT FOR THE P ROPOSITION THAT MUNICIPAL RATABLE VALUE IS TO BE CONSIDERED TO BE T HE SUM FOR WHICH PROPERTY MIGHT REASONABLY BE EXPECTED TO BE LET FRO M YEAR TO YEAR U/S 23(1)(A) OF THE ACT AND THAT NOTIONAL INTEREST CANN OT BE CONSIDERED FOR COMPUTING THE AMOUNT U/S 23(1)9B) OF THE ACT. THE A SSESSEE ALSO RELIED UPON THE CIRCULAR NO. 204 DATED 24/07/76 ISS UED BY CBDT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) HELD AS UNDER:- 10.5 IN THE FACTS OF THE PRESENT CASE THE PROPERT IES HAVE BEEN LET OUT BY THE APPELLANT AND SINCE ACTUAL RENT IS FAR GREATER THAN THE MUNICIPAL RATABLE VALUE THE ANNUAL VALUE WILL HAVE TO BE THE AMOUNT COMPUTED U/S 23(1)(B) OF THE ACT. THE AO HAS PROCEEDED TO INCLUDE NOTIONAL INTEREST WHILE COMPUT ING ANNUAL VALUE U/S 23(1)(B) OF THE ACT. THIS IS CONTRARY TO THE RATIO OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF JK INVESTORS. THE AMOUNT OF RS. 36 00 000/- INCLUDED B Y THE AO WHILE COMPUTING ANNUAL VALUE U/S 23 IS TO BE EXCLUD ED. 18. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 19. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CANVAS SED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE ITAT IN ITA NOS. 3847 TO 3849/M/09 FOR AY 2004-05 IN THE CASE OF M/S S. SUDA RSHAN & CO. ORDER DATED 11 TH MAY 2011. ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 9 20. AFTER HEARING THE LEARNED DR AND PERUSING THE R ELEVANT RECORD WE FIND THAT THE ISSUE UNDER CONSIDERATION IS COVER ED BY THE DECISION OF THE ITAT IN THE CASE OF S. SUDARSHAN & CO. (SUPR A) WHEREIN THE ITAT HELD AS UNDER:- 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE QUESTION WHETHER NOTIONAL I NTEREST ON INTEREST FREE DEPOSIT IS INCLUDIBLE WHILE CALCULATI NG ANNUAL LETTING VALUE OF THE PROPERTY U/S 23(1)(A) CAME UP FOR CON SIDERATION BEFORE THE FULL BENCH OF THE HONBLE DELHI HIGH COU RT IN CIT VS. MONI KUMAR SUBBA (2011) 333 ITR 38 (DEL)(SB). THE H ONBLE DELHI HIGH COURT HAS HELD THAT NO ADDITION TO THE ANNUAL LETTING VALUE FOR NOTIONAL INTEREST U/S 23(1)(A) IS SUSTAINABLE. IN VIEW OF THIS JUDGMENT IT IS CLEAR THAT THE ACTION OF THE AO CAN NOT BE UPHELD. WE THEREFORE APPROVE THE VIEW TAKEN BY THE LD. C IT(A) IN THESE THREE APPEALS. 21. DETAILED FINDINGS OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. MONI KUMAR SUBBA [2011] 333 ITR 38 (DEL.) A RE AS UNDER:- IN THE PRESENT CASE THE ASSESSING OFFICER ADDED N OTIONAL INTEREST ON THE INTEREST FREE SECURITY FOR ARRIVING AT ANNUAL LETTING VALUE SINCE THAT WAS NOT PERMISSIBLE THE EFFECT WO ULD BE THAT SUCH ASSESSMENT WAS RIGHTLY SET ASIDE BY THE COMMIS SIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL. THEREFORE THE ORDERS WOULD NOT CALL FOR ANY INTERFERENCE. THESE APPEALS ARE THUS DISMISSED ON THIS GROUND. ONCE WE HOLD THIS THE V ERY BASIS ADOPTED BY THE ASSESSING OFFICER TO FIX ANNUAL LETT ING VALUE WAS WRONG AND THEREFORE NO FURTHER EXERCISE IN FACT IS REQUIRED BY US IN THESE APPEALS. HOWEVER WE MAY OBSERVE THAT NO PARTICULAR TEST CAN BE LAID DOWN AND IT WOULD DEPEND ON THE FACTS OF EACH CASE. WE WOULD DO NOTHING MORE THAN TO EXTRACT THE FOLLOWING PASSA GE FROM THE SUPREME COURT JUDGMENT IN THE CASE OF MOTICHAND V. BOMBAY MUNICIPAL CORPORATION AIR 1968 SC 441 442: IT IS WELL-RECOGNIZED PRINCIPLE IN RATING THAT BOT H GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFER ENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HY POTHETICAL RENT FOR INSTANCE BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHER E THERE ARE NO RENTS BY REFERENCE TO THE ASSESSMENTS OF COM PARABLE PROPERTIES OR TO THE PROFITS EARNED FROM THE PROPER TY OR TO THE COST OF CONSTRUCTION. ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 10 WE HAVE ALSO TAKEN NOTE OF THE JUDGMENT OF THE BOMB AY HIGH COURT IN THE CASE OF J.K. INVESTORS [2001] 248 ITR 723 WHEREIN THE COURT HINTED THAT VARIOUS FACTORS MAY BECOME RE LEVANT IN DETERMINING THE FAIR RENT. THE PRECISE OBSERVATI ONS OF THE COURT IN THE SAID JUDGMENT ARE AS UNDER (PAGE 727): AT THE COST OF REPETITION IT MAY BE MENTIONED THAT UNDER SECTION 23(1)(A) THE ASSESSING OFFICER HAS TO DECI DE THE FAIR RENT OF THE PROPERTY. WHILE DECIDING THE FAIR RENT VARIOUS FACTORS COULD BE TAKEN INTO ACCOUNT. IN SUCH CASES VARIOUS METHODS LIKE THE CONTRACTORS METHOD COULD BE TAKEN INTO ACCOUNT. IF ON COMPARISON OF THE FAIR RENT WITH TH E ACTUAL RENT RECEIVED THE ASSESSING OFFICER FINDS THAT THE ACTUAL RENT RECEIVED IS MORE THAN THE FAIR RENT DETERMINAB LE AS ABOVE THEN THE ACTUAL RENT SHALL CONSTITUTE THE AN NUAL VALUE UNDER SECTION 23(1)(B) OF THE ACT. NOW APPL YING THE ABOVE TEST TO THE FACTS OF THIS CASE WE FIND A CAT EGORICAL FINDING OF THE FACT RECORDED BY THE T4IBUNAL THAT T HE ACTUAL RENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE FAI R RENT. UNDER THE ABOVE CIRCUMSTANCES IN VIEW OF THE SAID FINDING OF THE FACT WE DO NOT SEE ANY REASON TO INTERFERE . 22. THIS ISSUE IS ALSO COVERED BY THE DECISION OF T HE ITAT MUMBAI BENCHES IN ITA NOS. 199 & 200/M/2010 FOR AY 2005-06 & 2006-07 IN THE OWN CASE OF THE ASSESSEE VIDE ORDER DATED 9 TH MAY 2011 WHEREIN THE ITAT HELD AS UNDER:- 14. WE ALSO FIND THAT A CO-ORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF DCIT VS RECLAMATION REALTY INDIA PVT. LTD IN ITA N O. 14114/M/07 FOR A.Y. 2004-05 AND OTHERS ORDER DATED 26.11.2010 HAD AN OC CASION TO DEAL WITH SIMILAR ISSUE AND AFTER ELABORATELY ANALYZING ALL THE LEGAL POSITION WITH REGARD TO THE ABOVE ISSUE OBSERVED AS FOLLOWS: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ORIG INALLY PROVISIONS OF SECTION 23 OF THE ACT PROVIDED FOR DETERMINATION OF ANNUAL VALUE OF HOUSE PROPERTY ONLY ON THE BASIS OF SUM FOR WHICH THE PR OPERTY 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. 1.4.1976 SECTION 23(1)(B) WAS INTRODUCED WHEREBY IT WAS PRO VIDED THAT IF THE ACTUAL RENT RECEIVED BY AN ASSESSEE IS IN EXCESS OF THE SU M FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR ANNUAL VALUE WILL BE THE RENT RECEIVED. WHILE EXPLAINING THE AFORESAID A MENDMENT CBDT IN CIRCULAR 204 DATED 24.7.1976 IN PARAGRAPH 9 HAS STA TED AS FOLLOWS :- HITHERTO THE ANNUAL VALUE OF HOUSE PROPERTY CHAR GEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY WAS DEEM ED TO BE THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. IN MANY CASES HOWEVER THE ACTUAL RENT RECEIVED OR RECEIVABLE IN A YEAR EXCEEDS THE MUNICIPAL VALUATION OF THE PROPERTY. SU B SECTION (1) OF SECTION ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 11 23 HAS BEEN AMENDED TO PROVIDE THAT THE WHERE ANY P ROPERTY 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 PROPERT Y MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR THE ANNUAL RENT RECEIVED OR RECEIVABLE SHALL BE TAKEN AS THE ANNUAL VALUE OF THE PROPERTY . 18. FROM THE AFORESAID CIRCULAR IT IS CLEAR THAT T HE LAW PRIOR TO INTRODUCTION OF SECTION 23(1)(B) WAS THAT ANNUAL VA LUE WAS EQUAL TO MUNICIPAL VALUATION OF THE PROPERTY. THE ABOVE CIRC ULAR GIVES AN INDICATION AS TO HOW THE EXPRESSION THE SUM FOR WHICH THE PR OPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR US ED IN SECTION 23(1)(A) HAST TO BE INTERPRETED. 19. IN THE CASE OF DIWAN DAULAT KAPPOR VS. NEW DELH I MUNICIPAL COMMITTEE 122 ITR 700 (SC) THE QUESTION BEFORE TH E HONBLE SUPREME COURT WAS AS TO WHAT SHOULD BE THE BASIS OF DETERMI NING THE ANNUAL VALUE FOR THE PURPOSE OF LEVY OF PROPERTY TAX. THE EXPRES SION ANNUAL VALUE AS DEFINED IN THE DELHI MUNICIPAL CORPORATION ACT 195 7 AND PUNJAB MUNICIPAL ACT 1911 WAS GROSS ANNUAL RENT AT WHICH SUCH HOUS E OF BUILDING MAY REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. T HE HON'BLE SUPREME COURT HELD THAT THE ANNUAL VALUE IS ALWAYS RENT REA LIZABLE BY LANDLORD AND THAT ACTUAL RENT IS ONLY AN INDICATOR WHAT THE LAND LORD MIGHT REASONABLY EXPECT TO GET FROM A HYPOTHETICAL TENANT. THE HONOU RABLE COURT FURTHER HELD THAT WHERE TENANCY IS SUBJECT TO RENT CONTROL LEGISLATATION STANDARD RENT WOULD BE A PROPER MEASURE AND IN ANY EVENT AN NUAL VALUE CANNOT EXCEED SUCH STANDARD RENT. IN THE CASE OF MRS. SHEI LA KAUSHISH VS. CIT - ( 2002-TIOL-526-SC-IT ) = 131 ITR 435 (SC) THE QUESTION AROSE IN THE CONTEXT OF PROVISIONS OF SECTION 23 OF THE I.T. ACT . THE HON'BLE SUPREME COURT APPLYING THE DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF 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 A CT 1957 AND THE PUNJAB MUNICIPAL ACT 1911 FOR THE PURPOSE OF LEVY OF HOUSE TAX BUT IT WOULD BE EQULLY APPLICABLE IN INTERPRETING THE DEFI NITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT 1 961 BECAUSE THESE DEFINITIONS ARE IN IDENTICAL TERMS AND IT WAS IMPOS SIBLE TO DISTINGUISH THE DEFINITION OF ANNUAL VALUE IN SUB-SECTION (1) OF SECTION 23 OF THE I.T. ACT 1961 FROM THE DEFINITION OF THAT TERM IN THE DELHI MUNICIPAL CORPORATION ACT 1957 AND THE PUNJAB MUNICIPAL ACT 1911. WE MU ST THEREFORE HOLD ON AN IDENTICAL LINE OF REASONING THAT EVEN IF THE ST ANDARD RENT OF A BUILDING HAS NOT BEEN FIXED BY THE CONTROLLER UNDER SECTION 9 OF THE RENT ACT AND THE PERIOD OF LIMITATION PRESCRIBED BY SECTION 12 OF TH E RENT ACT FOR MAKING AN APPLICATION FOR FIXATION OF THE STANDARD RENT HAVIN G EXPIRED IT IS NO LONGER COMPETENT TO THE TENANT TO HAVE THE STANDARD RENT O F THE BUILDING FIXED THE ANNUAL VALUE OF THE BUILDING ACCORDING TO THE DEFIN ITION GIVEN IN SUB- SECTION (1) OF SECTION 23 OF THE I.T. ACT 1961 MU ST BE HELD TO BE THE STANDARD RENT DETERMINABLE UNDER THE PROVISIONS OF THE RENT ACT AND NOT THE ACTUAL RENT RECEIVED BY THE LANDLORD FROM THE T ENANT. THIS ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 12 INTERPRETATION WHICH WE ARE PLACING ON THE LANGUAGE OF SUB-SECTION (1) OF SEC.23 OF THE IT ACT 1961 MAY BE REGARDED AS HAVIN G RECEIVED LEGISLATIVE APPROVAL FOR WE FIND THAT SEC.6 OF THE TAXATION L AWS (AMENDMENT) ACT 1975 SUB-SECTION (1) HAS BEEN AMENDED AND IT HAS NO W BEEN MADE CLEAR BY THE INTRODUCTION OF CLAUSE(B) IN THAT SUB-SECTION T HAT WHERE THE PROPERTY IS LET AND THE ANNUAL RENT RECEIVED OR RECEIVABLE BY T HE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM FOR WHICH THE PROPE RTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR THE AMOUNT SO RE CEIVED 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 BUILDIN G MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR MAY BE LESS THAN THE ACTUAL AMOUNT RECEIVED OR RECEIVABLE BY THE LANDLORD FROM THE TEN ANT. 20. HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRABHABATI BANSALI 141 ITR 419 HAD TO DEAL WITH A CASE OF A PROPERTY I N MUMBAI WHERE THE DISPUTE WAS WITH REGARD TO DETERMINATION OF ITS ANN UAL VALUE U/S. 23 OF THE ACT. HON'BLE CALCUTTA HIGH COURT AFTER MAKING REFER ENCE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DEWAN DAULAT R AI KAPOOR (SUPRA) AND MRS. SHEILA 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 FROM YEAR TO YEAR IN RESPECT OF AN INCOME ACCRUING SUBSEQUENT TO THE AMENDMENT DIFFERENT CONSIDERATIONS MIGHT ARISE. BUT WE ARE NOT CONCERN ED WITH SUCH SITUATION IN THE INSTANT CASE. THEREFORE IN VIEW OF THAT POS ITION AND THE MUNICIPAL LAW AND IN VIEW OF THE DECISION OF THE SUPREME COUR T IT APPEARS TO US THAT THE INCOME FROM HOUSE PROPERTY MUST BE COMPUTED ON THE BASIS OF THE SUM WHICH MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR AND WITH THE ANNUAL MUNICIPAL VALUE PROVIDED SUCH A VALUE IS NOT ABOVE THE STANDARD RENT RECEIVABLE AND THAT WOULD BE THE SAFEST GUIDE FOR THIS PURPOSE AND THE RENT ACTUALLY RECEIVED WOULD NOT BE OF ANY RELEVANC E. 21. THE COURT IN THE AFORESAID DECISION ALSO RELIED ON THE PROVISIONS OF SECTION 154 OF THE BOMBAY MUNICIPAL CORPORATION ACT WHEREIN THE MANNER OF DETERMINATION OF RATEABLE VALUE HAS BEEN LAID DO WN. THE SAID PROVISIONS ALSO SPEAK OF ANNUAL RENT FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. THUS THE COURT CONCLUDED THAT THE MUNICIPAL VALUATION AND THE ANNUAL VALUE U/S. 23(1) (A) ARE ONE OF THE SAME. THE DECISION OF HON'BLE CALCUTTA HIGH COURT H AS BEEN FOLLOWED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M.V. SONAV ALA VS. CIT 177 ITR 246 (BOM); WHEREIN HON'BLE BOMBAY HIGH COURT HAS OB SERVED AS FOLLOWS :- HOWEVER THE QUESTIONS POSED TO US ARE NOT WHETHER THE ANNUAL VALUE OF THE PROPERTY FOR THE PURPOSE OF SECTION 23(1)(A) SH OULD BE TAKEN AT THE ACTUAL COMPENSATION RECEIVED OR ON THE BASIS OF STA NDARD RENT. THE QUESTION IS WHETHER THE ANNUAL VALUE SHOULD BE TAKE N AT THE AMOUNT WHICH IS ACTUAL COMPENSATION RECEIVED OR AT THE AMOUNT FI XED AS MUNICIPAL RATEABLE VALUE. OBVIOUSLY MUNICIPAL RATEABLE VALUE CANNOT BE EQUATED TO STANDARD RENT. ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 13 IN THIS CONTEXT IT MAY BE DESIRABLE TO REFER TO TH E CALCUTTA HIGH COURTS DECISION IN THE CASE OF CIT VS. PRABHABATI BANSALI (1983) 141 ITR 419. ONE OF THE QUESTIONS INVOLVED IN THAT CASE WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE INCOME TAX OFFICER TO RE -DETERMINE THE ANNUAL VALUE OF THE PROPERTY UNDER SECTION 23(1) AFRESH WI TH REFERENCE TO ITS RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL CORPO RATION. THE QUESTION WAS ANSWERED IN THE AFFIRMATIVE AND THE COURT HELD THAT THE INCOME FROM HOUSE PROPERTY HAD TO BE COMPUTED ON THE BASIS OF T HE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE LET FROM YEAR TO YEAR AND THE ANNUAL MUNICIPAL VALUE. FOLLOWING THE CALCUTTA HIGH COURT DECISION (1983) 1 41 ITR 419 WHICH WE THINK HAS TAKEN THE RIGHT VIEW WE ANSWER THE QUES TIONS 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 ACCORDANCE WITH THE DIRECTIONS SET OUT ABOVE. NO ORDER AS TO C OSTS. 22. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SM ITABEN N. AMBANI VS. 323 ITR 104 (BOM) IN THE CONTEXT OF RULE 1BB TO THE WEALTH TAX RULES WHICH USES THE SAME EXPRESSION THE SUM FOR WHICH T HE PROPERTY MIGHT BE REASONABLY EXPECTED TO LET FROM YEAR TO YEAR AS IS FOUND IN SEC.23(1)(A) OF THE ACT HELD THAT RATEABLE VALUE AS DETERMINED BY THE MUNICIPAL AUTHORITIES SHALL BE THE YARDSTICK. THE LEARNED COU NSEL FOR THE ASSESSEE RELIED ON SEVERAL OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION THAT THE MUNICIPAL VALUE SHOULD BE THE B ASIS OF DETERMINING THE ANNUAL VALUE. WE ARE NOT MAKING REFERENCE TO THOSE DECISIONS SINCE IN OUR OPINION THE AFORESAID PRONOUNCEMENT OF HON'BLE BOMB AY HIGH COURT CONSIDERS THE DECISIONS OF HONBLE CALCUTTA HIGH CO URT WHICH IN TURN HAS CONSIDERED THE LAW LAID DOWN BY THE HON'BLE APEX CO URT ON THE ISSUE. IT IS CLEAR FROM THE AFORESAID EXPOSITION OF LAW THAT CHA RGE U/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 Y ARDSTICK FOR DETERMINING THE ANNUAL VALUE. IF THE PROPERTY IS SUBJECT TO REN T CONTROL LAWS AND THE FAIR RENT DETERMINED IN ACCORDANCE WITH SUCH LAW IS LESS THAN THE MUNICIPAL VALUATION THEN ONLY THAT CAN BE SUBSTITUTED BY THE MUNICIPAL VALUE. THE DECISION IN THE CASE OF MRS. SHEILA KAUSHISH (SUPRA ) MENTIONS STANDARD RENT UNDER THE RENT CONTROL ACT AS ONE OF THE YARDSTICKS . WE ALSO FIND FROM THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF SMT. PRABHABATI BANSALI (SUPRA) THAT STANDARD RENT IF IT DOES NOT EXCEED THE MUNICIPAL VALUATION ALONE CAN BE ADOPTED IN PLACE OF MUNICIPA L VALUATION. 15. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEW SO TAKEN BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL AS THE VERY FOUNDAT ION OF THE IMPUGNED ADDITION IS DEVOID OF LEGALLY SUSTAINABLE MERITS. WE ACCORDINGLY RESPECTFULLY FOLLOWING THE SAME UPHOLD THE ORDER O F THE CIT(A). ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 14 23. SINCE THE FACTS OF THE UNDER CONSIDERATION ARE IDENTICAL TO THAT OF THE CASE DECIDED BY THE ITAT(SUPRA) WE RESPECTF ULLY FOLLOW THE ORDER OF THE ITAT AND IN THE LIGHT OF THAT WE UPHOL D THE ORDER OF THE CIT(A) IN EXCLUDING THE NOTIONAL INTEREST WHILE COM PUTING THE ANNUAL VALUE U/S 23(1)(B) OF THE ACT AND DISMISS THE GROU ND RAISED BY THE REVENUE IN BOTH THE YEARS UNDER CONSIDERATION. 24. IN THE RESULT APPEALS OF THE REVENUE ARE DISMI SSED. ITA NO. 5820/M/08 APPEAL BY THE ASSESSEE FOR AY 2004-05 25. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-XIX MUMBAI PASSED ON 09/07/08 FOR THE ASSESSMENT YEAR 2004-05. 26. GROUND NOS. 1 TO 3 ARE SIMILAR TO THE GROUND NO S. 1 TO 3 RAISED IN AY 2003-04 THEREFORE FOLLOWING THE CONCLUSIONS DRAWN IN THOSE GROUNDS THESE GROUNDS ARE DISMISSED. 27. GROUND NO. 4 READS AS UNDER:- THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE AO IN COMPUTING ANNUAL VALUE OF THE APPELLANTS FLAT BEIN G FLAT NO. 22 IN BHOJWANI ENCLAVE BY CONSIDERING NOTIONAL INTEREST O N INTEREST FREE SECURITY DEPOSIT RECEIVED BY THE APPELLANT FROM THE LICENSEE OF THE FLAT. 28. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO HAD OBSERVED THAT THE ASSESSEE HAD SHOWN MONTHLY RENT F ROM THE FLAT NO. 22 BHOJWANI ENCLAVE LET OUT TO BAYER CROSPSCIENCE INDIA LTD. ON A MONTHLY RENT OF RS. 25 000/- WITH A SECURITY DEPOSI T OF RS.3 60 000/-. ON BEING ASKED TO EXPLAIN BY THE AO THE ASSESSEE E XPLAINED THAT THE SECURITY DEPOSIT CANNOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ANNUAL LETTING VALUE. HOWEVER THE AO STRAIGHT-AWAY TOOK 10% OF THE SECURITY DEPOSIT FOR DETERMINING ALV OF THE PROPERT Y AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEA L THE CIT(A) CONFIRMED THE ORDER OF THE AO OBSERVING THAT BECAUS E OF SECURITY DEPOSIT THE ASSESSEE IS RECEIVING LESS MONTHLY RENT WHEREAS IN OTHER ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 15 TWO PROPERTIES SECURITY DEPOSIT IS NOMINAL AND THE RENT IS MORE. ON BEING AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. 29. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF CI T VS. JK INVESTORS 248 ITR 723 AS WELL AS THE FULL BENCH DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MONI KUMAR SUBBA [2011] 333 ITR 38(DEL)(SB). 30. ON THE OTHER HAND THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD AS WELL AS THE DECISIONS CITED. IT IS OBSERV ED THAT THE AO HAS STRAIGHT-AWAY APPLIED 10% OF THE SECURITY DEPOSIT FOR DETERMINING THE ANNUAL LETTING VALUE AND THE SAME WAS UPHELD BY THE CIIT(A). IN VIEW OF THE JUDGMENT IN THE CASE OF CIT VS. JK INVE STORS (SUPRA) AS WELL AS THE DECISION OF THE HONBLE HIGH COURT IN T HE CASE OF MONI KUMAR SUBBA (SUPRA) COMPUTING THE ALV BY APPLYING 1 0% OF THE SECURITY DEPOSIT IS NOT CORRECT IN VIEW OF THE SAID DECISIONS. IN THE CASE OF MONI KUMAR SUBBA (SUPRA) THE HONBLE DELHI HIGH COURT HELD AS UNDER:- IN THE PRESENT CASE THE ASSESSING OFFICER ADDED NO TIONAL INTEREST ON THE INTEREST FREE SECURITY FOR ARRIVING AT ANNUAL LETTING VALUE SINCE THAT WAS NOT PERMISSIBLE THE EFFECT WO ULD BE THAT SUCH ASSESSMENT WAS RIGHTLY SET ASIDE BY THE COMMIS SIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL. THEREFORE THE ORDERS WOULD NOT CALL FOR ANY INTERFERENCE. THESE APPEALS ARE THUS DISMISSED ON THIS GROUND. ONCE WE HOLD THIS THE V ERY BASIS ADOPTED BY THE ASSESSING OFFICER TO FIX ANNUAL LETT ING VALUE WAS WRONG AND THEREFORE NO FURTHER EXERCISE IN FACT IS REQUIRED BY US IN THESE APPEALS. HOWEVER WE MAY OBSERVE THAT NO PARTICULAR TEST CAN BE LAID DOWN AND IT WOULD DEPEND ON THE FACTS OF EACH CASE. WE WOULD DO NOTHING MORE THAN TO EXTRACT THE FOLLOWING PASSA GE FROM THE SUPREME COURT JUDGMENT IN THE CASE OF MOTICHAND V. BOMBAY MUNICIPAL CORPORATION AIR 1968 SC 441 442: ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 16 IT IS WELL-RECOGNIZED PRINCIPLE IN RATING THAT BOT H GROSS VALUE AND NET ANNUAL VALUE ARE ESTIMATED BY REFER ENCE TO THE RENT AT WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. VARIOUS METHODS OF VALUATION ARE APPLIED IN ORDER TO ARRIVE AT SUCH HY POTHETICAL RENT FOR INSTANCE BY REFERENCE TO THE ACTUAL RENT PAID FOR THE PROPERTY OR FOR OTHERS COMPARABLE TO IT OR WHER E THERE ARE NO RENTS BY REFERENCE TO THE ASSESSMENTS OF COM PARABLE PROPERTIES OR TO THE PROFITS EARNED FROM THE PROPER TY OR TO THE COST OF CONSTRUCTION. WE HAVE ALSO TAKEN NOTE OF THE JUDGMENT OF THE BOMB AY HIGH COURT IN THE CASE OF J.K. INVESTORS [2001] 248 ITR 723 WHEREIN THE COURT HINTED THAT VARIOUS FACTORS MAY BECOME RE LEVANT IN DETERMINING THE FAIR RENT. THE PRECISE OBSERVATI ONS OF THE COURT IN THE SAID JUDGMENT ARE AS UNDER (PAGE 727): AT THE COST OF REPETITION IT MAY BE MENTIONED THAT UNDER SECTION 23(1)(A) THE ASSESSING OFFICER HAS TO DECI DE THE FAIR RENT OF THE PROPERTY. WHILE DECIDING THE FAIR RENT VARIOUS FACTORS COULD BE TAKEN INTO ACCOUNT. IN SUCH CASES VARIOUS METHODS LIKE THE CONTRACTORS METHOD COULD BE TAKEN INTO ACCOUNT. IF ON COMPARISON OF THE FAIR RENT WITH TH E ACTUAL RENT RECEIVED THE ASSESSING OFFICER FINDS THAT THE ACTUAL RENT RECEIVED IS MORE THAN THE FAIR RENT DETERMINAB LE AS ABOVE THEN THE ACTUAL RENT SHALL CONSTITUTE THE AN NUAL VALUE UNDER SECTION 23(1)(B) OF THE ACT. NOW APPL YING THE ABOVE TEST TO THE FACTS OF THIS CASE WE FIND A CAT EGORICAL FINDING OF THE FACT RECORDED BY THE T4IBUNAL THAT T HE ACTUAL RENT RECEIVED BY THE ASSESSEE WAS MORE THAN THE FAI R RENT. UNDER THE ABOVE CIRCUMSTANCES IN VIEW OF THE SAID FINDING OF THE FACT WE DO NOT SEE ANY REASON TO INTERFERE . 32. IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF C IT VS. JK INVESTORS (SUPRA) AS WELL AS THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF MONI KUMAR SUBBA (SUPRA) WE SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 33. GROUND NO. 6 IS REGARDING CHARGING OF INTEREST U/S 234B & 234C IS CONSEQUENTIAL IN NATURE THEREFORE THE AO IS DIRECTED ACCORDINGLY. ITA NOS. 714 & 1473/M/07 AND 5820 & 5753/M/08 SHAILAJA S. HEMDEV 17 34. GROUND NO. 7 REGARDING INITIATION OF PENALTY PR OCEEDINGS IS PREMATURE IN NATURE THEREFORE THE SAME IS NOT REQ UIRED TO BE ADJUDICATED BY US. 35. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 36. TO SUM UP APPEALS FILED BY THE ASSESSEE BEING ITA NO. 714/M/07 IS DISMISSED & 5820/M/08 IS PARTLY ALLOWED AND APPEALS FILED BY THE REVENUE BEING 1474/M/07 & 5753/M/08 AR E DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2011. SD/- SD/- (P.M. JAGTAP) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 27 TH JULY 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE E BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. `