Income Tax Appellate Tribunal - Mumbai
Asha Bhosle , Mumbai vs Assessee on 21 September, 2011
1
ITA 2552/M/10, Mrs. Asha Bhosle.
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "A"
BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI R.K. PANDA, A.M.
ITA No. 2552/Mum/2010
Assessment year 2004-05
Smt. Asha Bhosle, Income Tax Officer,
Flat No. Vikas Anand Co-Op. Ward 11(1)(1),
Hsg. Society, Aayakar Bhawan, 4th Floor,
Plot No. 124, Amrut Apartment, Vs. M.K. Road, Churchgate,
10th Road, Khar (W), Mumbai 400020.
MUMBAI -400 052.
PAN ABBPB 5610K
Appellant Respondent
Appellant by Shri Jitendra Sanghavi
Respondent by Shri P.K.B. Menon
Date of hearing 21.7.2011
Date of pronouncement 21.9.2011
ORDER
PER R.K. PANDA A.M. This appeal filed by the assessee is directed against the order dt. 11.07.03 of the CIT(A)- 3, Mumbai relating to A.Y. 2004-05.
2. 2. Ground of appeal No. 1 reads as under:-
"The learned CIT(A) erred in not allowing flats at Vikas Anand, Khar to be considered as self occupied property and therefore calculating the income therefrom treating the same as a deemed let out property.
Your appellant submits that under the facts and in the circumstances of the appellant's case the flats at Vikas Anand, Khar are self occupied property and therefore self occupancy allowance ought to have been granted in respect of said flats."2
ITA 2552/M/10, Mrs. Asha Bhosle.
3. Facts of the case in brief are that the assessee is a reputed play back singer. During the course of assessment proceedings, the A.O. noted from the statement of total income that assessee had offered income from house property at ` 10511/- in respect of seven flats owned by her at various places in Mumbai and Pune as deemed let out property u/s 22 to 27 of the I.T. Act, 1961. The details of the cost of the flats as stated by the A.O. are as under:-
(i) Flat at Pratibha Co. Op. Soc. - ` 6,77,500
(ii) Flat at Vikas Anand Co.Op. Soc. - ` 46,83,000
(iii) Two Flat at Maryland, Santacruz - ` 11,75,000
(iv) Flat at Poona I - ` 3,35,000
(v) Flat at Poona II - ` 85,000
It was submitted during the course of assessment proceedings that the assessee ordinarily resides at 102 Prabhukunj, Peddar Road, Mumbai, a flat owned by her daughter Ms. Varsha Bhosle and other seven flats in Mumbai and Pune. It was also submitted that a residential immovable property is under construction at Lonavala. The house property income of the above mentioned properties has been declared at ` 10511/- by adopting Municipal Ratable Value u/s 22/23 of the I.T. Act. According to the A.O., the Municipal Ratable Value cannot be a barometer for determining ALV. Further, the assessee has taken an adhoc amount of ` Nil for Maryland property considering the same as self occupied property while computing the property income. Excluding the Bungalow under construction which is not occupied, the A.O. estimated the house property income at 8% of the cost of acquisition in respect of five residential properties in Mumbai and Pune.
3.1 During appellate proceedings, the assessee stated that flat at Vikas Anand is self occupied property. It was submitted that due to addition on account of 8% of cost of acquisition, the assessee wished to treat Vikas Anand property as self occupied property as it was more beneficial to her. However, the ld. CIT(A) was not convinced with the arguments advanced by the assessee. According to him, the assessee herself while filing return of income has treated 3 ITA 2552/M/10, Mrs. Asha Bhosle.
Maryland property as self occupied property. Therefore, she cannot change her stand to treat Vikas Anand property as self occupied. He accordingly upheld the action of the A.O. in considering the Maryland property as self occupied. So far as the ALV of the property is concerned, the ld. CIT(A) following the order for A.Y. 2001-02 in assessee's case, directed the A.O. to consider 5% of the cost of construction as reasonable for determining ALV. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us.
4. The ld. Counsel for the assessee submitted that during the course of assessment proceedings, the A.O. did not make any enquiry as regard to property income while computing the ALV of the property at 8% of the cost of acquisition. The A.O. should have considered the flat at Vikas Anand as self occupied house property as against flat at Maryland property taken by the assessee. He submitted that during A.Y. 2001-02 the assessee had claimed SOP allowance in respect of Flat at Vikas Anand Building which was accepted by the ld. CIT(A). He submitted that during the assessment proceedings, the assessee has requested the A.O. to consider Vikas Anand property as self occupied property since he has deviated from the method of determining the ALV of the properties. Since all the properties are under her occupation, therefore, maximum benefit should have been given to the assessee. He submitted that although the claim was made before the ld. CIT(A), he has overlooked the same. He accordingly submitted that the self occupied property status should be given to house property situated at Vikas Anand Cooperative Hsg. Society, Khar.
5. The ld. D.R., on the other hand, submitted that the A.O. has done no wrong. He has only accepted the option exercised by the assessee by considering the Maryland property as self occupied. The assessee in subsequent years is free to exercise her option. He accordingly supported the order of the ld. CIT(A).
4ITA 2552/M/10, Mrs. Asha Bhosle.
6. We have considered the rival arguments made by both the sides, perused the orders of A.O. and ld. CIT(A) and the paper book filed on behalf of the assessee. We find the provisions of Section 23(4) reads as under:-
"Section 23(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 91) as if such house or houses had been let"
In the instant case, the assessee is the owner of seven flats situated at Mumbai and Pune apart from a house under construction at Lonavala. The assessee, no doubt, has specified earlier that the flat at Maryland is self occupied house property. However, during the course of assessment proceedings, she changed her stand and requested the A.O. to consider the flats at Vikas Anand at Khar as self occupied property since it was beneficial to her. Under these circumstances, we are of the considered opinion that the A.O. should have considered the flats at Vikas Anand Co. Op. Hsg. Soc., Khar as self occupied house property instead of Maryland property claimed in the return of income especially when he has changed the method of computation of income from self occupied house property by adopting 8% of cost of construction as ALV as against Municipal ratable value adopted by the assessee. It has been held by the Hon'ble Bombay High Court in the case of Balmukund Acharya vs. DCIT reported in [2009] 310 ITR 310 that the A.O. should not take advantage of the assessee's ignorance of law. Since the claim of the ALV by the assessee on the basis of Municipal Ratable value has been rejected by the A.O. and the same was substituted by him at 8% of the cost of construction, the A.O., in our opinion should have considered the flat at Vikas Anand as self occupied property since it was more beneficial to the assessee. In this view of the 5 ITA 2552/M/10, Mrs. Asha Bhosle.
matter, we set aside the order of the ld. CIT(A) and direct the A.O. to consider the Vikas Anand property as self occupied property as against flat at Maryland property. Ground No. 1 by the assessee is accordingly allowed.
7. Grounds of appeal No. 2 reads as under:-
"The ld. CIT(A) erred in confirming the disallowance of loss on account of difference in foreign exchange of ` 24,68,715/- by treating the loss as notional loss and considering the same as not allowable when the appellant is following cash system of accounting.
Your appellant submits that under the facts and in the circumstances of the appellant's case the foreign exchange loss of ` 24,68,715/- is allowable as a business loss while computing profits and gains of business or profession."
8. Facts of the case in brief are that the A.O. noted from the Income & Expenditure Account of the assessee that the assessee has claimed loss of ` 2468715/- on account of exchange rate difference computed on the accumulated balance outstanding in her EEFC account as on 31.3.04. On being questioned by the A.O., it was submitted that exchange rate difference arising out of foreign currency transactions should be recognised as income or as expense in the period in which they arise. The income and expenses are accounted at the rates prevalent on the date of incurring the expenses or receipt of income. If the realisation of income is postponed or the payment is effected later, the resulting exchange gain or loss will be recognised in current income. The Accounting Standard II relating to accounting for changes in foreign exchange rates at each balance sheet date monetary items denominated in a foreign currency (including balances in bank account denominated in a foreign currency) was brought to the notice of the A.O. Various decisions were also brought to the notice of the A.O. 8.1 However, the A.O. was not convinced with the explanation given by the assessee. Since the loss claimed by the assessee is actually a notional loss and 6 ITA 2552/M/10, Mrs. Asha Bhosle.
not a real loss and since the assessee is following cash system of accounting, he held the same as not an allowable expenditure u/s 37(1) of the Act.
8.2 Before the ld. CIT(A), it was submitted that in the preceding year, when there was profit on account of difference in valuation of foreign exchange, the same was offered for tax and was accepted by the Department. Therefore, the Department cannot take a contrary view. The submissions made by the assessee before the A.O. were reiterated before the ld. CIT(A). Various decisions were also cited before him.
8.3 However, the ld. CIT(A) was also not convinced with the arguments advanced before him and upheld the action of the A.O. While doing so, he noted that the assessee is maintaining cash method of accounting and, therefore, other than the monies actually utilized during the year by way of expenditure or converted into Indian rupees, the remaining would be in the EEFC bank account as part of opening balance or actual receipts of the year i.e. the opening balance would pertain to receipts of earlier year and the closing balance would include some amounts from the opening balance and receipts during the year less withdrawals, if any. Therefore, EEFC functions where money is received or withdrawn for various purposes and is on par with any other bank account in balance sheet. According to him, the notional loss claimed by the assessee is on different facts and pertains to assessee's own capital account. Such notional valuation based on prevailing market rate is not done in respect of any other capital asset in the balance sheet whether standing in domestic currency or foreign. Distinguishing the various decisions cited before him, he upheld the action of the A.O. 8.1 Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us.
7ITA 2552/M/10, Mrs. Asha Bhosle.
9. The ld. Counsel for the assessee submitted that in the preceding four assessment years, the assessee has offered to tax the gain on account of difference in foreign exchange on notional basis. Therefore, when the assessee has incurred loss during the year, the Department cannot take an inconsistent view. For this proposition, he relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Woodward Governor (India) Pvt. Ltd. reported in [2009] 312 ITR 354 (SC) . He further submitted that a direction may be given for reversal of income of the earlier year in the impugned assessment year by treating the same as loss or bad debt.
10. The ld. D.R., on the other hand, submitted that the assessee tries to equate the same with trading loss which under no circumstances can be allowed. In the preceding A.Y., the assessee herself has offered the notional income on account of difference in foreign exchange. However, that cannot override the provisions of law and entitle the assessee to claim the loss on account of difference in foreign exchange as an allowable expenditure.
11. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the ld. CIT(A) and the paper book filed on behalf of the assessee. In our opinion, consistency cannot override the provisions of law. Merely because the assessee was offering to tax on her own the gain on account of exchange rate difference on notional basis, the same in our opinion, cannot perpetuate the claim in the future years for deduction on account of loss due to difference in exchange. We also do not find any merit in the arguments advanced by the ld. counsel for the assessee that the extra income shown in the preceding years should be allowed to be reversed during the year and the assessee be allowed to claim the same as business loss or bad debts. Every assessment year is separate and distinct and the income or loss of one year cannot intermingle with the income or loss of another year. Further the loss due to difference in foreign exchange, in our opinion, cannot be equated 8 ITA 2552/M/10, Mrs. Asha Bhosle.
with trading loss. The loss on such notional basis cannot be allowed. In this view of the matter, we do not find any infirmity in the order of the ld. CIT(A) and uphold the same. The ground raised by the assessee is accordingly dismissed.
12. In the result, appeal filed by the assessee is partly allowed.
Order pronounced on 21.9.2011.
Sd/- sd/-
(N.V. VASUDEVAN) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, dated 21.9.2011.
RK
Copy to...
1. The appellant
2. The Respondent
3. The CIT(A) -V, Mumbai
4. The CIT - MC V, Mumbai
5. The DR Bench, "E"
6. Master File
// Tue copy//
BY ORDER
DY/ASSTT. REGISTRAR
ITAT, MUMBAI
9
ITA 2552/M/10, Mrs. Asha Bhosle.
Date Initials
1 Draft dictated on 30.8.11, Sr. PS
5.9.11,
15.9.11
2 Draft placed before the Author 2.9.2011, Sr. PS
5.9.11,
16.9.11
3 Draft placed before the second
Member
4 Approved draft comes to the Sr. PS Sr. PS
5 Kept for pronouncement on Sr. PS
6 File sent to the Bench Clerk Sr. PS
7 Date on which file goes to the Head
Clerk
8 Date on which file goes to the AR
9 Date of dispatch of order