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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A)- 51, Mumbai dated 21/06/2017 for A.Y.2012-13 in the matter of order passed u/s.143(3) of the IT Act. 2. Following grounds have been taken by the assessee:-
1. Addition of Rs.5, 05,400/- in the computation of House Property Income: 1.1 The Commissioner of Income tax (Appeal) - 36, Mumbai (for brevity CIT(A)) erred in confirming the addition of deemed gross rent of Rs.7,92,000/- (Rs.33,000/- p.m) as against the actual casual gross rent received of Rs.?0,000/- during the short period which has resulted into an addition of Rs.5,05,400/- after standard deduction u/s 24(a). 1.2 The said CIT(A) erred in not considering the fact and submissions of the Appellant that the said premises was leased for a casual short period and remained vacant during the whole year and C.S.Watwani HUF therefore the annual letting value (ALV) has to be the actual rent received of Rs.70,000/- as provided u/s 1.3 The said CIT(A) erred in not considering the following judicial decisions relied upon by the appellant: (i) Smt. Smitaben N Ambani Vs. CWT 323 ITR 104 (Bom) (ii) Premsudha Exports (P) Ltd., Vs. ACIT 110 1TD 158 (mum) 1.4 Without prejudice, the said CIT(A) erred in not considering the submission of the appellant that in any case ,the ALV of the said property for the vacancy period cannot exceed the Municipal Ratable Value as held in various judicial decisions.
2. The appellant craves leave to add, amend, alter, modify and/or delete all or any of the above grounds on or before the date of hearing.
The only grievance of assessee relates to determining letting value as per provisions of Section 23(1) (a) in place of provisions of 23(1)(c).
Facts in brief are that assessee had let out only part of office at Crystal Plaza on casual basis to a contractor for the repairing and renovation of the neighboring office owner. The said contractor used only a part of the said premises and therefore, no agreement was entered into. The said contractor paid a sum of Rs.70,000/- as a compensation for use of the said premises. The assessee offered the said sum of Rs.70,000/- under the head "Income from house Property" However, AO assessed rent income under the head "Income from House Property " at Rs.7,92,000/- (being deemed rent of Rs. 33,000/- p.m.) as against the actual casual rent received of Rs.70,000/- during the short period , which has resulted into an additional rent income of Rs.5,05,400/- (after deduction of standard deduction) while computing the "Income from House Property" on the ground that the rate of rent in the same commercial promises ranges C.S.Watwani HUF between Rs.31,000/- to Rs.40,000/- P.M. as inquired by the Inspector of the said A.O. 5. By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us. 6. It was argued by learned AR that AO has not considered the fact that no agreement for leave and license was entered into since it was a casual lease for a shorter period. As per learned AR, the said A.O. also erred in not considering the fact that after vacation, by the said contractor, the assessee had not let out the said office premises to anyone. Therefore, it is submitted that no notional rent income can be added U/sec 23 when the said commercial premises remained vacant during the year under appeal and therefore, the annual letting value (ALV) has to be the actual rent received of Rs.70,000/- as provided U/sec. 23(1)(c). 7. Reliance was placed on the decision of the Co-ordinate Bench in the case of Smt. Smitaben N. Ambani v/s CWT 323 ITR 104 (Bom), wherein it was held as under:- “on a reading of rule 1BB(as it then stood), it is clear that in the case of self-occupied property, the valuation of a house for the purpose of wealth-tax is to be calculated on the basis of gross maintainable rent which is the sum for which the house might reasonably be expected to be let from year to year.
It may be that in areas which are governed by the rent control legislation, the reasonable letting value cannot exceed the standard C.S.Watwani HUF rent, but on considering the statutory definition of the term 'standard rent in rent control legislation and the mode and manner of calculating municipal ratable value, situations can be countenanced where the standard rent of a given premises might be more or different than the sum for which a house might reasonably be expected to be let from year-to-year as calculated by the local municipal authority for the purpose of arriving at the municipal ratable value.” The basis on which a self-occupied property is valued under rule 1BB and municipal ratable value arrived at under the municipal law is the same, i.e., a reasonable amount of rent that can be expected by the owner from a hypothetical tenant. While arriving at such reasonable amount of rent that can be expected by the owner from a hypothetical tenant, the amount of statutory deduction, if any, permissible under the local municipal law must be added to the ratable value. Thus, while applying provisions of rule 1BB fox valuing the self-occupied property, municipal ratable value with addition of statutory deductions, if any, may be adopted instead of standard rent for arriving at the gross maintainable rent.
Reliance was also placed on the decision of GMP Investment Ltd., 50 SOT 180 wherein following was the observation of Mumbai Tribunal:- “7. We find that section 22 categorically provides .............. The next question then is as to on what basis should the annual letting value be computed. So far as a property which is not let out or vacant is C.S.Watwani HUF concerned, the provisions of section 23(1 )(a) come into play. The Assessing Officer had brushed aside the valuation as per BMC annual letting value on the ground that the BMC rates are not sacrosanct but only indicative, and proceeded to take the actual rental value of one of the galas as the standard rent. We see no substance in this plea and the CIT(A) was quite justified in reversing this action of the Assessing Officer by directing him to the BMC annual letting value. Hon'ble Bombay High Court, in the case of V. Sonavala v. CIT [1989] 177 ITR 246 have held that for the purpose of lutation on the basis of 'rent for which property might be reasonably let out, under section 23(1)(a), municipal valuation is to be taken into account. The actual rent being realized by similar property cannot have, in this context, any bearing. The stand of the CIT(A) is thus correct and does not call for any interference."
On the other hand, learned DR relied on the order of the lower authorities and contended that AO has correctly computed rental income under provisions of Section 23(1)(a) of the IT Act. 10. I have considered rival contentions and carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by learned AR in the context of factual matrix of the case. 11. For the purposes of section 22, the annual value of any property shall be deemed to be—