M/S.SURYAVARDHAN ESTATES P L vs. THE DY COMMISSIONER OF INCOM

TCA.Nos.767 to 769 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 09.10.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.767 to 769 of 2019 & CMP.Nos.21892 & 21898 of 2019

M/s.Suryavardhan Estates Pvt. Ltd., Chennai-2 ...Appellant Vs The Deputy Commissioner of Income Tax, Corporate Circle-6(2), Chennai-34 ...Respondent

APPEALS under Section 260A of the Income Tax Act, 1961 against the common order dated 17.10.2017 made in ITA.No.462/Mds/2017, C.O.No.36/Mds/2017 and ITA.No.697/Mds/2017 on the file of the Income Tax Appellate Tribunal, Madras ‘C’ Bench for the assessment year 2012-13.

For Appellant: Mr.A.S.Sriraman For Respondent: Mr.J.Narayanasamy, SSC

1/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 COMMON JUDGMENT (Judgment was delivered by T.S.SIVAGNANAM,J) We have elaborately heard Mr.A.S.Sriraman, learned counsel appearing for the appellant - assessee and Mr.J.Narayanasamy, learned Senior Standing Counsel appearing for the respondent – Revenue. 2. These appeals have been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) challenging the common order dated 17.10.2017 made in ITA.No.462/Mds/2017, C.O.No.36/Mds/ 2017 and ITA.No.697/Mds/2017 on the file of the Income Tax Appellate Tribunal, Madras ‘C’ Bench (for brevity, the Tribunal) for the assessment year 2012-13. 3. The above appeals are admitted on the following substantial questions of law : “i. Whether the provisions of Section 23(5) of the Income Tax Act, 1961 inserted by the Finance Act, 2017 with effect from 01.4.2018 could be treated as retrospective in operation for the purpose of computing notional rent for taxation under the head ‘income from house property’? 2/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 ii. Whether the provisions of Section 23(5) of the Income Tax Act, 1961 was correctly applied by the Tribunal for computing notional rent for the unsold stock of flats in Victoria Towers especially when the notional computation on the plain reading of the said Sub-Section would apply after one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the Competent Authority resulting in mis-construction of the provision ? iii. Whether the assessment of notional rent pertaining to unsold stock of flats in Victoria Towers overlooking the approved main object in the memorandum of association of the appellant which provided for the assessment of actual rent alone under the head ‘income from business’ as fortified by the law declared by the Hon’ble Supreme Court in the case reported in 373 ITR 673 is correct in law despite the assessment of only the actual rent from the other tower as accepted by them in the impugned order as well as by the Revenue/respondent for the very same assessment year namely assessment year 2012-13 and also for the assessment year 2014-15 ? iv. Whether the assessment of notional rent for the unsold stock of flats (Victoria Towers) under 3/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 the head ‘income from house property’ is correct despite the decision in deleting the notional rent computation for the unsold stock of commercial space (Coromandel Plaza) in the computation of income from house property establishing conflicting decision and misconstruction of the provisions of Section 22 of the Income Tax Act, 1961 ? v. Whether the Appellate Tribunal is correct in law in dismissing the appeal in ITA.No.697/ Mds/2017 as time barred by limitation/out of time by 72 days while overlooking the affidavit filed/placed on record incorporating the reasons for such delay while proving the perversity in recording facts in relation thereto? And vi. Whether the assessment of notional rent at Rs.500/- per sq.ft., in terms of Section 23 of the Income Tax Act, 1961 was correct in law especially in the absence of valid materials available on record/comparable instances in relation thereto and especially in the light of the cryptic findings in the impugned order in relation thereto?” 4. The assessment for the year under consideration was completed by the assessment order dated 27.3.2015. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax 4/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 (Appeals)-15, Chennai-34 [for brevity, the CIT(A)], who, by order dated 07.11.2016, allowed the appeal. As against that, the Revenue preferred an appeal before the Tribunal and the assessee filed a cross objection. The Tribunal, by common order dated 17.10.2017, which is impugned in these appeals, allowed a portion of the appeal filed by the Revenue and thereby set aside the order passed by the CIT(A) to that extent. 5. With regard to other issues, the Tribunal held against the Revenue, which was challenged by the Revenue by filing TCA.Nos.537 and 538 of 2018 and they are disposed of today i.e. 09.10.2010 by a common judgment on the ground that the Tribunal itself recalled that portion of the order and that the matters are now pending before the Tribunal for a fresh consideration. 6. We have carefully gone through the impugned proceedings and we find that the reasons assigned by the Tribunal are not clear and cogent. The Tribunal appears to have not taken note of the submissions, which have been raised before it in the cross objection as well as while arguing for the assessee in the Revenue’s appeal. In fact, the assessee raised the following grounds before us, which we find that they were also raised 5/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 before the Tribunal, but were not considered : “i. The Appellate Tribunal erred in sustaining the computation of annual letting value of the unsold stock of residential flats in Victoria Towers for the purpose of computing notional rent under the ‘income from house property’ in the computation of taxable total income without assigning proper reasons and justification. ii. The Appellate Tribunal failed to appreciate that having noticed the main object of the appellant in the approved memorandum of association especially Clause 4 of the main object ‘to carry on the business of real estate agent and to buy, take on lease or otherwise acquire, sell, let on hire or dispose of immovable property like houses, buildings, flats, holiday resorts, the assessment of notional rent in such circumstances under the head ‘income from house property’ was bad in law. iii. The Appellate Tribunal failed to appreciate that having accepted the stand on the assessment of rental income from the Coromandel Plaza/commercial complex under the head ‘income from business’ in the impugned order after noticing the assessment of actual rent by the respondent/Revenue also under the head ‘income 6/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 from business’, there was no legal reasoning for assessing notional rent for unsold stock of flats especially in the context of the appellant admittedly engaged in the business of real estate including the letting of flats on hire, thereby vitiating the different treatment/conclusion reached in the impugned order of this issue. iv. The Appellate Tribunal failed to appreciate that the notional computation of rent for the purpose of taxation under the head ‘income from house property’ even though should relate to any buildings or lands appurtenant thereto of which the assessee is the owner, the artificial/wrong distinction made in the impugned order between the unsold stock of residential flats and unsold stock of shopping space in the two towers owned by the appellant for the purpose of computing notional rent under the head ‘income from house property’ for the unsold stock of flats was wrong, erroneous, unjustified, incorrect and not sustainable in law. v. The Appellate Tribunal failed to appreciate that having decided the issue relating to the deletion of notional rent pertaining to the unsold stock of commercial space in Coromandel Plaza in favour of the appellant, the sustenance of 7/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 the notional addition pertaining to the Victoria Towers under the head ‘income from house property’ had established the perversity in their findings resulting in conflicting decision as well as proving complete non application of mind while further establishing the misconstruction of the provisions of law and the judge made law referred to the impugned order.”

09.10.2020

To 1.The Income Tax Appellate Tribunal, Madras ‘C’ Bench 2.The Deputy Commissioner of Income Tax, Corporate Circle-6(2), Chennai-34

RS 9/10 http://www.judis.nic.in TCA.Nos.767 to 769 of 2019 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J

TCA.Nos. 767 to 769 of 2019 & CMP.Nos.21892 & 21898 of 2019

09.10.2020 10/10 http://www.judis.nic.in