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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 05/12/2011 of the ld. First Appellate Authority, Mumbai.
The only ground argued/agitated by the assessee pertains to estimation of rental income at Rs.5,89,600/- as against Rs.43,200/- actually, received by the assessee.
During hearing of this appeal, Shri Hariom Patel, ld. counsel for the assessee, advanced arguments, which is identical to the ground raised by asserting that the Assessing Officer estimated the rental income at Rs.5,89,600/- of two rooms and the assessee let out identical two rooms to another person on rent for Rs.48,000/- only. Reliance was placed upon the decision in CIT vs Akshay Textile Trading and Agencies Pvt. Ltd. 304 ITR 401 (Bom.) and ACIT vs Mayur Recreational and Development Ltd. (2008) 301 ITR (AT) 324 (Del.)(SB). The crux of the argument is that actual rent was received only to the tune of Rs.48,000/-.
2.1. On the other hand, the ld. DR, Shri G. N. Makwana, strongly defended the impugned order by contending that actual rent received by the assessee was Rs.5,89,600/-, therefore, the ld. Assessing Officer as well as the ld. Commissioner of Income Tax (Appeals) are justified in their conclusion.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs.95,43,660/- in his return filed on 31/07/2008. The assessee is an individual, showed salary income, income from house property, long term capital gain and income from other sources. The assessee for the year under consideration, in its computation of income also declared rental income of Rs.5,89,600/- for M/s West Coast Construction Pvt. Ltd. On asking by the ld. Assessing Officer, the assessee furnished the written submissions, which were considered by the Assessing Officer. The assessee at the relevant time was owner of property no.31 and 32 at sterling CHS Ltd., which was let out to Sidharth Patel and Kalpana Patel for annual license fee of Rs.42,300/-. Simultaneously, the assessee also received lease rent of Rs.5,89,600/- from M/s West Coast Construction Pvt. Ltd. in respect of Room No.51 & 52 of the same size and in the same building. The assessee was asked to explain the reason of lower license fee with respect to Room No.31 & 32 as compare to 51 & 52. It was explained by the assessee, that owners of all individual flats have licensed the commercial rights among themselves. The totality of facts clearly indicates that the arrangement of cross leasing of flats was to reduce the incidence of taxes. The whole arrangement is designed to defeat the law. Fact remains that the income of Rs.5,89,600/- was actually received and the assessee exploited the commercial rights as beneficial owner. Hence, the fact that the assessee has chosen not to receive the fair rent from his legally owned flats in consideration for receipt of rent for some other flats, will not absolve him from not charging the market rent of the flat legally owned by him. In the impugned order, there is uncontroverted fact that the municipal ratable value as per details filed by the assessee is Rs.52,410/-, which is more than the actual rent declared by the assessee at Rs.43,200/-. It means that the rent declared by the assessee was not the fair rent for which the property in question, reasonably be expected to let out.
2.3. Before proceeding further, we are reproducing hereunder the provision of section 23 of the Act, which deals as to how the annual value to be determined.
(1) For the purposes of section 22, the annual value of any property shall be deemed to be— (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.—For the purposes of clause (b) or clause (c) of this sub- section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules8 as may be made in this behalf, the amount of rent which the owner cannot realise. (2) Where the property consists of a house or part of a house which— (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil. (3) The provisions of sub-section (2) shall not apply if— (a) the house or part of the house is actually let during the whole or any part of the previous year; or (b) any other benefit therefrom is derived by the owner. (4) Where the property referred to in sub-section (2) consists of more than one house— (a) the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let. The operative words in section 23(1)(a) are that “the sum for which the property might reasonably be expected to let out from year to year.” These provide specific direction to the Revenue authorities for determining the “fair rent”. In the present appeal, the actual rent received by the assessee (as per assessee’s calculation itself) to the tune of Rs.5,89,600/-, thus, as per the provisions itself, there is no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), because, the decision was arrived at on the basis of factual figures of rent provided by the assessee himself. The ld. Assessing Officer, on the basis of material available on record, reasonably concluded accordingly.
2.4. So far as, the reliance placed by the assessee upon the decision in the case of Akshay Textiles and Trading Agencies Pvt. Ltd. (Supra), is concerned, the Hon’ble High Court was deeming with section 23(1)(a) of the Act using the expression “the sum for which the property might reasonably be expected to be let out from year to year.” In that case, there was no evidence on record that the transaction was not genuine. In that situation, the Hon’ble High Court reached to a conclusion, whereas, in the present appeal undisputedly, the assessee received the amount of Rs.5,89,600/-, therefore, this judicial pronouncement may not help the assessee. Likewise, in the case of Mayur Recreational and Development Ltd., the question before Tribunal was with respect to annual letting value and its determination and actual rent received by the assessee. The question was as to how the standard rent is to be determined. We have perused the facts of the case and found them altogether different. The Bench held that the standard rent of property is synonymous with “the sum of which the property might reasonably be expected to let from year to year and thus, the ld. Assessing Officer is bound to calculate such standard rent. However, admittedly, in the present appeal, the assessee received the amount of Rs.5,89,600/- from flats no.51 & 52 as rent from M/s West Coast Construction Pvt. Ltd. 2.5. So far as, the contention of the assessee that the property income may be considered as a whole and not from individual point of view, is concerned, we find that the provision of section 23 has been explained with the insertion of Explanation-1, which means (a) in case, where the property is let out throughout the previous year, the actual rent received or receivable by the owner in respect of such years and (b) in any other case, the amount which bears the same proportion to the amount of the actual rent received or receivable by the owner for the period for which the property is let, as the period of twelve months bears to such period, thus, as per the provision itself. The ratio laid down in Corporation of Calcutta vs Smt. Padma Devi AIR 1962 SC 151, 153, CED vs Radha Devi Jalan (1968) 67 ITR 761 (Cal.), Government Servant Co-operative Housing Society Ltd. vs UOI AIR 1998 SC 2636, 2638 followed in K.P. Sony vs UOI (1999) 153 taxation 447, 450 (Del.) supports our view.
2.6. By the Finance Act, 2001 (14 of 2001), substitution was made in the section for and from A.Y. 2002-03 in place of than existing section 23 for the purposes of determination of annual value of the property. As per section 23(1), for the purposes of section 22, the annual value of any property shall be deemed to be :-
� The sum for which the property might reasonably be expected to let from year to year (Section 23(1)(a) or � Where the property or any part of the property is let-
(a) And the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in section 23(1)(a), the amount so received or receivable (section 23(1)(b) or xxxxxxxxxxxxxxxx
If the aforesaid provision of the Act is kept in juxtaposition with the facts of the present appeal, undisputedly, the assessee received rent of RS.5,89,600/- from M/s West Coast Construction Pvt. Ltd. in respect of property no. 51 and 52, which are of the same size and located in the same building, thus, the receipt of actual rent is not in dispute, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals).
Finally, the appeal of the assessee is dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 01/02/2016.