Shri A.R.Lakshmanan, L/H of Smt.AR.Valliammal, CHENNAI v. ITO, Karaikudi

ITA 868/CHNY/2011 | 2000-2001
Pronouncement Date: 28-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 86821714 RSA 2011
Assessee PAN ABYPL3011H
Bench Chennai
Appeal Number ITA 868/CHNY/2011
Duration Of Justice 2 month(s) 18 day(s)
Appellant Shri A.R.Lakshmanan, L/H of Smt.AR.Valliammal, CHENNAI
Respondent ITO, Karaikudi
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 28-07-2011
Date Of Final Hearing 26-07-2011
Next Hearing Date 26-07-2011
Assessment Year 2000-2001
Appeal Filed On 10-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NO. 868/MDS/2011 ASSESSMENT YEARS : 2000-01 SHRI A. R. LAKSHMANAN L/H OF SMT. A.R. VALLIAMMAL 91/2 VINAYAGA NAGAR KUTCHERRY ROAD MYLAPORE CHENNAI 600 004. PAN : ABYPL3011H (APPELLANT) V. THE INCOME TAX OFFICER WARD I(3) KARAIKUDI. (RESPONDENT) APPELLANT BY : SHRI G. BASKAR RESPONDENT BY : SHRI P.B. S EKARAN CIT - DR O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE ITS GRIEVANC E IS THAT THE CIT(APPEALS) HELD SECTION 25B OF INCOME-TAX ACT 19 61 (IN SHORT THE ACT) INTRODUCED THROUGH FINANCE ACT 2000 TO BE R ETROSPECTIVE IN NATURE AND APPLIED FOR THE IMPUGNED ASSESSMENT YEAR SO AS TO TAX THE ARREARS OF RENT RECEIVED BY HIM. I.T.A. NO. 868/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT STATE BANK OF INDIA WHICH WAS A TENANT OF THE ASSESSEE HAD MENTIONED I N THE TDS CERTIFICATE A HIGHER AMOUNT OF RENT THAN WHAT WAS D ECLARED BY THE ASSESSEE IN THE RETURN. EXPLANATION WAS SOUGHT IN THIS REGARD AND ASSESSEE BY HIS LETTER DATED 20.12.2006 SUBMITTED T O THE A.O. THAT THE ARREARS OF RENT RECEIVED FOR THE PERIOD OF FIVE YEARS STARTING FROM 1.1.1997 WAS INCLUDED IN SUCH CERTIFICATE BUT THIS COULD NOT BE TREATED AS RENT OR INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. AS PER THE ASSESSEE ARREARS OF RENT COULD NOT BE CONS IDERED AS A PART OF THE ANNUAL VALUE. ASSESSING OFFICER HOWEVER DID NOT ACCEPT THIS EXPLANATION BUT RATHER COMPLETED THE ASSESSMENT CON SIDERING THE RENT RECEIVED FROM STATE BANK OF INDIA ALONG WITH ARREARS OF RENT AS PART OF INCOME UNDER THE HEAD INCOME FROM HOUSE PR OPERTY. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS) ARGUMENT OF THE ASSESSEE WAS THAT ARREARS OF RENT COULD BE TAXED ONLY IN THE ASSESSMENT YEARS AND RELEVANT TO THE YEAR OF ACCRUAL OF SUCH RENT AN D NOT ON RECEIPT. AS PER THE ASSESSEE ASSESSING OFFICER ALSO DID NOT ALLOW THE INTEREST AND PROPERTY TAX AS A DEDUCTION. LD. CIT(APPEALS) HOWEVER WAS OF THE OPINION THAT SECTION 25B INSERTED BY FINANCE AC T 2000 WITH EFFECT I.T.A. NO. 868/MDS/11 3 FROM 1 ST APRIL 2001 WAS CLARIFICATORY IN NATURE AND HENCE COULD BE APPLIED FOR IMPUGNED ASSESSMENT YEAR 2000-01 ALSO. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE RAJASTHAN HIGH CO URT IN THE CASE OF CIT V. DOWAGAR MAHARANI RESIDENTIAL ACCOMMODATION W ELFARE ASSOCIATION TRUST (2008) 217 CTR 497 FOR GIVING SUC H AN INTERPRETATION. THEREFORE HE UPHELD THE ORDER OF A.O. IN SO FAR AS IT RELATED TO CONSIDERATION OF ARREARS OF RENT WAS CON CERNED. HOWEVER HE DIRECTED THE A.O. TO RECONSIDER THE CLAIM OF THE ASSESSEE FOR INTEREST PAYMENT ON THE BUILDING LOAN IF PROPER EVI DENCE WAS PRODUCED. NEVERTHELESS NO DIRECTION WHATSOEVER WA S GIVEN WITH REGARD TO CLAIM OF DEDUCTION OF PROPERTY TAX. 4. NOW BEFORE US LEARNED A.R. ASSAILING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT THE DECISION RELIED ON BY THE LD. CIT(APPEALS) OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF DOWAGAR MAHARANI RESIDENTIAL ACCOMMODATION WELFARE ASSOCIATION TRUST (SUPRA) STOOD REVERSED BY HON'BLE APEX COURT IN (2010) 230 CTR (SC) 18. ACCORDING TO HIM HON'BLE APEX COURT OPINED THAT THERE WAS NO NEED FOR THE HON'BLE HIGH COURT TO INT ERPRET SECTION 25B ON THE FACTS OF THAT CASE. ON THE OTHER HAND ACCO RDING TO HIM COCHIN BENCH OF THIS TRIBUNAL IN THE CASE OF PUNALU R PAPER MILLS LTD. I.T.A. NO. 868/MDS/11 4 V. ITO (2009) 29 SOT 449 (29 TH AUGUST 2008) AND MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF SMT. ANITA M. SHAH V. DCIT (2008) 20 SOT 475 HAD CLEARLY HELD THAT SECTION 25B OF THE AC T DID NOT APPLY RETROSPECTIVELY BUT COULD BE APPLIED ONLY FROM AS SESSMENT YEAR 2001-02 ONWARDS. LEARNED A.R. SUBMITTED THAT THE D ECISION OF HON'BLE RAJASTHAN HIGH COURT HAVING BEEN REVERSED B Y HON'BLE APEX COURT THE RULINGS OF CO-ORDINATE BENCH OF THIS TRI BUNAL ON THE ISSUE HAD TO BE FOLLOWED. 5. PER CONTRA LEARNED D.R. SUBMITTED THAT HON'BLE APEX COURT HAD NOT REVERSED THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF DOWAGAR MAHARANI RESIDENTIAL ACCOMMODATION WELFARE ASSOCIATION TRUST (SUPRA). READING FROM THE HON'BL E APEX COURT DECISION RENDERED ON 5 TH FEBRUARY 2010 LEARNED D.R. SUBMITTED THAT ASSESSEE-PETITIONER THERE WAS ONLY GIVEN A PERMISSI ON TO MOVE TO HON'BLE RAJASTHAN HIGH COURT FOR RECALLING THE OBSE RVATION REGARDING SECTION 25B AND THE HON'BLE HIGH COURT IN PURSUANCE THEREOF HAD NOT MADE ANY RECALL OF THEIR ORDER. THEREFORE ACCORDI NG TO HIM INTERPRETATION OF LAW DONE BY THE HON'BLE RAJASTHAN HIGH COURT CONTINUED TO HOLD SWAY. I.T.A. NO. 868/MDS/11 5 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THE QUESTION IS REGARDING RETROSPECTIVITY OF APPLIC ATION OF SECTION 25B OF THE ACT. SECTION 25B WAS BROUGHT INTO STATUTE B Y FINANCE ACT 2000 WITH EFFECT FROM ASSESSMENT YEAR 2001-02. RET ROSPECTIVE THEREOF HAD FIRST TIME COME FOR ADJUDICATION BEFORE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF SHREE SHYAM KAMAL INDUSTRIE S (P) LTD. V. ITO (2005) 4 SOT 146 (DEL). IN ITS DECISION DATED 29.6 .2005 DELHI BENCH HELD THAT THE SAID SECTION WHICH CAME INTO FORCE ON 1.4.2001 COULD BE APPLIED ONLY FOR ASSESSMENT YEAR 2001-02 AND SUBSEQ UENT YEARS. THE SAME VIEW WAS HELD BY COCHIN BENCH OF THIS TRIB UNAL IN THE CASE OF K. VINOD KUMAR V. ACIT (2007) 16 SOT 227 (COCH). WHAT IS TO BE NOTED THAT THESE TWO DECISIONS WERE RENDERED PRIOR TO THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF DOWAGAR MAHARANI RESIDENTIAL ACCOMMODATION WELFARE ASSOCIATION TRUST (SUPRA). LATTER DECISION WAS PRONOUNCED ON 6 TH MAY 2008. NO DOUBT THERE IS A LATER DECISION OF COCHIN BENCH OF THIS TRIBUNAL I N THE CASE OF PUNALUR PAPER MILLS LTD. (SUPRA) WHICH HAS HELD OWN TO ITS EARLIER VIEW THAT SECTION 25B COULD NOT BE APPLIED RETROSPECTIVE LY. IF WE LOOK AT PARA 12 OF THE ORDER OF THAT BENCH OF THE TRIBUNAL IT GOES AS UNDER:- I.T.A. NO. 868/MDS/11 6 12. WE HEARD BOTH SIDES IN DETAIL AND CONSIDERED TH E ISSUE IN A CAREFUL MANNER. COCHIN BENCH OF THE TRIBUNAL IN TH E CASE OF K. VINOD KUMAR VS. ASSTT. CIT (2007) 16 SOT 227 (COCH) HAS HELD THAT S. 25B IS NOT CLARIFICATORY IN NATURE AND THER EFORE IT COULD NOT BE RETROSPECTIVELY APPLIED. THE VERY SAME VIEW W AS TAKEN BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SHRE E SHYAM KAMAL INDUSTRIES (P) LTD. (SUPRA). THE MUMBAI BENC H OF THE TRIBUNAL IN THE CASE OF SMT. ANITA M. SHAH (SUPRA) AGAIN HELD THAT S. 25B IS NOT CLARIFICATORY IN NATURE. IN VIEW OF THE ABOVE SUCCESSIVE JUDICIAL PRONOUNCEMENTS DELIVERING CONSI STENT VIEW ON THE ISSUE WE HOLD THAT IT IS NOT POSSIBLE TO HOLD THAT S. 25B IS JUST CLARIFICATORY. AS ARGUED BY THE LEARNED CHARTER ED ACCOUNTANT THE CALCUTTA HIGH COURT IN THE CASE OF HOPE (INDIA) LTD. (SUPRA) AND IN THE CASE OF HAMILTON & CO. (P) LTD. (SUPRA) HAS HELD THAT ARREAR RENT CANNOT BE BROUGHT TO TAX. IN THE CASE OF HAMILTON & CO. (P) LTD. (SUPRA) THE COURT HELD THA T WHERE RENT IS NOT RECEIVED WITHIN THE RELEVANT PREVIOUS YEAR THE SAME CANNOT BE TAXED IN A SUBSEQUENT YEAR OF RECEIPT. THE COURT ALSO HELD THAT THE ARREAR RENT DOES NOT SHED ITS CHARACTER OF INCOME FROM HOUSE PROPERTY AND THEREFORE CANNOT BE TAXED AS IN COME FROM OTHER SOURCES. THE RATIO OF THE DECISION IS THAT EVEN THOUGH ARREAR RENT RETAINS THE CHARACTER OF HOUSE PROPERTY INCOME THE SAME CANNOT BE BROUGHT TO TAX BECAUSE OF THE FACT T HAT THE LAW DOES NOT PERMIT TO ASSESS THE HOUSE PROPERTY INCOME IN S SUBSEQUENT YEAR OF RECEIPT. IT IS BECAUSE OF THAT I NHERENT INABILITY THE ARREAR RENT IS NOT TAXABLE IN THE YEAR OF RECEIPT. IN THE CASE OF HOPE (INDIA) LTD. (SUPRA) AGAIN THE CA LCUTTA HIGH COURT HAS HELD THAT RENT MUST BE HELD TO MEAN SUCH AMOUNT PAYABLE BY A TENANT WHICH HAS BEEN AGREED UPON OR WHI CH HAS BEEN DETERMINED AS FAIR RENT BY THE RENT CONTROLLER AND THEREFORE INCOME FROM HOUSE PROPERTY CANNOT BE COMP UTED ON THE BASIS OF ENHANCED SANCTIONED AND AGREED AFTER THE CLOSE OF THE PREVIOUS YEAR. THE LAW PREVAILING BEFORE 1 ST APRIL 2001 HAS ALREADY BEEN SETTLED BY THE JUDICIAL PRONOUNCEMENTS O F CALCUTTA HIGH COURT AS STATED ABOVE. THE LEGISLATURE HAS C ONSCIOUSLY TAKEN NOTE OF THIS INHERENT INABILITY HAS INSERTED A NEW S. 25B THROUGH THE FINANCE ACT 2000 TO BE EFFECTIVE FROM 1 ST APRIL 2001 APPLICABLE TO THE ASST. YR. 2001-02 ONWARDS S . 25B IS I.T.A. NO. 868/MDS/11 7 ALTOGETHER CHANGING THE POSITION DECLARED BY THE COU RTS BEFORE 1 ST APRIL 2001. THE POSITION UPTO 1 ST APRIL 2001 HAS BEEN WELL- SETTLED. SUCH BEING THE CASE IT IS NOT POSSIBLE I N LAW TO HOLD THAT S. 25B IS CLARIFICATORY IN NATURE AND RETROSPECTIVE IN OPERATION. WE HOLD THAT IT HAS ONLY PROSPECTIVE OPERATION. THUS IT IS CLEAR THAT RELIANCE HAS BEEN PLACED BY COCHIN BENCH ON ITS EARLIER DECISION IN K. VINOD KUMAR (SUPRA) AND ALSO THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF SHREE S HYAM KAMAL INDUSTRIES (P) LTD. (SUPRA) BOTH OF WHICH WERE GIVE N PRIOR TO THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CAS E OF DOWAGAR MAHARANI RESIDENTIAL ACCOMMODATION WELFARE ASSOCIAT ION TRUST (SUPRA). LATTER CASE WAS NEVER BROUGHT TO ITS NOTI CE THOUGH THE ORDER IN PUNALUR PAPER MILLS LTD. (SUPRA) WAS GIVEN ON 29 TH AUGUST 2008. NO DOUBT THE TRIBUNAL ALSO RELIED ON THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF HOPE (INDIA) LTD. (238 IT R 740) FOR COMING TO THIS CONCLUSION BUT IT WAS AFTER CONSIDERING T HIS DECISION OF CALCUTTA HIGH COURT IN THE CASE OF HOPE (INDIA) LTD . (SUPRA) THAT THE RAJASTHAN HIGH COURT HELD SECTION 25B TO BE CLARIFI CATORY IN NATURE AND TO HAVE RETROSPECTIVE EFFECT. NO DOUBT HON'BL E APEX COURT ON ASSESSEES APPEAL HELD IN 230 CTR (SC) 18 THAT THE RE WAS MERIT IN THE CONTENTION OF THE ASSESSEE THAT NO NEED EXISTED FOR INTERPRETATION I.T.A. NO. 868/MDS/11 8 OF SECTION 25B ON THE FACTS AND CIRCUMSTANCES OF TH E CASE. WE ARE REPRODUCING FULL JUDGEMENT OF APEX COURT HEREUNDER: - PRIMA FACIE WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO NEED FOR THE HIGH COURT TO INTERPRET S . 25B OF THE I.T. ACT ON THE FACTS AND CIRCUMSTANCES OF THIS CAS E. WE DO NOT FIND PRIMA FACIE THE REASON FOR HAVING EXAMINED S . 25B. 2. IN THE CIRCUMSTANCES WE HEREBY GRANT PERMISSION TO THE ASSESSEE-PETITIONER TO MOVE THE HIGH COURT FOR RECALL/EXPUNGEMENT OF ONLY THOSE OBSERVATIONS PERTAI NING TO S. 25B IF THE HIGH COURT SO DEEMS IT FIT. AS ARGUED BY LEARNED D.R. THE HON'BLE APEX COURT G AVE PERMISSION TO THE ASSESSEE THEREIN TO MOVE FOR A RECALL/EXPUNG EMENT OF OBSERVATIONS PERTAINING TO SECTION 25B IF THE HIGH COURT DEEMED IT FIT. THERE WAS NO EXPLICIT REVERSAL OF THE FINDINGS OF H ON'BLE RAJASTHAN HIGH COURT THAT SECTION 25B WAS CLARIFICATORY IN NA TURE AND HAD RETROSPECTIVE EFFECT. NOTHING WAS BROUGHT ON RECOR D BY LEARNED A.R. TO SHOW THAT THE HIGH COURT HAD RECALLED THAT PART OF ITS ORDER REGARDING SECTION 25B. THUS THE POSITION IS THAT W E ARE HAVING ON DATE THE DECISION OF HON'BLE RAJASTHAN HIGH COURT T HAT SECTION 25B HAD RETROSPECTIVE OPERATION. THERE IS NO OTHER CON TRARY DECISION OF ANY OTHER HIGH COURTS AVAILABLE NOW NOR BROUGHT TO OUR NOTICE BY EITHER SIDES. WE ARE OF THE OPINION THAT IN THE FA CE OF DECISION OF I.T.A. NO. 868/MDS/11 9 HON'BLE HIGH COURT THOUGH NON JURISDICTIONAL WE AR E BOUND TO FOLLOW IT EVEN WHEN PITTED AGAINST A NUMBER OF DECISIONS OF C O-ORDINATE BENCHES OF THIS TRIBUNAL WHICH TOOK A DIFFERENT VIE W. HENCE WE HAVE TO HOLD THAT SECTION 25B WAS CORRECTLY HELD TO BE R ETROSPECTIVE BY LD. CIT(APPEALS). NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(APPEALS). BUT NEVERTHELESS ON THE ASPECT OF CONSIDERATION OF DEDUCTION OF PROPERTY TAX WE FIND THAT LD. CIT(APP EALS) HAS NOT GIVEN ANY DIRECTION. WE THEREFORE REMIT THIS ISSUE BAC K TO THE FILE OF THE A.O. FOR CONSIDERING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF PROPERTY TAX IF NECESSARY EVIDENCE IS PRODUCED. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 28 TH JULY 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 28 TH JULY 2011. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-I MADURAI/ CIT-I MADURAI/D.R./GUARD FILE