SETH PROPERTIES,MUMBAI vs. JT CIT RG 12(1), MUMBAI

The Revenue has raised following grounds:– “1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the addition of deemed rent amounting to ` 4,89,46,330, without appreciating the fact that the assessee failed to provide the information about monthly rental income of all the tenants compelling the Assessing Officer to adopt the monthly rental income of the tenants rationally.

Brief facts, apropos ground no.1 are, the assessee a partnership firm is engaged in the business of real estate development. For the assessment year under dispute, the assessee filed its return of income on 26th July 2011, declaring total income of ` 7,28,41,580. During the assessment proceedings, the Assessing Officer noticed that the assessee is the owner of a building situated at Connaught Circle, New Delhi, which has been given on rent to a number of tenants. He also 3 M/s. Seth Properties noticed that the assessee has also offered rental income of ` 1,99,092 from the said property. From the records of the assessee for the assessment year 2007–08 and 2008–09, the Assessing Officer found that the property was given on rent to Hemkunt Chemicals Pvt. Ltd. for ` 733 per month who in turn sub–let it to Bank of Punjab. He also noticed that there was inter–se dispute between the assessee, Hemkunt Chemicals Pvt. Ltd. and Bank of Punjab. He found that in the assessment year 2007–08 and 2008–09, the Assessing Officer adopted the market value of rental income at ` 1,56,420 and each year it is increased by 10%. He found that on that basis the Assessing Officer in the assessment year 2008–09 has adopted monthly rental income of ` 24,894. Taking that as a basis, the Assessing Officer worked out the deemed rental income for the impugned assessment year at ` 7,01,22,420 and after allowing statutory deductions determined the net taxable income under the head income from house property of ` 4,89,46,330. The assessee challenged the aforesaid addition made by the Assessing Officer before the learned Commissioner (Appeals).

The learned Commissioner (Appeals) having found that in assessee’s own case for assessment year 2003–04, 2004–05 to 2006– 07, the Tribunal has deleted the addition made by the Assessing Officer on account of deemed rental income, followed the same and 4 M/s. Seth Properties deleted the addition made by the Assessing Officer in the impugned assessment year as well.

We have heard rival submissions and perused material available on record. The learned Counsel appearing for both the parties have agreed before us that the issue in dispute stands decided in favour of the assessee by the decisions of the Tribunal in assessee’s own case for earlier assessment years. On a perusal of record, it is seen that the issue relating to deemed rental income is a recurring dispute between the parties from assessment year 2003–04 onwards. While deciding assessee’s appeal for assessment years 2003–04, 2004–05 to 2006– 07 in ITA no.6701/Mum./2011 and others dated 4th March 2015, the Tribunal deleted the addition made by the Assessing Officer on account of deemed rental income. The same view was again reiterated by the Tribunal while deciding the assessee’s appeal for the assessment year 2007–08 and 2008–09 in ITA no.3063/Mum./2013 and Mum./2013, dated 7th September 2016. There being no material difference in facts brought to our notice, following the consistent view of the Tribunal in assessee’s own case, we uphold the order of the learned Commissioner (Appeals) on this issue. The ground raised is dismissed.

In ground no.2, the Revenue has challenged the deletion of addition of ` 1,06,821 on account of difference in working of capital gain.

Briefly stated the facts are, in the course of assessment proceedings, the Assessing Officer while examining working of capital gain furnished by the assessee found that the assessee has not taken the value of properties as per the Government approved valuer but has adopted much higher value in respect of three properties. Therefore, on the basis of value determined by the Government approved valuer, the Assessing Officer reduced the indexed cost of acquisition by ` 1,06,821 and added to the income of the assessee. The assessee challenged the addition before the learned Commissioner (Appeals).

The learned Commissioner (Appeals) after verifying the material on record found that in respect of some properties assessee has shown the value lesser than the value determined by the approved valuer, whereas, in few cases, the value shown the assessee was more than the value determined by the Government approved valuer. However, if the facts are seen in totality in respect of all the properties, it was found that the value adopted by the assessee was at a lower figure than the value determined by the Government approved valuer.

Having considered the rival submissions and perused material on record, we are of the view that the decision of the learned Commissioner (Appeals) on this issue is fair and reasonable. As could be seen from the materials on record, the Assessing Officer has only considered the difference in value in respect of three properties where he found the assessee’s value to be more than the value of the Government approved valuer. However, as observed by the learned Commissioner (Appeals), in respect of other properties, the value of the assessee is less than the value determined by the Government approved valuer. Therefore, if assessee’s valuation vis–a–vis valuation of the Government approved valuer is considered in totality, the assessee’s value in respect of properties is less than the Government approved valuer. The aforesaid factual finding of the learned

In the result, Revenue’s appeal is dismissed. ./2016 Assessee’s Appeal

The only ground raised by the assessee is in respect of disallowance of expenditure incurred towards legal and professional charges amounting to ` 2.41 lakh.

Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction of ` 2.41 lakh on account of legal and professional charges called upon the assessee to justify the claim of deduction. In response to the query raised by the Assessing Officer, the assessee furnished necessary details of legal and professional charges and submitted that since the expenditure was incurred to protect assessee’s right over the properties it is an allowable expenditure. The Assessing Officer, however, did not find merit in the submissions of the assessee. The Assessing Officer held that since the expenditure incurred was in relation to the property the income from which is assessable under the head house property, the professional and legal expenditure claimed cannot be allowed. The 8 M/s. Seth Properties assessee challenging the disallowance before the first appellate authority.

The learned Commissioner (Appeals) after considering the submissions of the assessee, however, sustained the disallowance made by the Assessing Officer.

The learned Authorised Representative submitted that the property was taken on lease from the Government. He submitted, when the Government proceeded to cancel the lease of the property the assessee had to take recourse to legal process to protect its right over the property and, therefore, incurred the expenditure. He submitted, since the property was utilised for business purpose and part of it was given on rent the assessee is entitled to claim the expenditure incurred as business expenditure.

Learned Departmental Representative relied upon the decision of the first appellate authority.

We have heard rival submissions and perused material available on record. As could be seen, the claim of business expenditure on account of legal and professional charges was disallowed solely for the reason that income from the said property is assessed under the head income from house property. However, it has been submitted before

In the result, assessee’s appeal is allowed for statistical purposes.

To sum up, Revenue’s appeal is dismissed and assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 28.03.2018