ACIT 3(2)(2), MUMBAI vs. NARESH CHANDER OBEROI, MUMBAI

Aforesaid appeals by revenue for Assessment Years [in short referred to as ‘AY’] 2013-14 and 2014-15 contest the order of Ld. first appellate authority on certain common grounds of appeal and therefore, disposed of by way of this consolidated order for the sake of convenience and brevity.

The registry has noted a delay of 14 days in filing of appeal for AY 2014-15. However, perusal of Column 9 of Form 36 filed by the revenue would show that the date of communication of order appealed against has been mentioned as 19/07/2018 which, in fact, is the date of appellate order. The proforma of Scrutiny Report as available on record would reveal that the correct date of receipt of order is 06/08/2018 and considering this date, the appeal is, prima-facie in order. Therefore, we proceed to adjudicate the same on merits as argued before us.

First, we take up ITA No. 1601/Mum/2017 for AY 2013-14 which is against the order of Ld. Commissioner of Income-Tax (Appeals)-8, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-8/IT- 569/2015-16 dated 25/11/2016 on following grounds of appeal:

1 Facts on record would reveal that the assessee being resident individual was assessed for year under consideration u/s 143(3) of the Income Tax Act,1961 on 29/02/2016 wherein the income of the assessee was determined at Rs. 539.29 Lakhs after certain additions as against returned income of Rs.445.39 Lakhs filed by the assessee on 27/07/2013. As evident from grounds of appeal, the subject matter of present appeal is addition on account of notional rental value of (i) Flat No.31B, Maker Tower, Cuffe Parade, Mumbai & (ii) Flat No.171B, Maker Tower, Cuffe Parade, Mumbai.

2 During assessment proceedings, it transpired that the assessee has one self-occupied property viz. Flat at 181B, Jolly Maker -1, Cuffe Parade, Mumbai, the annual value of which was taken as Nil as per the provisions of the act. The Annual Rental value of another Flat No. 171B, Maker Tower A&B, C.S. No. 641, Cuffe Parade, Colaba, Mumbai was offered as Rs.60,000/-. This property was acquired by the assessee on 26/04/2012 for a consideration of Rs.14.54 Crores. However, disregarding the value offered by assessee, Ld. AO worked out notional rental value @8% of cost of the property for 11 months which worked out to be Rs.106.65 Lakhs. After allowing statutory deduction of 30%, the balance notional rental income was added into the hands of the assessee.

3 The assessee was in a possession of another property situated at Flat No.31-B, Maker Tower, Cuffe Parade, Mumbai which was occupied by the assessee’s son. The said property was in joint ownership of the assessee and his son in the ratio of 60:40. However, the assessee had gifted his share in the property to his son vide gift deed dated

Aggrieved, the assessee contested the rate of 8% as adopted by Ld. AO before Ld. CIT(A) and pleaded that the Rateable value adopted by the Municipal Corporation shall be the fair rental value as held in various judicial decisions. The Ld. first appellate authority, relying upon its own order in assessee’s own case for AYs 2011-12 & 2012-13 and relying upon the decision of this Tribunal in Pramila H.Sanghvi V/s ITO [ITA No. 2589/Mum/2011] deleted the addition on account of notional rental value. The relevant observations could be extracted in the following manner: - “5.1.1 This ground pertains to addition of Rs. 93,89,976/- made by the A.O. as income from self-occupied property. This issue had also come up before me in the appellant's appeal for A.Y. 2011-12 & 2012-13. I have decided this issue in favour of the appellant. Relevant extract of my decision is reproduced hereunder: The basic issue in the instant case is the AL V for the second house owned and self-occupied by the appellant. It is seen that the appellant has two self occupied properties, viz. 181B, Jolly Maker Tower A No. 1, 18th Floor, Cuffe Parade, Mumbai 400005 (henceforth referred to as Property 1) and 31B, Maker Tower, Cuffe Parade, Mumbai 400005 (henceforth referred to as Property 2). He lives in Property 1 with family. He owns Property 2 along with his son, Shri Bharat Oberoi in a 60% - 40% ownership ratio. For the Property 1, the appellant declared it as self occupied and claimed exemption. For Property 2, he offered Rs 8,010/ as annual lettable value (ALV) on basis of Shri Naresh Chander Oberoi Assessment Years :2013-14 & 2014-15 letter given by Maker Tower A & B Co-operative Housing Society Ltd., Mumbai 400005. The AO did not accept this ALV. Based on his Inspector's report, the AO estimated the annual rental value at Rs. 56,94,5447- and made the addition of Rs. 34,16,7267-towards income from self-occupied property, being 60% of the estimated rent. 5.1.1 It is noted that the Property 2 which is co-owned by the appellant's son is already under self occupation by the son. The property is therefore encumbered and 60% of Property 2 cannot be expected to be rented out to at fair market price. This is a unique situation requiring judicious application of the provisions of the Act. In a sense, the remaining 60% of the Property 2 can be said to be under notional self occupation of the appellant as his own son is occupying it. Had the son been living with the appellant in Property 1, it would still be considered as self occupied by the occupant. In the instant case, due to the indivisibility of living space of Property 2 it can be said that 60% is notionally occupied by the appellant. In that case, that portion of 60% has to be treated as second self occupied property of the appellant. 5.1.2 At this stage, I find guidance in a recent judgement of Hon'ble ITAT, Mumbai in ITA No. : 2589/Mum/2011 Assessment Year. 2005-06 Ms. Pramila H. Sanghvi Vs Income tax Officer quoted below: This appeal by the assessee is directed against the order dated 3.2.2011 of CIT(A) for the assessment year 2005-06. The only dispute raised is regarding annual value of second house property which was self occupied by the assessee.

Facts in brief are that the assessee owned two house properties one at Ahmedabad and the other at Mumbai and both were self occupied. Income from Mumbai property had been claimed exempt as self occupied property (SOP) and in respect of Ahmedabad property assessee had shown annual value at Rs.2,500/-. The AO observed that the annual value of the second SOP has to be determined as if the same were let out. He, therefore, estimated annual value at 6% of the investment made in the property which came to Rs.5,08,488/-and after allowing statutory deduction, he determined house property income at Rs.3,53,442/-. In appeal CIT(A) agreed with the AO that annual value of the second self occupied property had to be determined under section 23(1)(a) as if the same were let out. He accordingly confirmed the order of AO aggrieved by which the assessee is in appeal before the Tribunal.

Before us, the Id. Authorised Representative for the assessee submitted that the annual value of second SOP should be determined on the basis of Municipal Rateable Value (MRV). The Id. AR also pointed out that the property was covered by Rent Control Act, and therefore, ALV could not exceed the standard rent determined under the Rent control Act. The Id. DR on the other hand supported the orders of authorities below.

We have perused the records and considered the rival contentions carefully. The dispute is regarding determination of ALV of second

In the result, appeal of the assessee is allowed for statistical purposes. 5.1.3 In the instant case, the claim of the appellant that the impugned property is covered under the Maharashtra Rent Control Act, 1999 has not been controverted by the AO. Therefore, the decision of Hon'ble IT AT Mumbai quoted above has to be followed wherein it states, "In case rent of the property is covered under Rent Control Act, ALV can not exceed the standard rent determined/determinable under the said Act in view of the judgment f Hon'ble Supreme Court in the case of Mrs. Sheila Kaushik (131 ITk435)." 5.1.4 The Annual Rateable Value certified by the Maker Towers A & B Co- operative Housing Society Ltd. Dt. 24 June 2011 at Rs. 17,102/- has also not been challenged by the AO. There is therefore, no option but to accept the same in view of the decision of the Hon'ble ITAT. The estimation made by AO on basis of local enquiries made by Inspector is not as per law. The addition of Rs. 34,16,726A is therefore deleted. 5.1.2 Since the facts and circumstances are the same for this assessment year, except for the amount involved, following my decision for assessment year 2011-12 above, this ground of appeal is allowed. The assessing officer is directed to delete the addition of Rs. 93,89,9767- made on account of notional rent of self-occupied property. This ground of appeal is allowed. Aggrieved, the revenue is in further appeal before us.

The Ld. Departmental Representative [DR], drawing our attention to the statutory provisions, submitted that only one property could be considered to be in self-occupation of the assessee whereas all the other

Upon consideration of decisions cited by Ld. AR, we find that the factual matrix is squarely covered in assessee’s favor by catena of judicial pronouncements wherein it has been held that municipal rateable value is a recognized basis for determination of ALV. The said proposition has duly been approved by Hon’ble Bombay High Court in CIT V/s Tip Top Typography [368 ITR 330] as well as in Smt. Smitaben N.Ambani V/s CWT [323 ITR 104] which has subsequently been followed by Hon’ble Court in number of decisions. Therefore, no infirmity could be found in the impugned order, in this regard. The other decisions of this Tribunal also support the said proposition. Additionally, no fault could be found in the reasoning of Ld. first appellate authority in paragraph 5.1.1 that the property under co-ownership was encumbered

Therefore, finding no reason to interfere with the stand of Ld. CIT(A), we dismiss the appeal. ITA No. 5565/Mum/2018: AY 2014-15

Facts are pari-materia similar in this year except for the fact that the assessee has been saddled with addition on account of notional rental value with respect to only one property viz. Flat No.171B, Maker Tower, Cuffe Parade, Mumbai. The Ld. first appellate authority, relying upon the decision in earlier years, has deleted the additions, against which the revenue is in further appeal before us. Since facts and circumstances are identical, our observation as well as conclusion as for AY 2013-14 shall mutatis mutandis apply to this year also. In result, the appeal stands dismissed.

Both the appeal stands dismissed.

""थ"/ The Respondent 3. आयकरआयु"(अपील) / The CIT(A) 4. आयकरआयु"/ CIT– concerned 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 6. गाड"फाईल / Guard File