RNR APPARELS LTD, MUMBAI v. ITO 2(3)(1), MUMBAI

ITA 1326/MUM/2009 | 2003-2004
Pronouncement Date: 24-02-2010 | Result: Allowed

Appeal Details

RSA Number 132619914 RSA 2009
Assessee PAN OUTOF5700S
Bench Mumbai
Appeal Number ITA 1326/MUM/2009
Duration Of Justice 11 month(s) 28 day(s)
Appellant RNR APPARELS LTD, MUMBAI
Respondent ITO 2(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 24-02-2010
Date Of Final Hearing 11-02-2010
Next Hearing Date 11-02-2010
Assessment Year 2003-2004
Appeal Filed On 26-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI A.L.GEHLOT AM & SMT. P.MADHAVI DEVI JM I.T.A.NOS.1326 & 1327/MUM/2009 A.YRS. 2003-04 & 2005-06 M/S RNR APPARELS LIMITED 7 ESPERENCA SHAHID BHAGAT SINGH ROAD COLABA MUMBAI 400 039 PAN NO.AAACQ 1819 H INCOME TAX OFFICER 2(3)(1) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI HARISH TULSIYAN & SHASHI TULSIYAN. REVENUE BY : SHRI MOHD. USMAN. O R D E R PER P.MADHAVI DEVI JM: THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST C IT(A)S SEPARATE ORDERS DATED 19/12/2008 FOR THE ASSESSMENT YEARS 2003-04 AND 2005-06 RESPECTIVELY. 2. SINCE IN BOTH THE YEARS EXCEPT FOR THE QUANTUM THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE COMMON FOR THE S AKE OF CONVENIENCE GROUNDS OF APPEAL RAISED FOR THE A.Y 20 03-04 ARE REPRODUCED HEREUNDER- 1. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] ERRED IN LAW AND FACTS IN UPHOLDING THE ACTION OF THE ASSESS ING OFFICER IN ASSESSING THE RENTAL INCOME RECEIVED FROM SUB-TE NANT IN RESPECT OF THE TENANTED PREMISES AS INCOME UNDER TH E HEAD HOUSE PROPERTY. 2. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF THE LEARN ED ASSESSING OFFICER IN ASSESSING INCOME UNDER THE HEAD HOUSE P ROPERTY INCOME ON ESTIMATED BASIS AT RS.26 58 432/- AGAINST THE ACTUAL RENT RECEIVED OF RS.3 60 000/-. 2 3. YOUR APPELLANT PRAYS THAT A. THE ASSESSMENT OF INCOME RECEIVED IN RESPECTED OF TENANTED PREMISES UNDER THE HEAD HOUSE PROPERTY INCOME BE HE LD TO BE BAD IN LAW; B. THE ESTIMATION OF ANNUAL LETTING VALUE AT RS.26 58 432/- BE DELETED. C. SUCH OTHER RELIEF AS MAY BE DEEMED FIT BE GRANTE D. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS GROUND OF APPEAL NO.1 AND ACCORDINGLY IT IS DISMISSED AS NOT PRESSED . 4. AS REGARDS GROUND NO.2 BRIEF FACTS ARE THAT THE ASSESSEE COMPANY HAS OBTAINED TENANCY RIGHTS OF A PREMISES A T 7 TH FLOOR 71 ESPERENCA COLABA CAUSEWAY MUMBAI FROM THE ROMAN CATHOLIC TRUST VIDE AN AGREEMENT DATED 23-2-1996 AND THEREAFTER SU B-LET THE PROPERTY TO AN OTHER PARTY M/S KRISHNA VINYLS LTD. THE ASSESSEE OFFERED THE RENTAL INCOME AS BUSINESS INCOME. AO H OWEVER TREATED THE SAME AS INCOME FROM HOUSE PROPERTY AND THE SAME HAS BEEN CONFIRMED BY THE CIT[A] AND THE ASSESSEE HAS CHALL ENGED IT AS GROUND OF APPEAL NO.1 IN THESE APPEALS. AS THE ASSESSEE HA S DECIDED NOT TO PRESS GROUND OF APPEAL NO.1 THE NEXT QUESTION TO B E CONSIDERED IS THE COMPUTATION OF ANNUAL LETTING VALUE OF THE PROPERTY U/S.23(1)(A) OF THE INCOME TAX ACT. THE AO OBSERVED THAT THE ASSESSEE H AD GIVEN PART OF THE PROPERTY ON RENT TO M/S KRISHNA VINYLS LTD. FOR A CONSIDERATION OF RS.25 000/- P.M. FOR A PERIOD OF SIX MONTHS I.E. W. E.F. 1-4-2002 TO 30- 9-02 AND THEREAFTER AT RS.30 000/- FOR THE BALANCE SIX MONTHS I.E. 1-10-02 TO 31-3-02. HE OBSERVED THAT DURING THE COU RSE OF ASSESSMENT 3 PROCEEDINGS FOR THE A.Y 2005-06 THE ASSESSEE RENTE D OUT THE SAME PREMISES DURING THE MONTH OF MARCH 2005 TO M/S MSC SHIP MANAGEMENT (I) PVT. LTD. @ RS.2 76 920/- P.M. AS TH ERE WAS AN ASTRONOMICAL DIFFERENCE BETWEEN THE RENT RECEIVED F ROM M/S KRISHNA VINYLS LTD. AND M/S MSC SHIP MANAGEMENT (I) PVT. LT D. AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE REN TAL INCOME SHOULD NOT BE TAKEN AT RS.2 21 536/- P.M. AFTER REDUCING 3 0% OF THE RENT RECEIVED BY THE ASSESSEE IN 2005. THE ASSESSEE SUBM ITTED ITS REPLY STATING THAT IT HAS LET OUT ONLY 700 SQ.FT. OUT OF 5700 SQ.FT. OF THE AREA TO M/S KRISHNA VINYLS LTD. ON LEAVE AND LICENSE BAS IS AND IN SUPPORT THEREOF FILED AN AGREEMENT WITH M/S KRISHNA VINYLS LTD. THE ELECTRICITY BILLS FOR THE RELEVANT PERIOD OF BOTH M/S KRISHNA V INYLS LTD. AND M/S MSC SHIP MANAGEMENT (I) PVT. LTD. WERE ALSO FILED TO PROVE THAT ONLY A PART OF THE PREMISES HAS BEEN LET OUT TO M/S KRIS HNA VINYLS LTD. WHILE THE ENTIRE 5700 SQ.FT. HAS BEEN LET OUT TO M/S MSC SHIP MANAGEMENT (I) PVT. LTD. AND THEREFORE THE DIFFERENCE IN THE RENT. THE AO WAS HOWEVER NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND HELD THAT THE AGREEMENT BETWEEN THE ASSESSEE AND M/S KRI SHNA VINYLS LTD. WAS NOT REGISTERED AND THEREFORE NOT RELIABLE. HE THEREAFTER PROCEEDED TO TAKE THE RENT @ RS.2 21 536/- P.M. AND ACCORDINGLY COMPUTED THE ANNUAL LETTING VALUE. SIMILARLY FOR A .Y 2005-06 ALSO AO OBSERVED THAT THE PROPERTY HAD BEEN LET OUT TO M/S KRISHNA VINYLS LTD. FOR THE FIRST 11 MONTHS OF THE YEAR AND THEN TO M/S MSC SHIP MANAGEMENT (I) PVT. LTD. FOR THE LAST MONTH OF THE YEAR AND THEREFORE 4 HE ADOPTED THE RENT GIVEN BY M/S MSC SHIP MANAGEMEN T (I) PVT. LTD. @ RS.2 76 920/- FOR ALL THE MONTHS OF THE YEAR AND COMPUTED THE ANNUAL LETTING VALUE ACCORDINGLY. AGGRIEVED ASSESS EE FILED AN APPEAL BEFORE THE CIT[A] WHO CONFIRMED THE ORDER OF THE A O AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE HAD GIVEN ONLY A PART OF THE PREMISES ON RENT TO M/S KRISHNA VINYLS LTD. AND THE RENT RECEIVED FROM M/S MSC SHIP MANAGEMENT (I) PVT. LTD. FOR THE MONTH OF MARCH 2005 CANNOT BE THE BASIS FOR COMPUTING TH E ANNUAL LETTING VALUE FOR THE F.YRS. 2002-03 AND 2004-05. HE SUBMIT TED BEFORE US THE MUNICIPAL RATEABLE VALUE OF THE PROPERTY AS GIVEN B Y THE BRIHAN MUMBAI MAHANAGARPALIKA VIDE LETTER DATED 12-11-2008 AND SUBMITTED THAT AS PER THE SAID LETTER THE MUNICIPAL RATEABLE VALUE OF THIS PROPERTY WAS ONLY RS.4599/- P.M. WHEREAS THE ACTUAL RENT RE CEIVED AND OFFERED BY THE ASSESSEE IS MUCH MORE AND THEREFORE THE IN COME OFFERED BY THE ASSESSEE HAS TO BE TAKEN INTO CONSIDERATION ONL Y AS PROVIDED U/S.23 OF THE ACT. HE ALSO PLACED RELIANCE UPON THE DECISI ON OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AKSHAY TEXTILES T RADING AND AGENCIES P. LTD. REPORTED IN 304 ITR 401 WHEREIN IT HAS BEE N HELD THAT U/S.23(1)(A) OF THE ACT THE RENT RECEIVABLE IS TO BE EITHER STANDARD RENT OR THE RATEABLE VALUE AS FIXED BY THE LEGAL AUTHORI TY. 6. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 5 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS WE FIND THAT THE DISPUTE BEFORE US IS THE COMPUTATION OF ANNUAL LETTING VALUE OF THE PROPERTY. CLAUSE (A) OF SUB-SEC.(1) OF SEC.23 PROVIDES THAT THE ANNUAL VALUE OF THE PROPERTY SHAL L BE DEEMED TO BE THE SAME FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR THERE IS A CATENA OF DECISIONS TO THE EFFECT THAT ANNUAL VALUE OF PROPERTY HAS TO BE COMPUTED KEEPING IN VIEW THE MUNICIPAL RATEABLE VALUE AND ALSO THE STANDARD RENT WHERE-EVER THE RENT CONTROL ACT IS APPLICABLE. IT IS ONLY AFTER TH E COMPUTATION OF THE ANNUAL LETTING VALUE OF THE PROPERTY THAT CL.(B) OR (C) OF SUB-SEC.(1) OF SEC.23 WOULD COME INTO PLAY. IN THE CASE BEFORE US NEITHER THE AO NOR THE CIT(A) HAVE COMPUTED THE ANNUAL LETTING VALUE OF THE PROPERTY AS PROVIDED IN SEC.23(1)(A) OF THE ACT. THE HONBLE BO MBAY HIGH COURT IN THE CASE OF AKSHAY TEXTILES TRADING AND AGENCIES P. LTD.CITED SUPRA HAS HELD AS UNDER- THOUGH THE RATEABLE VALUE MAY ALSO ON OCCASIONS HA S TO CONSIDER THE STANDARD RENT IN CASES WHERE THE RENT LAWS MAY BE A PPLICABLE. BEFORE THE AMENDMENT BROUGHT ABOUT TO SECTION 23 BY THE FI NANCE ACT 2001 WITH EFFECT FROM APRIL 1 2002 EVEN IF AN ASSESSEE HAD RECEIVED HIGHER RENT THAN THE STANDARD RENT THE ADDITIONAL AMOUNT W OULD NOT BE THE SUBJECT OF TAX. TO OVERCOME THIS OMISSION THE SECTI ON WAS SUBSTITUTED TO COVER ALSO THOSE CASES WERE RENT RECEIVED WAS HI GHER THAN THE STANDARD RENT OR RENT BASED ON MUNICIPAL RATEABLE V ALUE. IF THE ARGUMENT OF THE ASSESSEE IS TO BE CONSIDERED THEN THE EXPRESSION REASONABLE WOULD HAVE TO BE GIVEN DIFFERENT MEANI NG. IN OUR OPINION IT IS NOT POSSIBLE TO GIVE A MEANING AND WIDER AMPL ITUDE THAN WHAT IS CONTAINED IN SECTION 23(1)(A). THE LEGISLATURE HAS SUBSTITUTED THE PROVISION AND BROUGHT IN SECTION 23(1)(B) TO COVER THE PART OF THE ANNUAL VALUE WHICH OTHERWISE WOULD NOT FALL WITHIN THE TAX AMBIT BEFORE ITS AMENDMENT. IN THAT CONTEXT THE EXPRESSION REC EIVABLE WOULD MEAN THAT THOUGH THE ANNUAL VALUE IS FIXED IN TERMS OF THE AGREEMENT EVEN THOUGH IT IS NOT RECEIVED IN THE RELEVANT YEAR YET THE SAME WOULD BE ASSESSABLE TO TAX IN TERMS OF THE ILLUSTRATION G IVEN ON BEHALF OF THE ASSESSEE . 6 WE FIND THAT BOTH THE AO AND CIT[A] HAVE NOT CONSI DERED THE MUNICIPAL RATEABLE VALUE AND HAVE NOT COMPUTED THE STANDARD RENT FOR COMPUTING THE ANNUAL LETTING VALUE. IN VIEW OF THE SAME WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE A O TO RECOMPUTED THE ANNUAL LETTING VALUE OF THE PROPERTY KEEPING IN VIE W THE GUIDELINES ISSUED BY THE HONBLE BOMBAY HIGH COURT AND VARIOUS OTHER JUDICIAL PRECEDENTS ON THE ISSUE. NEEDLESS TO MENTION THAT T HE ASSESSEE SHALL BE GIVEN FAIR OPPORTUNITY OF HEARING. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:24 TH FEBRUARY 2010. P/-* 7