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Income Tax Appellate Tribunal, “C” Bench, Mumbai
O R D E R Per B.R. Baskaran, AM :-
The appeal filed by the Revenue is directed against the order dated 25.3.2013 passed by learned CIT(A)-13, Mumbai and it relates to A.Y. 2008-09.
None appeared on behalf of the assessee even though the case was adjourned on the last occasion at the specific request of the assessee. Hence, we proceed to dispose of the appeal ex parte, without presence of the assessee.
We have heard learned Departmental Representative and perused the record. The Revenue has raised grounds on following issues :
a) Deletion of notional interest of ` 44.97 lakhs assessed as rental income. b) Disallowance made u/s. 14A.
The first issue relates to determining the annual letting value in respect of the properties let out by the assessee. The Assessing Officer noticed that the assessee has rented out certain premises to its associate concerns and the aggregate amount of rent received by it was ` 47.74 lakhs. In respect of one associate concern named M/s. Hakuhudo Percent P. Ltd., the assessee has collected rent of ` 62/- per square ft. per month and in respect of other associate concerns the assessee has collected rent of ` 2/- per sq.ft. per month. It was noticed that the assessee has collected huge security deposit from other concerns. Accordingly, the Assessing Officer took the view that the assessee has charged lower rent from them in view of huge amount of security deposits received by it. Accordingly the Assessing Officer estimated interest on the security deposits @ 11.75% and added the same to the annual letting value. Learned CIT(A) however deleted the addition by following decision rendered by Hon'ble Delhi High Court in the case of CIT Vs. Moni Kumar Subba (333 ITR 38) and also decision rendered by Mumbai Bench of the Tribunal by following decision of Hon'ble Bombay High Court in the case of J.K. Investors (248 ITR 723).
During the course of hearing learned Departmental Representative placed reliance on the decision rendered by Hon'ble P&H High Court in the case of CIT Vs. K. Streetlite Electric Corporation ( 20 taxmann.com 532).
We noticed that learned CIT(A) has not brought out the facts relating to the property under consideration. The annual value of the property is determined under section 23 of the Act. Under sec. 23(1)(a) the Annual value of the property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. Under clause (b) of sec. 23(1), if the actual rent received or receivable is more than the sum referred to in sec. 23(1)(a), then the amount so received or receivable shall be taken as annual letting value. The manner of determining the annual letting value u/s 23(1)(a) has been settled by various High Court decisions. Hence, the question of adding the notional rent computed on the security deposits has to be examined in terms of the provisions of sec. 23 only. We notice that this manner of determining the Annual letting value as prescribed u/s. 23 of the Act has not been examined by learned CIT(A). Accordingly, we are of the view that this issue requires fresh examination at the end of the learned CIT(A). Accordingly we set aside the order of learned CIT(A) and restore the same to his file for fresh consideration.
The next issue relates to disallowance made u/s. 14A of the Act. The Assessing Officer worked out the disallowance of ` 14,59,560/- by applying rule 8D of the I.T. Rules. Learned CIT(A), however, deleted the disallowance of interest worked out u/r. 8D(2)(ii) on the reasoning that the loans taken by the assessee were used for specific purposes and hence no disallowance of interest is called for.
At the time of hearing learned Departmental Representative could not contradict the findings given by learned CIT(A) and accordingly we uphold the order of learned CIT(A) on this issue.
In the result, appeal filed by the Revenue is partly allowed for statistical purposes.
Order has been pronounced in the Open Court on 8.6.2016.