THE KUMAR FAMILY TRUST,DELHI vs. ACIT, CENTRAL CIRCLE-4, DELHI

3. For that on the facts and in the circumstances of the case and in law and without prejudice to the preceding grounds, the Ld. CIT(A) grossly erred in holding that the assessee was not entitled to the benefit of Section 23(2) of the Act, without correctly appreciating the fact that the beneficiaries of the assessee Trust were all individuals and therefore the status of the assessee Trust was also that of an 'individual'. to 2776/Del/2022 4. For that on the facts and in the circumstances of the case and in law and without prejudice to the preceding grounds, the lower authorities failed to appreciate that the assessee Trust was a private discretionary Trust created solely for the benefit of the member-individuals and therefore they ought to have held that the assessee Trust was entitled to claim benefit of Section 23(2) of the Act for each house property held by it qua each individual-member of the assessee Trust.

5. For that on the facts and in the circumstances of the case and in law and without prejudice to the preceding grounds, the manner in which the lower authorities computed the annual lettable value of the properties was completely fallacious and unjustified and in that view of the matter the impugned addition of Rs.12,60,000/- ought to be cancelled.

6. For that the appellant craves leave to N.A. submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before.”

5. We proceeded to adjudicate the above grounds issue-wise.

Sl. Name Properties Remarks No. S.No. Location 9. THE KUMAR FAMILY 1. SHOP AT LANDMARK, (Leased to Ritika TRUST JUHU TARA ROAD, @ Rs.550000/- MUMABI PM) Mr. Suresh Chander Kumar 2. SHOPS AT MEGA (Leased to Ritika Trustee MALL, GURGAON @ Rs.350000/- PM) Mrs. Ritu Kumar Trustee 3. REIS MAGOS, GOA Mr. Ashvin Prakash 5. JARDIM TROPICALE – VILLA NO.1 – SANGOLDA Mr. Amrish Prakash Kumar 6. VATIKA LANDBASE – Beneficiary LTD. (UNIT 708) 7. VATIKA LANDBASE LTD. (UNIT 709)

to 2776/Del/2022 Asst Year Date of filing of Income Date of order Last date of original ROI returned u/s 143(1) notice u/s 143(2) /2013-14 30.09.2013 1,21,57,710/- N.A. 30.09.2014 2014-15 26.06.2015 50,07,870/- 29.11.2015 30.09.2015 2015-16 27.08.2015 50,40,270/- 14.10.2015 30.09.2016 2016-17 05.08.2016 47,12,910/- 28.11.2016 30.09.2017 2.3 Consequent to the search action u/s 132 which took place on 29.05.2018, the AO had issued notices u/s 153A dated 03.02.2020 for the above-mentioned assessment years requiring it to file true and correct taxable income for these years. All the returns of income were filed disclosing the income as originally returned by the appellant. The summarized details of the original income declared u/s 139 and income return u/s 153A are as follows: Asst. Year Income Income returned u/s returned u/s 139 153A 2013-14 1,21,57,710/- 1,21,57,710/- 2014-15 50,07,870/- 50,07,870/- 2015-16 50,40,270/- 50,40,270/- 2016-17 47,12,910/- 47,12,910/- The AO thereafter issued notices u/s 143(2) 8s 142(1) of the Income- 2.4 tax Act, 1961. Copies of the relevant notices for AYs 2013-14 to 2016-17 are enclosed at Pages 107 to 134 of the Paperbook. In response to the questionnaire issued by the AO, the appellant filed suitable explanations 8c submissions, extracts of which are also enclosed at Pages 135-146 of paper book. In the enquiries made in the course of assessment, the AO had required 2.5 the appellant to explain as to why no rental income was reflected in respect of the properties held at Gurgaon and Goa. The AO noted that the properties at Goa were used for business under the name and style of M/s. RTA Retreats but according to him the income therefrom was not reflected by the assessee. From these notices/ enquiries it shall be noted that no incriminating document or papers found by the Department in the course of search in relation to the unabated income-tax assessment of AYs 2013-14 to 2016-17 was referred to by the AO. Meaning thereby that the impugned assessments framed by the AO making additions of Rs. 12,60,000/-, Rs.25,20,000/-, Rs.25,20,000/- 8c Rs.25,20,000/- in AYs 2013-14, 2014-15, 2015-16 8c 2016-17 respectively, to 2776/Del/2022 was not with reference to any incriminating material or document found in the course of the search. The aforesaid fact is further fortified by the findings recorded by the 2.6 AO in the assessment order wherein he has referred to emails exchanged between the group personnel regarding the properties at Goa. On perusal of the said emails, it is evident that these were regular communications made in the regular course of business activities in as much as it did not contain anything incriminating whatsoever. The entity, M/s. RTA Retreats was a proprietorship firm of Mr. Ashvin Kumar and the income/expenses derived from the business activities conducted at the property in Goa formed part of his regular books of accounts. Accordingly, the information contained in these emails cannot by any stretch of the imagination be construed to be ‘incriminating’ in nature. It is further submitted that even the AO is unable to correlate or link as to how the contents of these emails led to the unearthing of unexplained income of the appellant. The AO has also not specified as to how this material was ‘incriminating’ in nature. Reference in this regard is made to the decision of the Hon’ble ITAT, 2.7 Delhi in the case of Lord Krishna Dwellers (P) Ltd Vs ACIT in & 2403/Del/2014 dated 17.12.2018, In the decided case, Search u/s 132 was conducted against the assessee and certain sale deeds were impounded by the Investigating authorities which related to purchase of land worth Rs. 4.01 crores. Based on the registered sale deeds, the AO observed that the assessee had paid consideration in cash of Rs. 1.05 crores which was disallowed u/s 40A(3) of the Act. On appeal, the question posed before the Hon’ble Tribunal was whether the registered sale deeds constitute ‘incriminating’ material to trigger the provisions of section 153A of the Act. The ITAT observed that there is no dispute that the purchases of land including the cash payments reflected in the seized sale deeds were duly recorded in the regular books of account. It was further observed that there is no dispute in relation to the sources of payments made for purchase of land. According to the Ld. Tribunal therefore, the sale deeds, transactions when duly recorded in the regular books of account, cannot be considered as incriminating material found during the course of search operation. According to ITAT, it is not the case of the Revenue that if the search and seizure operation had not been conducted, the Revenue could never have come to know that the assessee had entered into various purchase transactions of land. The ITAT thus deleted the disallowance made by the AO u/s 40A(3) with reference to such sales deeds in the order framed u/s 153A in respect of an unabated year. 2.8 Reliance in this regard is placed on the decision of the Hon’ble ITAT, Cuttack in the case of Daffodil Vincom Pvt Ltd Vs DCIT in ITA (SS) Nos. 95 & 96/Kol/2018 dated 28.06.2019. In the decided cases, the AO had added the share capital raised by the assessee in AYs 2011-12 8s 2012-13 by way of unexplained cash credit u/s 68 of the Act in the assessments framed u/s 153A of the Act. On appeal, it was the assessee’s contention that the addition u/s 68 was not based on any incriminating material found in the course of search and to 2776/Del/2022 therefore the assessee claimed that the impugned additions be deleted. On the other hand, the Revenue contended that the additions were made with reference to documents marked as SFA/01 and SFA/02, which were seized in the course of the search and hence stated that the AO had rightly made the impugned addition. The Hon’ble Tribunal found that the documents referred to by the AO comprised of the disclosed bank account statements. These were found during the course of search and seizure operation but for such reason these could not be held as incriminating in nature justifying the impugned addition on account of share application money. The Tribunal noted that the deposits and withdrawals within the said bank account statement were duly recorded in the regular books of account of the assessee and therefore the account statements didn’t form “incriminating evidence” so as to justify the impugned additions. The Tribunal therefore, in absence of any incriminating material found in the course of search, deleted the additions made in the orders u/s 153A in the unabated assessments for AY 2011-12 & AY 2012-13. 2.9 Attention is further invited to the decision of the Hon’ble ITAT, Delhi in the case of HBN Insurance Agencies Vs ACIT in ITA No. 3783/Del/2014 dated 23.12.2019. In the decided case the AO had made an addition by way of unexplained bank deposits in the assessments framed u/s 153A of the Act. On appeal, the assessee contended that the additions made u/s 68 were not based on any incriminating material found in the course of search whereas the Revenue claimed that the balance sheet, bank statements etc. found and seized in the course of search constituted incriminating material’ which justified the impugned addition. The Hon’ble Tribunal upheld the contention of the assessee by observing as under: “In our considered opinion, the profit and loss account and balance sheet of the assessee company, by any stretch of imagination, cannot be considered as incriminating material. It is also not the case of the Revenue that the bank accounts were unearthed during the search operation. On these facts, the ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla [supra], squarely apply wherein the Hon'ble High Court of Delhi held as under: ……….. Respectfully following the ratio laid down by the Hon'ble High Court of Delhi and Hon'ble Supreme Court [supra], we are of the considered view that the assessment framed u/s 153A of the Act for both the Assessment Years under appeal deserves to be set aside. We, accordingly direct the Assessing Officer to delete the impugned additions from both the Assessment Years. ”

2.10 Useful reference in this regard may also be made to the decision of Hon’ble ITAT, Guwahati in the case of ACIT Vs Goldstone Cements Ltd (ITA Nos.l26-131/Gau/2020) dated 10.12.2021. In the decided case also the AO had referred to the electronic seized material marked as GCL-HD-1 as the to 2776/Del/2022 relevant ‘incriminating material’ to justify the addition/s made u/s 68 of the Act in relation to the share subscription monies raised by the company. On appeal both the Ld. CIT(A) as well as Hon’ble ITAT observed that the alleged electronic material referred to by the AO was the group-wise shareholding pattern found in regular books of accounts which also formed part of the secretarial records filed with ROC and thus constituted a regular business document whose contents did not contain anything incriminating whatsoever. Hence, in absence of incriminating material, the order of the AO disturbing the unabated assessments were held to be invalid and accordingly quashed. It is imperative to mention that the aforesaid order of the Hon’ble Tribunal has since been affirmed by Hon’ble Guwahati High Court in of 2022 dated 29.09.2023, 2.11 In view of the above decisions, the appellant thus submits that the email communications regarding the properties at Goa which formed port of the regular business records of the appellant cannot and does not constitute ‘incriminating material’ so as to justify the impugned additions made u/s 23 of the Act in the unabated assessments framed u/s 153A for AYs 2013-14 to 2016-17. 2.12 Even with regard to the additions made u/s 23 of the Act in relation to the commercial properties at Gurgaon, it is evident from the face of the assessment order that the AO had made enquiries through ITI / Investigation Wing in the course of the assessment which cannot by any stretch of the imagination be said to be incriminating material unearthed in relation to these properties at Gurgaon in the course of search so as to justify the additions made in the unabated AYs 2013-14 to 2016-17. 2.13 These facts considered cumulatively show that no incriminating material whatsoever was found in the course of search pertaining to the appellant to justify the additions made u/s 23 of the Act in the unabated assessments of the relevant AYs 2013-14 to 2016-17. In the circumstances, the appellant submits that the impugned additions made in the absence of any incriminating material found in the course of search were wholly unsustainable and deserve to be deleted in full. 2.14 Reference in this regard is made to the following judgments of the judicial forums wherein it has been consistently held that where no incriminating material is found in the course of search pertaining to the assessee’s unabated assessment, then it is not permissible to make any addition while passing an order of assessment u/s 153A of the Act. PCIT Vs Abhisar Buildwell (P.) Ltd. (149 taxmann.com 399) [SC] - - CIT Vs Kabul Chawla reported in [380 ITR 573] ( Delhi HC) - CIT Vs Continental Warehousing Corpn [58 taxmann.com 78] All Cargo Global Logistics Ltd Vs DCIT [18 ITR (Trib) 106] (Mum - ITAT) Mani Square Ltd Vs ACIT (118 taxmann.com 452) - to 2776/Del/2022 PCIT Vs. Best Infrastructure (India) (P.) Ltd. (ITA Nos. 11 to 22 of 2017) - (Del HC) PCIT Vs. Lata Jain (384 ITR 543) (Del HC) - Pr. CIT v. Saumya Construction (P.) Ltd. (387 ITR 529) (Guj HC) - - Pr. CIT v. Meeta Gutgutia (248 taxman 384) (Del HC) CIT v. Sinhgad Technical Education Society (378 ITR 84) (Bom HC) - Jai Steel (India) Vs ACIT [259 CTR 281] (Raj HC) - Chetandas Lakshmandas [254 CITR 392] (Del HC) - CIT vs Veerprabhu Marketing Ltd [73 taxmann.com 149] (Cal HC) - 2.15 For the reasons set out in the foregoing and in view of the above-cited judgments, the appellant submits that since no incriminating material whatsoever was found or seized from the appellant’s premises in the course of search operations which would have any bearing or relation to the income- tax assessments for the relevant assessment years, the additions made in the assessment of the appellant framed u/s 153A for the AYs 2013-14 to 2016- 17 were unsustainable and therefore should be directed to be deleted in full.

to 2776/Del/2022 4. Ground No. 3 of AYs 2014-15 to 2016-17 and Ground No. 2 of AY 2013-14 6b AYs 2017-18 to 2019-20 (Addition u/s 23 in relation to properties at Goa) The appellant is a private discretionary trust settled by Mrs. Ritu 4.1 Kumar 8b Mr. Shashi Kumar in favour of their sons, Mr. Ashvin Kumar and Mr. Amrish Kumar, who are the principal beneficiaries of the Trust. Clause 8.1 of the Trust Deed states that all the properties owned by the Trust shall be applied only for the benefit of the beneficiaries of the Trust. Copy of the Trust Deed is enclosed at Pages 45 to 52 of the Paper Book. Accordingly, in terms of the Deed of Trust, the Trustees had permitted one of the principal beneficiary, Mr. Ashvin Kumar to use the properties owned by the Trust for business purposes. The principal beneficiary, Mr. Ashvin Kumar had accordingly used these properties in the course of business for the purposes of providing accommodation to tourists which were being run under the name 8s style M/s RTA Retreats. The income derived from this business activity formed part of the total income of Mr. Ashvin Kumar and has all along been assessed to tax at the normal marginal tax rates. Referring to some email communications, the AO inferred that the 4.2 action of the appellant Trust permitting its beneficiaries to use the properties without payment of any rent was a tool to avoid tax and according to him as the appellant did not charge any rent, the annual value of the said property has to be assessed to tax. The appellant submits that the aforesaid reasoning given by the AO is factually as well as legally unsustainable. Section 22 of the Act provides that the properties which are occupied 4.3 for the purposes of business shall be excluded from the charge of income under the head House Property. From the facts set out above it is apparent that the appellant which is a private discretionary trust had not given the properties to any outsider or third party but it was given for business use by the principal beneficiary of the Trust. In terms of the Deed of Trust, not only were the Trustees required to apply the assets for the benefit of the beneficiaries but even the assets & properties which were vested with the appellant Trust beneficially belonged to and shall ultimately stand vested in the beneficiaries alone. Therefore the act of the appellant trust allowing the beneficiary to use the properties owned by the Trust for business purposes cannot be viewed adversely or said to be unjustified or illegal. 4.4 Reliance in this regard is placed on the decision of the Hon’ble Gujarat High Court in the case of CIT Vs Rasiklal Balabhai (119 ITR 303) involving somewhat similar facts & circumstances as involved in the present case. In the decided case, an individual partner had permitted the partnership firm to use the property held by him in his personal name without any rent/charge. The AO however refused to accept that the property was being used by him in business and therefore estimated and assessed the annual value. On appeal however, the Hon’ble High Court upheld the order of the lower appellate authorities deleting the same, by observing as under: to 2776/Del/2022 The assessee must be held to be carrying on business, when that business is a business of a partnership firm since the firm, as a partnership firm has no legal entity and, it is a compendious expression for all the partners. In that view of the matter, therefore, the first condition which is prescribed in section 22 for purposes of qualifying for exemption, viz., that the person must be carrying on his business in question was fulfilled. If an assessee partner is in law carrying on business, though the business may be the business of a firm, it is beyond comprehension as well as common sense that he could not be said to be carrying on business in the premises in respect of the income of which the exemption is claimed since he is occupying the same as a partner and not in the capacity of an owner. If, when a partnership carries on a business, each partner thereof, carried on that business, and if the firm is carrying on business on the premises in respect of the income of which the exemption is claimed, it must be held as a necessary implication that that partner is occupying the premises. Therefore, the Tribunal, was justified in holding that the annual letting value of the godown, owned by the assessee and used for the business carried on by him in partnership was not liable to be included in his total income under section 22.

Following the above judgment similar view was expressed by the 4.5 jurisdictional Delhi High Court in the case of H.S. Singal & Sons (118 Taxman 894). In the decided case the assessee HUF was owning a property which was being used by a partnership in which the family of the assessee was a partner. The AO held that the property was not being used by HUF for its own business and therefore assessed the annual value to tax u/s 23 of the Act. On appeal, the Hon’ble High Court held that an HUF is not a juristic person and that the HUF and the members of the family are one and the same. Accordingly, since the property was being used by the assessee family for business purposes, it was held that no annual value could be assessed to tax. The relevant observations of the Hon’ble High Court is as follows:

“An HUF is not a juristic person for all purposes and cannot enter into an agreement of partnership with either another HUF or individual. It is open to the manager or karta of a joint HUF as representing the family to agree to become a partner with another person. The partnership agreement in that case is between the manager or the karta and the other person and by the partnership agreement no member of the family except the said person acquires a right or interest in the partnership. Requirements of section 22 are that (i) a person who is the owner of the property is carrying on business or profession and for the purpose of such business or profession carried on by him the property is used; (ii) to 2776/Del/2022 the income of such business or profession is chargeable to tax. Section 22 is in essence an exception to the charging or taxing provision and provides for exemption in a case where the property is used for the purpose of business or profession and the owner of the property and the owner of the business or profession are the same person. That being the situation, the Tribunal was justified in its conclusions. We are in agreement with the view expressed by the Gujarat and Madras High Courts and are unable to agree with the view expressed by the Karnataka and Allahabad High Courts. The answer to the question referred is in the affirmative, in favour of the assessee and against the revenue.” 4.6 Similar view has been expressed by the following High Courts as well. CIT Vs Rabindranath Dhol (79 Taxman 170) (Orissa HC) - CIT Vs Mustafa Khan (145 Taxman 522) (All HC) - In the present case also the assessee Trust is not a juristic person. The 4.7 appellant Trust derives its status from the beneficiaries in as much as all the assets/income of the appellant Trust beneficially belongs to the beneficiaries. In that view of the matter, and on the admitted fact that the principal beneficiary of the appellant Trust was using the property for business purposes, it is submitted that the lower authorities had grossly erred in assessing the annual value of the properties at Goa. The appellant submits that these properties qualify in the exception set out in Section 22 of the Act and therefore its annual value is not assessable under the head ‘House Property’. With regard to the AO’s allegation that the non-charging of rent by the 4.8 appellant trust from its beneficiaries was a tax saving tool, it is submitted that this observation does not hold any water. Had the appellant Trust charged rent from the principal beneficiary, on one hand, the rent would be taxable in its hands but correspondingly it was also tax deductible in the hands of the beneficiary. Since both the appellant Trust and the beneficiary are taxed at the same tax rates, it was not the case that the appellant avoided any tax by not charging rent from its beneficiary. This may be viewed from another angle as well. Assuming that rent was charged by the appellant Trust, then such income ultimately would in turn be passed on to the beneficiary i.e. Shri Ashvin Kumar for whose benefit the appellant Trust was formed. Hence, there is no rationale for the beneficiary to pay rent to the appellant private trust which was formed by his parents for his personal benefit. For the reasons set out above therefore it is submitted that, as the 4.9 properties at Goa were being used for business purposes, their annual value was not assessable to tax in view of the specific exception carved out in Section 22 of the Act. The AO may accordingly be directed to delete the same. 4.10 Without prejudice to the above submissions, the appellant further submits that the ‘annual value’ of the property ought to be assessed with to 2776/Del/2022 reference to the annual value adopted for local municipal tax purposes for the relevant year. The appellant in this regard relies on the submissions made at Paras 6.1 to 6.5 below.

to 2776/Del/2022 The Supreme Court in CIT v. Indira Balkrishna [1960] 39 ITR 546, while considering what constitutes an association of persons, held that the word "association" means "to join in any purpose" or "to join in an action". Therefore, "association of persons" as used in section 2(31)( v) of the Income-tax Act, 1961, means an association in which two or more persons join in a common purpose or common action. The association must be one the object of which is to produce income, profits or gains. In the present case, neither the trustees nor the beneficiaries can be considered as having come together with the common purpose of earning income. The beneficiaries have not set up the trust. The trustees derived their authorities under the terms of the deed of trust. Neither the trust nor the beneficiaries have come together for a common purpose. They are merely in receipt of income. The mere fact that the beneficiaries or the trustees being representative assessees are more than one, cannot lead to the conclusion that they constitute "an association of persons". In Suhashini Karuri v. WTO [1962] 46 ITR 953, this court held that joint trustees must be taken to be a single unit in law and not as an "association of persons" and there is nothing wrong in treating such a unit as "an individual". In CIT v. Sodra Devi [1957] 32 ITR 615, the Supreme Court held that the word "individual" does not mean only a human being, but is wide enough to include a group of persons forming a unit. In Mammad Keyi v. WTO [1966] 60 ITR 737, the Full Bench of the Kerala High Court held (Velu Pillai J. dissenting) that the term "individual" in section 3 of the Wealth-tax Act, includes a Moplah Muslim family which is governed by the usages similar to those that governed a Hindu undivided family. It is now well-settled that the word "individual" does not necessarily and invariably always refer to a single natural person. A group of individuals may as well come in for treatment as an individual under the tax laws if the context so requires. Reference may be made in support of this proposition, to the Full Bench decision of the Kerala High Court in Kerala Financial Corporation v. WTO [1971] 82 ITR 477, where the statutory Corporation was held to be assessable as an individual. The said decision drew strength from a number of decisions of the Supreme Court including that in Sodra Devi's case [1957] 32 ITR 615. The other decision is Andhra Pradesh State Road Transport Corporation v. ITO [1964] 52 ITR 524 (SC). We may also refer to the decision in Jogendra Nath Naskar v. CIT [1969] 74 ITR 33, wherein the Supreme Court has observed that there could be no reason why the word "individual" in section 3 of the Indian Income- tax Act, 1922, should be restricted to human being alone and not to juristic entities. … to 2776/Del/2022 Having regard to the facts and circumstances of this case, we are of the view that the trustees of the assessee-trust have to be assessed in the status of an "individual". We, accordingly, return our answer in the affirmative and in favour of the assessee.” 5.3 Following the above judgment, an identical view has been expressed by the Hon’ble Delhi High Court in the case of CIT Vs Food Corpn. of India, Contributory Provident Fund Trust (318 ITR 318) and Hon’ble Madras High Court in the case of CIT v. Shriram Ownership Trust (122 taxmann.com 155). In view of the foregoing judgments therefore and without prejudice to the earlier submissions, the appellant submits that it is legally entitled to the benefit of at least one-self occupied property in terms of Section 23(2) of the Act.

Ground No. 6 of AYs 2014-15 to 2016-17 and Ground No. 5 of AY 6. 2013- 14 and AYs 2017-18 to 2019-20 (Manner of computation of annual lettable value was erroneous) 6.1 Without prejudice to the above submissions, the appellant further submits that the ‘annual value’ of the property is required to be assessed with reference to the annual value adopted for local municipal tax purposes for the relevant year. The sum which is assessable under the head “house property’ in terms of Sections 22 & 23 of the Act, is higher of the “annual value” of the property or the rent actually received. The term “annual value” however has not been defined in the said Section or for that matter in the Income-tax Act, 1961. Instead, the term “annual value” has been defined in the Wealth-tax Act, 1957. Rule 4 of the Schedule-Ill of Wealth-tax Act, 1957 states that “gross maintainable rent” in relation to an immovable property which is not let-out is the amount of annual rent assessed by the local authority in whose area the property is situated for the purpose of levy of property tax or any other tax on the basis of such assessment. Therefore, similarly, for the purposes of determining the annual value under Section 23(l)(a) of the I.T. Act, 1961, the annual municipal value computed as per the principles laid down in Schedule III of the Wealth-tax Act, 1957 is to be adopted. It is submitted that these two Acts must be read in consonance and the principles for determining annual value under these Acts are common. The "property tax is levied by the Municipal Corporations of the respective States with reference to the annual valuation of the property. The said municipal valuation is to be considered as the “prevailing market value” for the purposes of Section 23(l)(a) of the Income-tax Act, 1961. 6.2 Reliance in this regard is placed on the decision of the jurisdictional Delhi High Court in the case of CIT Vs Moni Kumar Subba (333 ITR 38) wherein it was held as follows: “13. The next question would be as to whether the annual letting value fixed by the Municipal Authorities under the Delhi Municipal to 2776/Del/2022 Authority Act can he the basis of adopting annual letting value for the purposes of section 23 of the Act. This question was answered in affirmative by the Calcutta High Court in Satua Co. Ltd. 's case (supra) on the ground that the provisions contained in the Delhi Municipal Corporation Act for fixing annual letting value is pari materia with section 23 of the Act. The Court opined that the fair rent fixed under the Municipal laws, which takes into consideration everything, would form the basis of arriving at annual value to be determined under section 23(l)(a) and to be compared with actual rent and notional advantage in the form of notional interest on interest free security deposit could not be taken into consideration. …… 14. In fact, this is the view taken even by the Supreme Court in the case of Mrs. Shiela Kaushish v. CIT [1981] 131 ITR 435/7 Taxman 1 on account of similarity of the provisions under the municipal enactments and section 23 of the Act.

15. It is on this basis that in the present case, the CIT(A) gave primacy to the rateable value of the property fixed by the Municipal Corporation of Delhi vide its assessment order dated 31-12-1996 and on this basis, opined that the actual rent was more than the said rateable value and therefore, as per section 23(l)(b), the actual rent would be the income from house property and there could not have been any further additions.

16. Since the provisions of fixation of annual rent under the Delhi Municipal Corporation Act are pari materia of section 23 of the Act we are inclined to accevt the aforesaid view of the Calcutta High Court in Satya Co. Ltd. 's case (suyra) that in such circumstances, the annual value fixed by the Municipal Authorities can be a rationale yardstick. However, it would be subject to the condition that the annual value fixed bears a close proximity with the assessment year in question in respect of which the assessment is to be made under the income-tax laws. Gainful reference in this regard may also be made to the following 6.3 observations of the Calcutta High Court in the case of CIT Vs Bhaskar Mitter (73 Taxman 437) wherein the Court held as below: “The ratio of the several decisions of the Supreme Court as well as this Court is that there is unity of the Municipal Act and the Income- tax Act on the question of annual value and that such annual value cannot exceed the standard or fair rent under the Rent Control Act and may in a given case even be lower than the standard or fair rent. The principles for determining the annual municipal value and the annual letting value under the two Acts being common, in a case where the annual municipal value is available, that itself would be the annual to 2776/Del/2022 letting value under the Act. In fact, this principle has now been statutorily recognized in Schedule III of the Wealth-tax Act, 1957. Rule 5 of Part 'B‘ of Schedule III to the Wealth-tax Act lays down the procedure for determining the gross maintainable rent...” 6.4 In view of the above therefore it is prayed that the AO be alternatively directed to re-work the annual value of these properties with reference to the annual values determined by the Municipal Corporation. Without prejudice to the above and in the alternate rental yield of 6.5 immovable properties in metro cities are generally in the range of 2% of the value of investment. This view has been endorsed by the Hon’ble ITAT, Mumbai in the cases of DCIT Vs Rustomjee Evershine Joint Venture in dated 31.07.2023 and ACIT Vs Chalet Hotels Ltd in ITA No. 2513/Mum/2021 dated 30.08.2023. Following the same, the AO may alternatively be directed to restrict the ALV of the impugned properties to 2% of the cost of investment made by the appellant.”

by the assessee are also allowed due to the fact that the legal ground raised in ground no.1 is allowed. The grounds are consequential in nature. Accordingly, the appeals in AYs 2013-14 & 2014-15 are allowed.

20. Coming to the AYs 2015-16 and 2016-17, we observed that there is trail of emails exchanged by the family members as per which the property under consideration are under commercial exploitation by one of the beneficiaries of the trust. It is a fact on record that the beneficiary has disclosed the income earned from the property in his personal return of income, however it should have been income of the assessee. We cannot say that there is no incriminating material for these assessment years under consideration i.e. 2015-16 and 2016-17. Accordingly, ground no.1 raised in AYs 2015-16 & 2016-17 are dismissed.

21. Coming to the merits of the issue under these assessment years, we observed to 2776/Del/2022 that the properties under consideration are under the trust and the trust has utilised the properties at Goa for commercial exploitation and gave the same to one of the beneficiaries. Therefore, no doubt, one of the beneficiaries carried on the exploitation of the property and declared the commercial rent by the beneficiary in his financial statements. It clearly shows that the property under consideration was utilised by Ashvin Prakash Kumar for commercial purposes. Therefore, it is a fact on record that the commercial exploitation of the abovesaid properties was not favourable to the assessee/ family members. The assessee should have declared the annual lettable value u/s 23 of the Act. Considering the fact that the assessee trust is a separate entity under the Act in case any property belongs to the assessee are given to any of the beneficiary who is also a separate entity under the provisions of the Act and Ashvin Prakash Kumar has declared the rental income of the property in his financial statement even though, on the loss, it is still exploitation of the property owned by the assessee trust. Therefore, assessee should have declared rental income u/s 23 of the Act and it is not necessary that the annual lettable value considering the fact that it was used for commercial purposes by one of the beneficiaries of the trust in his individual capacity. Strictly speaking, the revenue of the RTA Retreats should have been the revenue of the assessee trust. Since the beneficiary has to 2776/Del/2022 already declared the revenue as his own, the assessee should have declared the annual lettable value as the rent. Since it has failed to do, the AO has made the addition based on the report from the Joint Director (Inv.), Goa. The annual rent determined/estimated was Rs.12.40 lakhs after standard deduction. However, we noticed that Mr. Ashvin Prakash Kumar has earned the gross income itself of Rs.3.59 lakhs and Rs.8.39 lakhs in AY 2015-16 and 2016-17.