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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, DCIT, Circle 21(1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal sought to set aside the impugned order dated 11.08.2017 passed by the Commissioner of Income-tax (Appeals)-38, Delhi qua the assessment year 2013-14 on the ground that :-
“On the facts and under circumstances of the case, the Ld. CIT (A) has erred in directing the AO to calculate the Gross Annual Value (GAV) from 14.12.2012 to 31.03.2013 which is violation of section 23 (1) of the I.T. Act, 1961 which is a deeming and Gross Annual Value (GAV) is to be calculated on year to year basis.” 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer (AO) made addition of Rs.4,20,91,300/- while calculating income from house property on the ground that the assessee has failed to furnish any detail in this regard and as such, 10% of the cost of assets is being deemed to be the annual value of the property under section 23 (1) of the Income-tax Act, 1961 (for short ‘the Act’).
Assessee carried the matter before the ld. CIT (A) by way of filing the appeals who has partly allowed the appeal. Feeling aggrieved by the order passed by the ld. CIT (A), the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Ld. DR for the Revenue challenging the impugned order contended that Gross Annual Value (GAV) has to be computed on financial year basis. Ld. DR filed written submissions which have been made part of the judicial record but ultimately ld. DR relied upon the order passed by the AO and has not controverted the facts marshaled by the ld. CIT (A) in the light of the case law discussed in the impugned order. However, on the other hand, ld. AR for the assessee relied upon the order passed by the ld. CIT (A).
The Revenue has challenged the directions issued by the ld. CIT (A) to AO to calculate Gross Annual Value (GAV) from 14.12.2012 to 31.03.2013 in accordance with the provisions contained under section 23 (1) of the Act after ascertaining the prevailing capital W.I.P. of Rs.85,90,06,089/- after allowing deduction of the interest expenditure in accordance with section 24(b) of the Act on the ground that it is violation of section 23(1) of the Act which is deeming and GAV is to be calculated on year to year basis.
We have perused the order passed by the ld. CIT (A) who has thrashed the facts qua the issue in question in the light of the case law relied upon by the parties to the appeal and has found that GAV has not been computed in accordance with the provisions of section 23(1)(a) of the Act.
For ready perusal, provisions contained u/s 23(1)(a) of the Act are extracted as under :-
“23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be— (a) the sum for which the property might reasonably be expected to let from year to year; or
Perusal of the assessment order goes to prove that the AO without bringing on record any evidence of the quantum of rent realizable by the assessee qua the property in question proceeded to take ad hoc rate of 7% of the value of property in question to be its annual value. So, we are of the considered view that GAV computed by the AO by ignoring the provisions contained u/s 23(1)(a) of the Act is not sustainable in the eyes of law.
Ld. CIT(A) has also taken into account the decision rendered by the coordinate Bench of the Tribunal in Sunil Kumar Saha vs. ITO, Ward 55 (1), Kolkata (2015) 64 taxmann.com 109 wherein it is held that, “estimation of notional rent by the AO without giving basis for the same was liable to be rejected. It is also held by the coordinate Bench of the Tribunal in the case of Universal Precision Screws vs. ACIT (2016) 69 taxmann.com 368 that, “when it is proved that once a term loan had been taken for acquiring or constructing property which fetched income under the head ‘income from house property’, interest on such loan had to be allowed as deduction u/s 24(b) of the Act”.
Keeping in view the aforesaid facts, ld. CIT (A) returned the following findings :-
“4.3 I have carefully perused the submissions of appellant and the assessment order on this ground of appeal. The appellant acquired 23,991.5 sq.ft of a building named "THE CAPITAL" at Plot No.C-70, in Bandra Kurla Complex for a consideration of Rs.70,81,68,900/- on January 28, 2011 from the builder M/s Wadhwa Group Holdings Private Limited. This property was under construction in FY 2011-12 and was disclosed by appellant under the head 'Capital Work in Progress' in its audited financial statements for that year. Subsequently, the appellant on April 11, 2013 i.e. in AY 2014-15 received a letter dated March 30, 2013 from M/s Wadhwa Group Holdings Pvt. Ltd., the owner of the aforesaid building, stating that as they had obtained the occupation certificate from Mumbai Metropolitan Region Development Authority ("MMRDA") till the 17th Floor of the building on December 14, 2012, the appellant was granted permission to occupy the 10th floor of the building w.e.f.. March 30, 2013. Further, as the said property was acquired by the appellant with intent to sell the same was disclosed under the head schedule 20 other Current Assets- Assets held for sale in its audited financial statements for the period ended March 31, 2013 relevant to AY 2013-14. The appellant has repeatedly stated that it had not received permission to occupy the property before 30.03.2013; hence, the provisions of sections 22 and 23(1) of the IT Act, 1961, with respect to computation of notional income were wrongly applied by AO. Appellant has also relied on a no. of judicial pronouncements in support of its submissions. However, the facts of the cases relied upon by appellant can be distinguished from the facts of the impugned case. In this regard, even though the owner was granted permission to occupy the building with effect from March 30, 2013 it is also a fact that the owner of the aforesaid building had obtained the occupation certificate from Mumbai Metropolitan Region Development Authority ("MMRDA") till the 17th Floor of the building on December 14, 2012. Hence, assessing officer is directed to compute gross annual value of the property u/s 23(1) from December 14, 2012 to March 31, 2013 in accordance with the provisions of section 23(1) after ascertaining the prevailing Capital W.I.P. of Rs.85,90,06,089/- after allowing deduction of the interest expenditure in accordance with section 24(b) of the Act. With these remarks ground of appeal 3 and its sub-grounds are partly allowed.”
Aforesaid findings returned by the ld. CIT (A) are based upon the facts factually dealt with on record wherein the assessee contended that since he (assessee) has not received the permission to occupy the property before 30.03.2013, the provisions of section 22 and 23 (1) of the Act in regard to notional income was wrongly applied by the AO.
However, ld. CIT(A) reached the conclusion on facts that though assessee was granted permission to occupy the building w.e.f. 30.03.2013 but he had obtained the occupation certificate from Mumbai Metropolitan Region Development Authority (MMRDA) till 17th floor of the building on 14.12.2012. In these circumstances, ld. CIT (A) has rightly directed to compute the GAV of the property in question under section 23(1) from December 14, 2012 to March 31, 2013 after ascertaining the prevailing capital W.I.P. of Rs.85,90,084/-. So, finding no illegality or perversity in the impugned order, appeal filed by the Revenue is hereby dismissed. Order pronounced in open court on this 12th day of January, 2021.