SHRI RADHEY CONSTRUCTION PVT LTD vs. PR COMMISSIONER OF INCOME TAX-I

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 248 / 2017 Shri Radhey Construction Pvt. Ltd., B-7-A, Shiv Marg, Bani Park, Jaipur ----Appellant Versus Principal Commissioner of Income Tax-I, New Central Revenue Building, Department of Income Tax, Statue Circle, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. S.L. Poddar for Mr. N.L. Agarwal For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 12/12/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal for statistical purpose. 2. This Court while admitting the appeal on 09.10.2017 framed following substantial questions of law: “1. Whether the ld. ITAT was justified under law to held the Assessee liable to pay income tax on the annual letting value of the unsold flats owned by it under the head income from house property ignoring the fact that the Hon’ble Supreme Court of India has granted SLP in Ansal Housing and Constructions Ld. Vs. CIT against CIT vs. Ansal Housing and Constructions decided by Hon’ble Delhi High Court on the similar question of law? 2. Whether the ld. ITAT was justified under law while ignoring the instructions issued by the CBDT vide circular no. 14 of 2001 dated

(2 of 4) 22.11.2001 in para 29.2 & 29.3, which are binding on the departmental officers and wherein it has been clarified that the unrealized rent shall not be included in the actual rent receivable and therefore shall not form part of the annual value?” 3. On the first issue, we make it clear that the decision of the Tribunal will be subject to the SLP which is pending before the Supreme Court. If the SLP is decided in favour of the assessee it will be open for the assessee to take benefits pursuant to the decision. The issue is answered in favour of assessee subject to SLP otherwise the order of the Tribunal is not disturbed. 4. On the second issue, counsel for the appellant has taken us to the conditions which reads as under: “3. Board circular is in favour of the assessee The board has issued explanatory notes on the amendments carried out by Finance act, 2001. The provisions of section 23 were amended by the Finance Act 2001. The board has issued the following clarification under Circular No. 014 of 2001 Dt. 22nd November, 2001 which goes in favour of the assessee. Circular No. 014 of 2001 DT. 22nd November, 2001 Subject Finance Act, 2001-Explanatory Notes on provisions relating to Direct Taxes Dated 22/11/2001 "29.2 The substituted section 23 retains the existing concept of annual value as being the sum for 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 provided that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be

(3 of 4) the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is still higher than the ALV. Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy, the actual rent received or receivable is less than the ALV, the sum so received 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." The above para of the circular very clearly state that where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy, the actual rent received or receivable is less than the ALV, the sum so receive or receivable shall be the annual value. The circular issue by the board are of binding nature particular those which given relief to the assessee which is so held by the Hon'ble Supreme Court in the following case:- UCO Bank vs. CIT

(1999)237 ITR 889 CBDT Circulars-Binding nature- Relaxation of law- CBDT has power, inter alia, to tone down the rigour of the law and ensure fair enforcement of its provisions by issuing circulars- Circulars contemplated in s. 119(2) (a) cannot be adverse to the assessee- power is given for the purpose of just, proper and efficient management of work of assessment- Circular, however, are not meant for contradicting or nullifying any provision of the statute- they are meant to mitigate the rigour of application of a particular provision-So long as such a circular is in force it would be binding on the Departmental authorities in view of the provision of s. 119 to ensure a uniform and proper administration and application of the IT Act.” 5. Taking into consideration the view taken by the Tribunal that the property which is situated is different property, therefore contention raised by the counsel for appellant is not required to be accepted.

(4 of 4) 6. Second issue is answered in favour of department and against the assessee. 7. The appeal stands partly allowed. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. Chouhan/31