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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: SHRI D.KARUNAKARA RAO (AM) & SHRI RAM LAL NEGI (JM)
This appeal has been filed by the assessee against order dated 09/12/2013 passed by the Ld. CIT(Appeals)-12 Mumbai, for the Asst. year 2010-11, whereby the Ld. CIT(A) dismissed the appeal filed by the assessee against assessment order dated 04/01/2013 passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Brief facts of the case are that the assessee filed its return on income for the relevant assessment year declaring to the income of Rs. 2,85,62,410/-. The return was processed and after scrutiny assessment order u/s 143 (3) of the Act was passed determining the total income of Rs. 5,24,54,870/-. The A.O. noticed that the assessee had earned rental income of Rs. 4,70,91,450/- in respect of its property measuring 40,561 sq.ft. along with 11 car parking let out to its holding company Zodiac Clothing Company Ltd. (ZCCL). The assessee had also received rental income of Rs. 2,77,31,795/- in respect of its another property measuring 13817.53 sq.ft. along with 4 car parkings to an un-related party Hindalco Industries Ltd. The assessee had charged the rent @ Rs. 90 and Rs. 99 from its related company and Rs. 150 and Rs. 137 per sq.ft. from unrelated party. Accordingly, the assessee was asked to justify the difference. In response thereof the assessee inter alia contended that the house property was rented out to ZCCL @ Rs. 90/99 per sq.ft. considering the fair market rate and the assessee did not incur any extra cost on renovation, installation of air conditioners or furniture etc. The ZCCL was liable to incur property tax and other maintenance cost in respect of the premises let out to it. Moreover, the rent paid by ZCCL is commercial fair rent. The A.O. rejecting the contention of the assessee assessed the rental value of the premises rented out to ZCCL at Rs. 8,12,23,414/- against the amount of Rs. 4,70,91,450/- disclosed by the assessee.
3. Feeling aggrieved by the assessment order the assessee carried the matter before the Ld. CIT (A). The assessee contended before the Ld. CIT (A) that the A.O. has wrongly assessed the value of the property rented out to ZCCL without following the law laid down by the courts and Tribunals. However, the Ld. CIT (A) upheld the action of the AO and dismissed the appeal of the assessee.
4. Still aggrieved, the assessee is in appeal before the tribunal against the impugned order passed by the Ld. CIT(A) on the following effective grounds:-
“The learned Commissioner of Income Tax(Appeals) erred in upholding the annual value determined by the Assessing Officer for part of the First floor, Second floor, Third floor, and Fourth
floor let out to Zodiac Clothing Co. Ltd. for the period from 01/04/2009 to 31/03/2010 at Rs. 8,12,23,532/- instead of Rs. 4,70,91,450/- (being the rent received) as offered by the Appellant.
2. The Learned Commissioner of Income Tax (Appeals) erred in not considering the submission, evidence on record and not dealing with the direct decision on the above issue which was cited before the learned CIT(A) along with submission.
The learned Commissioner of Income Tax (Appeals) erred in not appreciating the difference in the characteristics of the properties.
The Learned Commissioner of Income Tax(Appeals) erred in giving directions in respect of A.Y. 2008-09 and A.Y. 2009-10 although no appeal was pending before him for those assessment years.”
Before us the Ld. Counsel for the assessee submitted that the Ld. CIT(A) has erred in upholding the annual value determined by the Assessing Officer for part of the First floor, Second floor, Third floor, and Fourth floor let out to Zodiac Clothing Co. Ltd. for the period from 01/04/2009 to 31/03/2010 at Rs. 8,12,23,532/- instead of Rs. 4,70,91,450/- (being the rent received) as offered by the Appellant. The Ld. Counsel for the assessee submitted that since the impugned order is not in accordance with the law laid down by the Hon’ble jurisdictional High Court Bombay in Vimal R. Ambani Vs. Dy. Commissioner of Income Tax- 375 ITR 66 (Bom), the same is liable to be set aside.
On the other hand the Ld. departmental representative relying on the concurrent findings of the authorities below submitted that there is no scope to interfere with the order passed by the Ld. CIT(A).
We have heard the rival submissions and also perused the material placed on record. The Ld. CIT (A) has dismissed the appeal of the assessee holding as under: “I have carefully considered the fats of the case averred in the impugned order as well as oral and written arguments of the learned representative of the appellant. During the appellate proceedings, the learned representative of the appellant fairly brought on record a copy of appellate order dated 25.10.2010 passed by my learned predecessor in the appellant’s case for A.Y. 2007-08 wherefrom it is noticed that the then CIT(A) had upheld the action of the A.O on this count. Having regard to all the relevant facts of the case, it is found that the facts and circumstances of the instant year are identical to those of the A.Y. 2007-08 wherein the erstwhile CIT(A), in her appellate order, had dismissed the appellant’s ground of appeal. Hence, I do not find any reason to differ from the view taken by my learned predecessor in office. Therefore, the action the A.O of arriving at a rental in respect of the premises let out to ZCCL at Rs. 8,12,23,532/- as against the sum of Rs. 4,70,91,450/- disclosed by the appellant, deserves to be upheld and it requires no interference.”
8. We notice that the AO has followed the view taken by the AO in the assessment year 2007-08, wherein the rent charged by the assessee from M/s Hindalco Industries Ltd. was adopted to work out the rental value of the property let out by the assessee to that ZCCL and the action taken by the AO was further confirmed by the CIT (A). Similarly, the Ld. CIT(A) has affirmed the findings of the AO without taking into consideration the rent control legislation, fair market letting value and standard rent while deciding the issue involved in this case.
In Vimal R. Ambani Vs. Dy. Commissioner of Income Tax- 375 ITR 66 (Bom), it has been held by the Hon’ble jurisdictional High Court that while determining the annual letting value in respect of properties which are subject to rent control and where the standard rent has not been fixed, the assessing Officer shall determining the annual letting value in accordance with the relevant rent control legislation, if the fair rent is less than the standard rent then it is the fair rent which shall be taken as annual letting value and not the standard rent. In the said case, the Assessing Officer had followed the view taken in the earlier years in respect of the assessee to the effect that the annual value should be determined on the basis of standard rate and not on the basis of the relatable value as determine by the Municipal Corporation.
We further notice that in the present case the AO has determined the rental income in question just following the view taken by the AO in the assessment year 2007-08, without taking into consideration the other factors relevant to determine the annual letting value of the property in question. The Ld. CIT(A) has also affirmed the same. We are, therefore, of the considered view that in the present case, the rent should be determined in accordance with the law laid down by the Hon’ble Bombay High Court in Vimal R. Ambani Vs. Dy. Commissioner of Income Tax (Supra) and other judgment/decision if any. Hence, the impugned order is set aside and the case is sent back to AO with the direction to adjudicate the issue afresh in accordance with the law laid down by the Hon’ble Bombay High Court in the aforesaid case, after affording reasonable opportunity of being heard to the assessee.
In the result the appeal filed by the assessee for Asst. Year 2010-11 is allowed for the statistical purposes.
Order pronounced in the open court 28th February, 2017.