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Income Tax Appellate Tribunal, BENCH “B” MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
स्थधमी रेखध सं./ PAN : ADRPJ4593R (अऩीरधथी /Appellant) (प्रत्मथी / Respondent) : अऩीरधथी की ओय से / Assessee by : Shri Yogesh A Thar प्रत्मथी की ओय से/ Revenue by : Shri Ravjisingh Arneja सुनवधई की तधयीख /Date of Hearing : 21.8.2017 घोषणध की तधयीख /Date of Pronouncement : 15.9.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: These two appeals are directed by the assessee against the two separate orders dated 19.9.2014 passed by the ld.CIT(A)-39 for the assessment years 2009-10 and 2010-11. Since, the appeals pertain to the together, heard together and are being dispose off by this common order.
Grounds of appeal
no.1,3 and 4 are not pressed at the time of hearing, hence dismissed as not pressed.
3. The issue raised in the grounds of appeal no.2 is against the confirmation of addition by CIT(A) as made by the AO u/s 23(1)(a) of the Act Rs.2,14,665/-.
4. The facts in brief are that during the course of assessment proceedings, the AO noticed that the assessee has three registered properties (flats) appearing in the schedule of its fixed assets and these properties were not offered for tax under the head House properties. As a result, the AO treated the Otters flat no. 20/21-B as self occupied property and the other flats two namely Otters flat no.2B and Peace Heaven Flat were deemed as let out house property by taking rent 8% of the total investment thereby calculating the income from property at Rs.2,14,665/-. The details of investments in the said properties were Rs.35,69,278/- and Rs. 2,64,018/- respectively aggregating to Rs.38,33,296/-. In the appellate proceedings, the ld.CIT(A) dismissed the appeals of the assessee by observing and holding as under : “5.3 I have considered the facts of the case, the assessment order and the submissions made by the appellant. The fact that the appellant was owner of the properties is not in dispute. The flats were vacant. The question to be considered is whether the annual value of the flats which was vacant throughout the previous year is chargeable to tax or is to be taken as NIL by resorting to provisions of Sec. 23(1)(c) and contending that where the flat is vacant it is actual rent received/receivable, which is to be taken as its annual value and since it was vacant throughout the previous year, the actual rent received/receivable being NIL, the annual value of the flat is to be taken at NIL. This view, it is contended, is supported by the ratio of the order of Mumbai Tribunal in the case of Premsudha Exports P Ltd (110 ITD 158 Mum). In this regard it hasa to be stated that the Andhra Pradesh High Court has taken a contrary view in the case of Vivek Jain vs. ACIT (337 ITR 74 [AP]). The Andhra Pradesh High Court has observed that the provisions of Sec. 23(1)(c) are attracted if i) property or any part thereof has been let; ii) it has been vacant during the whole or any part of the previous year and iii) owing to such vacancy the actual rent received or receivable is less than the sum referred to in Clause(a). When these conditions are satisfied, the amount received or receivable shall deem to be the annual value of the property. In view of the said decision of the Andhra Pradesh High Court, the action of the A.O. in determining the annual value of the said properties at Rs. 2,14,665/ - (total investment being Rs.38,33,296/-“.
The ld.AR vehemently submitted that out of two flats treated as deemed let out, the flat no.2B was let out in 2003 but vacant since then and therefore the provisions of 23(1) (c) of the Act should not be invoked. In respect the flat at Peace heaven, the assessee contended that the same could be assessed and brought to tax by resorting the provisions of section 23(1)( c) of the Act. The ld. AR, in defence of his argument relied on the decision of the Co-ordinate Bench of the Tribunal in the case of Informed Technologies India Ltd V/s DCIT (2016) 75 taxmann.com 128 (Mum-Trib) and Premsudha Exports (P) Ltd V/s ACIT (2008) 110 ITD 158 (Mum). The ld. AR prayed that in view of the ratio laid down by the Tribunal in these two cases, the addition made by the AO in respect Otters flat No.2-B deserved to be deleted.
On the other hand, the ld.DR supported the orders of authorities below. 7. We have heard both the parties and perused the material placed before us including the orders of authorities below and case cited by the rival parties. We find merit in the contention of the ld.AR that once the property is let out and at any point of time this remained vacant during the same cannot be brought to tax resorting to provisions of section 23(1)( c ) of the Act. The issue in the case of assessee is supported by the various decisions referred to and relied upon by the ld.AR in the case of Informed Technologies India Ltd (supra). The co-ordinate bench of the Tribunal in the said order has held as under : “The issue under consideration for adjudication is as to whether the 'ALV' of the property owned by the assessee had rightly been determined by the assessee by taking recourse to section 23(1)(c), or the same was liable to be determined under section 23(1)(a) as so held by the lower authorities. It is matter of undisputed fact that the property of the assessee remained let out upto 4-12-2008, and thereafter the same remained vacant. It is not the case of the department that after the property was vacated as on 4-12-2008, the same thereafter remained under the self occupation of the assessee. In light of the words 'Property is let' used in clause (c) of section 23(1), unlike the term 'house is actually let' as stands gathered from a conjoint reading of sub-sections (2) to (4) of section 23, it can safely and inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term 'Property is let' in section 23(1)(c), cannot be substituted by the term 'house is actually let' as used by the legislature in all its wisdom in sub-section (3) of section 23. Thus it can safely be concluded that the requirement 'house is actually let' during the year is not a prerequisite for bringing the case of an assessee within the sweep of section 23(1)(c), as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee, who continues to hold the said property for the purpose of letting out. The usage of the term 'Property is let' in section 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the 'ALV' of one self occupied property so chosen by the assessee is taken at Nil, however the 'ALV' of all the remaining self occupied properties are to be determined in terms of section 23(1)(a). Thus the term 'Property is let' used in section 23(1)(c) is solely with the intent to avoid misuse of determination of the 'ALV' of self occupied properties by the assessees by taking recourse to section 23(1)(c), however the same cannot be stretched beyond that and the 'ALV' of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined under section 23(1)(c). Thus the assessee in the present case had rightly determined the 'ALV' of the property at Rs. Nil by taking recourse to section 23(1)(c). [Para 7.1] In light of aforesaid observations the ground of appeal of the assessee is allowed and the addition made by the Assessing Officer and as such sustained by the Commissioner (Appeals) is vacated. [Para 7.2]” We therefore respectfully following the ratio laid down by the co-ordinate bench of the Tribunal direct the AO to delete the addition in respect of Otters flat No.2B by sustaining the addition in respect of second flat viz Peace Heaven. Accordingly, the ground taken by the assessee is partly allowed.
The issue raised by the assessee in the grounds of appeal
no.5 is with regard to upholding the disallowance of Rs.41,179/- being 10% out of vehicle-telephone expenses.
9. The AO during the course of assessment proceedings observed that the assessee has charged to the profit and loss account an amount of Rs.2,50,428/- and Rs.1,61,361/- towards vehicle expenses and telephone expenses respectively. The AO called for the details of these expenses during the course of assessment proceedings, when the assessee failed to furnish the details, the AO estimated the disallowance towards the personal element in the said expenses at the rate of 10% thereby added a sum of Rs.41,179/- to the total income of the assessee. In the appellate proceedings, the ld. CIT(A) upheld the order of the AO vide para 6.3 of the appellate order as under :, “6.3 I have considered the submissions of the appellant. It is held that the disallowance of 10% on the total expenditure incurred on vehicles and telephones is not unreasonable. Also, the tribunal in the case of the appellant for the assessment year 2006-07(ITA No.201/Mum/2010) dated 4.11.2010) has held that personal use of vehicle and telephone cannot be ruled out and has sustained the addition at 10% of the expenses claimed. The addition made by the AO is upheld”.
We have heard the rival submissions and perused the material placed before us. We find that the ld.CIT(A) has passed a very reasoned order by upholding the disallowance at 10% of the total expenses on the basis of the decision in assessee’s own case in the assessment year 2006- 07(supra). Since, the assessee has not furnished any details of expenses during the course of assessment proceedings before the AO or the CIT(A) and therefore the AO is not in a position to verify the expenses. Accordingly, we are inclined to uphold the order of the ld. CIT(A) on this issue. Accordingly, dismissed.
The appeal of the assessee is partly allowed. Since issues raised in this appeal are identical as we have decided in (AY-2009-10). Therefore our decision in that appeal would mutatis mutant applies to this appeal as well. Accordingly, this appeal also stands partly allowed as indicated above. 12. In the result, the appeals of the assessee are partly allowed.