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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMIT SHUKLA
सुनवाई की तायीख / Date of Hearing : 25.08.2016 घोषणा की तायीख /Date of Pronouncement : 07.9.2016 आदेश / O R D E R PER D. KARUNAKARA RAO, AM: There are four appeals under consideration and they are filed by the assessee for the AYs 2000-01; 2002-03; 2003-04 and 2007-2008. Since, the issue involved in these appeals is common. Therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order.
This appeal filed by the assessee on 8.6.2011 is against the order of the CIT (A)-19, Mumbai dated 18.2.2011 for the assessment year 2007-2008. In this appeal, assessee raised the following grounds which read as under:- “1. Ld CIT (A) erred in passing the order dated 18.2.2011 upholding the action of the AO of determining the Annual Rateable value invoking the provisions of section 23(1)(a) without appreciating the fact that the actual rent received by the appellant is much higher than the municipal rateable value. The appellant therefore prays that the directions given in the order dated 18.2.2011 passed by the Ld CIT (A) is without any basis and hence, the same may be quashed.
2. The Ld CIT (A) failed to appreciate that the provisions of section 23(1)(b) is applicable to the facts of the case. Hence, no addition on account of notional interest on the deposit given by the tenet can be added in the hands of the appellant.
3. The appellant denied any liability to pay the interest under section 234B and 234C of the Act. Hence, the same are not leviable.”
3. At the outset, Ld Counsel for the assessee mentioned that there is a delay of 3 days in filing the appeal before the Tribunal. In this regard, he brought our attention to the letter dated 16.3.2012 seeking for condonation of delay and the same is supported by the affidavit. In this regard, he read out the relevant paras from the said affidavit which read as under:- “3. Shri Amit. A Narang, MD of the appellant was out of Mumbai from 1.06.2011 due to some sudden and urgent personal work and returned to Mumbai only on 7.6.2011.
4. Immediately on his return to Mumbai, the MD of the appellant signed the appeal papers and filed in the office of the ITAT on 8.6.2011 after a delay of 3 days.
5. The short delay for filing the present appeal is not because of any malafide intention but, due to circumstances not in appellant’s control. Hence, your honours may be pleased to condone the delay in filing the appeal.”
4. After hearing Ld Counsel for the assessee and on perusal of the contents of the above affidavit as well as considering the smallness of the delay, we find, there is a sufficient and reasonable cause for not filing the appeal within the prescribed time. Accordingly, we condone the delay and proceed to adjudicate the appeal on merits.
5. Briefly stated relevant facts of the case are that the assessee is engaged in the business of trading in share and securities. Assessee filed the return of income for the AY 2007-2008 declaring the total loss of Rs. NIL after claiming the set off of brought forward loss of Rs. 10,643/-. Assessment was completed u/s 143(3) of the Act and the assessed income was determined at Rs. 3,55,168/-. During the assessment, AO observed that the assessee declared rental income from property at Rs. 6500/- pm and after availing the security deposit of Rs. 32,00,000/-. He further observed that the said property was leased out in earlier year at Rs. 1,12,500/- pm. Considering the above, AO opined that the property is reasonably expected to be let out from year to year for a rent of Rs. 1,12,500/-. Accordingly, AO come to a conclusion that when the actual rent received is much lower than the sum reasonable expected to let, the provisions of section 23(1)(a) apply. Accordingly, he determined the ALV of the property at Rs. 1,12,500/- per month and worked out the total ALV at Rs. 5,62,500/-. In this regard, AO relied on the Third Member decision of the ITAT, Mumbai in assessee’s own case for the AY 2001-02 and 2002-03 in ITA Nos. 5263 & 5264/Mum/2006. Aggrieved, assessee carried the matter in appeal before the first appellate authority.
During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) directed the AO to calculate interest on the interest free deposit of Rs. 32,00,000/- and to add the same to the value of the rent received by the assessee for the period under consideration. Again aggrieved with the said decision of the CIT (A), assessee is in further appeal before the Tribunal.
During the proceedings before us, at the outset, Ld Counsel for the assessee brought our attention to the above grounds and mentioned that only issued involved in this appeal relates to the inclusion of notional interest on the security deposit laying with the landlord for the purpose of computing the ALV of the property. In this regard, he fairly submitted that this issue is required to be decided in the light of the binding jurisdictional High Court judgment in the case of CIT vs Tip Top Typography [2012] 368 ITR 330 (Bom).
We have heard both the parties on this issue of inclusion of notional interest income on the interest free security deposit. It is a settled proposition of law by virtue of the judgment of the Hon’ble jurisdictional High Court in the case of Tip Top Typography (supra) that the notional interest should not be included while computing the income from house property under section 23(1)(a) and (b) of the Act. It is also a settled proposition that actual rent received or receivable by the land lord constitutes a reliable evidence to ascertain the properties’ capacity to earn the rent in open market. Considering the above, we agree with the Ld Counsel’s request for remanding the matter to the file of AO for deciding the matter afresh in line with the said judgment of the High Court (supra). We order accordingly. Thus, the grounds raised
by the assessee are allowed for statistical purposes.
9. In the result, appeal of the assessee is allowed for statistical purposes. (AY 2002-2003)
10. All these three appeals are filed by the assessee for the AYs 2000-01; 2002-03 and 2003-04. The issues raised in these appeals are identical to that of the ones raised by the assessee in ITA No.4610/M/2011 (AY 2007-08), which is adjudicated in the above paragraphs of this order. Considering the commonality of the issues, our