Income Tax Appellate Tribunal - Mumbai
Govindbhai L Kakadia, Mumbai vs Department Of Income Tax on 30 November, 2015
आयकर अपील
य अ धकरण "G" यायपीठ मंब
ु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND
SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 323 /Mum/2014
( नधा रण वष / Assessment Year : 2010-11)
Assistant Commissioner of बनाम/ Shri Govindbhai L.
Income Tax - 16(2), Kakadia,
v.
2 n d floor, 1001, Prasad Chambers,
Matru Mandir, Opera House,
Tardeo Road, Tata Road No. 2,
Mumbai - 400007. Mumbai - 400 004.
थायी ले खा सं . /PAN :AFTPK4028A
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Revenue by Shri Rajesh Ojha
Assessee by : None
ु वाई क तार ख / Date of Hearing
सन : 4-11-2015
घोषणा क तार ख /Date of Pronouncement : 30-11-2015
आदे श / O R D E R
PER RAMIT KOCHAR, ACCOUNTANT MEMBER :
This appeal, filed by the Revenue, being ITA No. 323/Mum/2014, is directed against the order dated 31-10-2013 passed by the Ld. Commissioner of Income Tax(Appeals) - 27, Mumbai (Hereinafter called "the CIT(A)"), for the assessment year 2010-11.
2. The grounds raised by the Revenue read as under:-
"1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct in holding the assessee was eligible for Municipal Ratable Value even though the assessee has offered the notional income on deemed let out property @ 8.50% of the total 2 ITA 323/M/14 investment made to acquire such residential and commercial properties in preceding assessment year i.e. A.Y.2009-10?"
2. The Ld. CIT(A) grossly erred on facts of the case in directing the Assessing Officer to tax the properties based on Annual Letting Value as per Municipal Ratable Valuation, which is an afterthought of the assessee and change of stand from the previous year."
3. The Brief facts of the case are that the assessee is an individual dealing in shares and derivatives and has derived income from house property and income from other sources. The case was selected for scrutiny and the assessing officer(Hereinafter called "the AO") observed from the Balance Sheet filed by the assessee that the assessee has not offered any taxable income from the following properties under the head 'Income from House Property' owned by the assessee, the details of which as extracted from the Balance Sheet of the assessee by the AO are as under:-
1 Flat at Gokul Nagar Rs.5,41,575 2 Siddhivinayak Flat Rs.6,47,890 3 Thane Showroom Rs.15,76,110 4 Ludhiana Showroom Rs.8,16,800 5 Shop at Rajkot Rs.18,20,000 6 Flat at Worli Rs.5,16,56,040 7 Calcutta Show room Rs.74,12,221 Total Rs.6,44,70,636 The assessee was asked to explain as to why notional value ( 8.5% of total investment ) cannot be taken for taxation under the head "Income from House Property". In reply, the assessee submitted that Thane Show room is under construction and Ludhiana Show room for which only advance paid but in assessment year 2009-10 the assessee has agreed to offer notional income on both the properties, therefore, the A.O. considered both these properties for notional income in assessment year 2010-11 also. Similarly, the assessee submitted before the A.O. that flat at Worli on which possession was received 3 ITA 323/M/14 by the assessee but the same is lying vacant i.e. no rental income on the same has been received by the assessee and the flat at Tahnee Height is already considered as self occupied property, hence flat at Worli is considered for notional income by the AO . The assessee also agreed to offer notional income on the remaining properties owned by the assessee. Accordingly the A.O. calculated the income from house property by taking 8.5% on investment value of Rs. 6,44,70,636/- on the properties detailed above and added the same to the income under the head "income from house property"
which comes to Rs. 54,80,000/- before allowing deduction u/s 24(a) of the Income Tax Act,1961(hereinafter called "the Act") vide assessment order dated 09th March 2013 passed u/s 143(3) of the Act.
4.Aggrieved by the assessment orders dated 09th March 2013 passed by the AO, the assessee carried the matter before the CIT (A) in first appeal whereby the assessee has challenged the computation of notional income @ 8.5% on the value of investment in the properties of Rs.6,44,70,636/- being income of Rs.54,80,000/- determined by AO under the head 'Income from House Property' and elaborate submissions were made as contained in the CIT(A) orders.
The assessee also contended before the CIT(A) that the Annual Letting Value (ALV) should be taken as nil as the properties were never let out . The assessee also submitted before the CIT(A) that as per Section 23(1)(a) of the Act, the income which can be brought to tax is either the ratable value or nil, whichever is lower. The assessee also relied on the following decisions to support its contentions :-
1. Kamal Mishra, 19 SOT 251 (Del)
2. Premsudha Exports, 110 TTJ 89 (Mum)
3. Smt. Shakuntaladevi (2012) - TIOL -64-ITAT (Ban) 4 ITA 323/M/14 The assessee also submitted that without prejudice to the stand taken regarding the deemed value to be taken at NIL , the revenue can at best adopt the municipal retable value as the deemed value of the property in question.
It was stated by the assessee that in a number of decisions that what is to be brought to the tax as income from house property u/s 23(1) of the Act is the higher of the rent actually received or the Municipal Ratable value or the standard rent as per Rent Control Act. The assessee relied upon the following decisions"
1. Sheila Kaushik v. CIT(1981) 131 ITR 435 (SC)
2. Amolak Ram Khosla v. CIT (1981) 131 ITR 589(SC)
3. Dewan Daulat Ram Kapoor v. NDMC (1980) 122 ITR 700(SC)
4. Dr Balbir Singh v. MCD (1985) 152 ITR 388(SC)
5. CIT v. Mayur Recreational & Development Ltd. (AIT -2008-189 ITA - SB)
6. CIT v. Raghubir Salan Charitable Trust 183 ITR 297(Delhi High Court)
7. L. Bansidhar & Sons HUF 201 ITR 655(Del. HC)
8. CIT v. Vinay Bharat Ram & Sons (HUF) 261 ITR 632(Delhi HC) The ld. CIT(A) after considering the submissions of the assessee and the case laws relied upon by the assessee held that the value which could be adopted by the A.O. is the municipal Ratable Value even while bringing to tax the deemed Annual Letting Value(ALV) in respect of the vacant properties and directed the A.O. to verify the Municipal Ratable value in respect of the above properties and modify the order accordingly.
5.Aggrieved by the decision of the ld. CIT(A) vide orders dated 31-10-2013, the Revenue is in appeal before the Tribunal.
5 ITA 323/M/14
6.At the time of hearing, none appeared on behalf of the assessee, therefore, we proceed to dispose of the appeal after hearing the ld. D.R.
7.The ld. D.R. relied upon the order of A.O. and submitted that the CIT(A) erred in directing the A.O. to verify the Municipal Ratable value of the above properties and compute the deemed ALV based on Municipal Ratable value in respect of vacant properties to bring to tax income under the head 'Income from House Property' as per Section 22 and 23 of the Act. The Ld. DR relied upon the decision of Hon'ble Bombay High Court in the case of (2014) CIT v. Tiptop Typography, (2014) 48 Taxmann.com 191 (Bom. HC) and stated that the Hon'ble jurisdictional High Court has laid down the guidelines for computation of ALV which is to be followed.
8.We have heard the ld. D.R. and perused the material placed on record and the case laws relied upon. We have observed that the assessee is owning the following properties on which income from house property is not being offered for taxation by the assessee in the return of income filed with the Revenue :-
1 Flat at Gokul Nagar Rs.5,41,575 2 Siddhivinayak Flat Rs.6,47,890 3 Thane Showroom Rs.15,76,110 4 Ludhiana Showroom Rs.8,16,800 5 Shop at Rajkot Rs.18,20,000 6 Flat at Worli Rs.5,16,56,040 7 Calcutta Show room Rs.74,12,221 Total Rs.6,44,70,636 The Hon'ble Bombay High Court in the case of Tiptop Typography (supra) has laid down the guidelines for determination of ALV for computing income under the head 'Income from House Property'. We further observe that the A.O. has not made any enquiry to compute the ALV in accordance with the 6 ITA 323/M/14 guidelines laid down by the Hon'ble Bombay High Court in the above case and simply made the addition based on 8.5% of the total investment made by the assessee in the property without making any enquiry as the assessee agreed to offer the notional income on the said properties. We have also observed that the CIT(A) has directed the AO to compute deemed ALV based on Municipal Ratable value in case of vacant properties to compute income under the head 'Income from House Property' which is again not in accordance with the guidelines laid down by Hon'ble Jurisdictional High Court decision in the case of Tip Top Typography (supra). The relevant extracts of judgment of Hon'ble Bombay High Court which stipulates how to compute ALV in accordance with the provisions of the Act are reproduced below:-
"45. In the above backdrop, the Full Bench held as under:--
'With this, we revert back to the moot question, viz., how to determine the "fair rent" of the property and then to find out as to whether actual rent received is less or more than the "fair rent" so that higher of two is taken as annual letting value under Section 23(1)(b) of the Act. For this purpose, we first discuss the validity of approach taken by the AO, viz., whether it is permissible to add notional interest of interest free security deposit and add the same to the actual rent received for arriving at annual letting value. Even the Division Bench while making reference did not countenance the aforesaid formula adopted by the AO as is clear from Para 12 of the reference order wherein it is observed as under:
"12. In this backdrop, the important question which arises for determination is: what is the fair rent of the properties, which were let out in the instant case? The mistake committed by the AO was that he did not address this issue and straightway proceeded to add notional interest on the interest free security deposit.
7 ITA 323/M/14 The aforesaid conclusion is correct. We may record that permissibility of adding notional interest into actual market rent received was not approved by the Calcutta High Court in the case ofCIT v. Satya Co. Ltd. [1997] 140 CTR (Cal) 569] and categorically rejected in the following words:
"There is no mandate of law whereby the AO could convert the depression in the rate of rent into money value by assuming the market rate of interest on the deposit as the further rent received by way of benefit of interest-free deposit. But section 23, as already noted, does not permit such calculation of the value of the benefit of interest-free deposit as part of the rent. This situation is, however, foreseen by Schedule III to the WT Act and it authorises computation of presumptive interest at the rate of 15 per cent as an integral part of rent to be added to the ostensible rent. No such provision, however, exists in the Act. That being so, the act of the AO in presuming such notional interest as integral part of the rent is ultra vires the provision of section 23(1) and is, therefore, unauthorised. Though what has been urged on behalf of the Revenue is not to be brushed aside as irrational, yet the contention is not acceptable as the law itself comes short of tackling such fact-situation."
This view of the Calcutta High Court has been accepted by a Division Bench of this Court as well in the case of CIT v. Asian Hotels Ltd. [2008] 215 CTR (Delhi) 84 holding that the notional interest on refundable security, if deposited, was neither taxable as profit or gain from business or profession under Section 28(iv) of the Act or income from house property under Section 23(1)(a) of the Act. Rationale given in this behalf was as under (page 493):
"A plain reading of the provisions indicates that the question of any notional interest on an interest free deposit being added to the income of an assessed on the basis that it may have been earned by the Assessee if placed as a fixed deposit, does not arise. Section 28(iv) is concerned with business income and is distinct and different from income from house property. It talks of the value of any benefit on perquisite, "whether convertible into money or not" arising from 8 ITA 323/M/14 "the business or the exercise of a profession." It has been explained by this Court in Ravinder Singh that Section 28(iv) can be invoked only where the benefit or perquisite is other than cash and that the term "benefit or amenity or perquisite" cannot relate to cash payments.
In the instant case, the AO has determined the monetary value of the benefit stated to have accrued to the assessed by adding a sum that constituted 18% simple interest on the deposit. On the strength of Ravinder Singh, it must be held that this rules out the application of Section 28(iv) of the Act.
Section 23(1)(a) is relevant for determining the income from house property and concerns determination of the annual letting value of such property. That provision talks of "the sum for which the property might reasonably be expected to let from year to year." This contemplates the possible rent that the property might fetch and not certainly the interest in fixed deposit that may be placed by the tenant with the landlord in connection with the letting out of such property. It must be remembered that in a taxing statute it would be unsafe for the Court to go beyond the letter of the law and try to read into the provision more than what is already provided for. The attempt by learned counsel for the Revenue to draw an analogy from the Wealth-tax Act, 1957 is also to no avail. It is an admitted position that there is a specific provision in the Wealth-tax Act which provides for considering of a notional interest whereas Section 23(1)(a) contains no such specific provision."
We approve the aforesaid view of the Division Bench of this Court and Operative words in Section 23 (1)(a) of the Act are "the sum for which the property might reasonably be expected to let from year to year". These words provide a specific direction to the Revenue for determining the "fair rent". The Assessing Officer, having regard to the aforesaid provision is expected to make an inquiry as to what would be the possible rent that the property might fetch. Thus, if he finds that the actual rent received is less than the "fair/market rent" because of the reason that the assessee has received abnormally high interest free security deposit and because of that reason, the actual 9 ITA 323/M/14 rent received is less than the rent which the property might fetch, he can undertake necessary exercise in that behalf. However, by no stretch of imagination, the notional interest on the interest free security can be taken as determinative factor to arrive at a "fair rent". The Provisions of section 23(1)(a) do not mandate this. The Division Bench in CIT v. Asian Hotels Ltd. [2010] 323 ITR 490 (Delhi), thus, rightly observed that in a taxing statute it would be unsafe for the Court to go beyond the letter of the law and try to read into the provision more than what is already provided for. We may also record that even the Bombay High Court in the case ofCIT v. J.K. Investors (Bombay) Ltd. [2001] 248 ITR 723 categorically rejected the formula of addition of notional interest while determining the "fair rent".
It is, thus, manifest that various Courts have held a consistent view that notional interest cannot form part of actual rent. Hence, there is no justification to take a different view that what has been stated in CIT v. Asian Hotels Limited [2010] 323 ITR 490/[2008] 168 Taxman 59 (Delhi).
The next question would be as to whether the annual letting value fixed by the Municipal Authorities under the Delhi Municipal Corporation Act can be the basis of adopting annual letting value for the purposes of section 23 of the Act. This question was answered in affirmative by the Calcutta High Court in CIT v. Satya Co. Ltd. [1997] 140 CTR (Cal.) 569 on the ground that the provisions contained in the Delhi Municipal Corporation Act for fixing annual letting value is in pari materia with section 23 of the Act. The Court opined that the fair rent fixed under the Municipal laws, which takes into consideration everything, would form the basis of arriving at annual value to be determined under Section 23(1)(a) and to be compared with actual rent and notional advantage in the form of notional interest on interest free security deposit could not be taken into consideration. It is clear from the following discussion therein:
"6. With regard to question Nos. (5) and (6) which are only for the assessment years 1984-85 and 1985-86 the further issue involved is whether any addition to the annual rental value can be made with reference to any notional interest on the deposit made by the tenant. When the annual value is determined under sub-
10 ITA 323/M/14 clause (a) of sub-section (1) of section 23 with reference to the fair rent then to such value no further addition can be made. The fair rent, takes into consideration everything. The notional interest on the deposit is not any actual rent received or receivable. Under sub-clause (b) of section 23(1) only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of money which is payable by the tenant for use of the premises to the landlord. Any advantage and/or perquisite cannot be treated as rent. Wherever any such perquisite or benefit is sought to be treated as income, specific provisions in that behalf have been made in the Act by including such benefit, etc., in the definition of the income under section 2(24) of the Act. Specific provisions have also been made under different heads for adding such benefits or perquisites as income while computing income under those heads, e.g., salary, business. The computation of the income under the head 'House property' is on a deemed basis. The tax has to be paid by reason of the ownership of the property. Even if one does not incur any sum on account of repairs, a statutory deduction therefore is allowed and where on repairs expenses are incurred in excess of such statutory limit, no deduction for such excess is allowed. The deductions for municipal taxes and repairs are not allowed to the extent they are borne by the tenant. However, even such actual reimbursements for municipal taxes, insurance, repairs or maintenance of common facilities are not considered as part of the rent and added to the annual value. Accordingly, there can be no scope or justification whatsoever for making any addition for any notional interest for determining the annual value.
Whatever benefit or advantage which is derived from the deposits - whether by way of saving of interest or of earning interest or making profits by investing such deposit - the same would be reflected in computing the income of the assessee under other heads.
In our view there is no scope for making any addition on account of so-called notional interest on the deposit made by the tenant, since there is no provision to this effect in section 22 or 23 of the IT Act, 1961."
11 ITA 323/M/14 In fact, this is the view taken even by the Supreme Court in the case of Mrs. Shiela Kaushish v. CIT [1981] 131 ITR 435 on account of similarity of the provisions under the municipal enactments and section 23 of the Act.
It is on this basis that in the present case, the Commissioner of Income Tax (Appeals) gave primacy to the rateable value of the property fixed by the Municipal Corporation of Delhi vide its assessment order dated December 31, 1996 and on this basis, opined that the actual rent was more than the said rateable value and therefore, as per Section 23(1)(b), the actual rent would be the income from house property and there could not have been any further additions.
Since the provisions of fixation of annual rent under the Delhi Municipal Corporation Act are in pari materia of section 23 of the Act, we are inclined to accept the aforesaid view of the Calcutta High Court in Satya Co. Ltd. [1997] 140 CTR (Cal.) 569 that in such circumstances, the annual value fixed by the Municipal Authorities can be a rational yardstick. However, it would be subject to the condition that the annual value fixed bears a close proximity with the assessment year in question in respect of which the assessment is to be made under the Income-tax laws. If there is a change in circumstances because of passage of time, viz., the annual value was fixed by the Municipal Authorities much earlier in point of time on the basis of rent than received, this may not provide a safe yardstick if in the Assessment Year in question when assessment is to be made under Income-tax Act. The property is let-out at a much higher rent. Thus, the Assessing Officer in a given case can ignore the municipal valuation for determining annual letting value if he finds that the same is not based on relevant material for determining the "fair rent" in the market and there is sufficient material on record for taking a different valuation. We may profitably reproduce the following observations of the Supreme Court in the case of Corporation of Calcutta v. Smt. Padma Debi, AIR 1962 SC 151, 153.
"A bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An
12 ITA 323/M/14 inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness."
Thus the rateable value, if correctly determined, under the municipal laws can be taken as ALV under Section 23(1)(a) of the Act. To that extent we agree with the contention of the learned Counsel of the assessee. However, we make it clear that rateable value is not binding on the Assessing Officer. If the Assessing Officer can show that rateable value under municipal laws does not represent the correct fair rent, then he may determine the same on the basis of material/evidence placed on record. This view is fortified by the decision of Patna High Court in the case ofKashi Prasad Kataruka v. CIT [1975] 101 ITR 810.
The above discussion leads to the following conclusions:
(i) ALV would be the sum at which the property may be reasonably let out by a willing lessor to a willing lessee uninfluenced by any extraneous circumstances.
(ii) An inflated or deflated rent based on extraneous consideration may take it out of the bounds of reasonableness.
(iii) Actual rent received, in normal circumstances, would be a reliable evidence unless the rent is inflated/deflated by reason of extraneous consideration.
(iv) Such ALV, however, cannot exceed the standard rent as per the Rent Control Legislation applicable to the property.
(v) If standard rent has not been fixed by the Rent Controller, then it is the duty of the Assessing Officer to determine the standard rent as per the provisions of rent control enactment.
(vi) The standard rent is the upper limit, if the fair rent is less than the standard rent, then it is the fair rent which shall be taken as ALV and not the standard rent.
We would like to remark that still the question remains as to how to determine the reasonable/fair rent. It has been indicated by the Supreme Court that 13 ITA 323/M/14 extraneous circumstances may inflate/deflate the "fair rent". The question would, therefore, be as to what would be circumstances which can be taken into consideration by the Assessing Officer while determining the fair rent. It is not necessary for us to give any opinion in this behalf, as we are not called upon to do so in these appeals. However, we may observe that no particular test can be laid down and it would depend on facts of each case. We would do nothing more than to extract the following passage from the Supreme Court judgment in the case of Motichand Hirachand v. Bombay Municipal Corporation, AIR 1968 SC 441, 442 :
"It is well-recognized principle in rating that both gross value and net annual value are estimated by reference to the rent at which the property might reasonably be expected to let from year to year. Various methods of valuation are applied in order to arrive at such hypothetical rent, for instance, by reference to the actual rent paid for the property or for others comparable to it or where there are no rents by reference to the assessments of comparable properties or to the profits carried from the property or to the cost of construction.'
46. We have and after careful reading of the provision in question and the conclusion of the Full Bench of the Delhi High Court councluded that a different view cannot be taken. We respectfully concur with the view taken in this Full Bench decision of the Delhi High Court.
47. We are of the view that where Rent Control Legislation is applicable and as is now urged the trend in the real estate market so also in the commercial field is that considering the difficulties faced in either retrieving back immovable properties in metro cities and towns, so also the time spent in litigation, it is expedient to execute a leave and license agreements. These are usually for fixed periods and renewable. In such cases as well, the conceded position is that the Annual Letting Value will have to be determined on the same basis as noted above. In the event and as urged before us, the security deposit collected and refundable interest free and the monthly
14 ITA 323/M/14 compensation shows a total mismatch or does not reflect the prevailing rate or the attempt is to deflate or inflate the rent by such methods, then, as held by the Delhi High Court, the Assessing Officer is not prevented from carrying out the necessary investigation and enquiry. He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make, would be for ascertaining the going rate. He can make a comparative study and make a analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave and license basis is of a similar nature, namely, commercial or residential. He should also satisfy himself as to whether the rate obtained by him from the deals and transactions and documents in relation thereto can be applied or whether a departure therefrom can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advantages and benefits an office or a block on the upper floor may fetch higher returns or vice versa. Therefore, there is no magic formula and everything depends upon the facts and circumstances in each case. However, we emphasize that before the Assessing Officer determines the rate by the above exercise or similar permissible process he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other considerations makes it unreasonable must precede the undertaking of the above exercise. After the above ascertainment is done by the Officer he must, then, comply with the principles of fairness and justice and make the disclosure to the Assessee so as to obtain his view.
15 ITA 323/M/14
48. We are not in agreement with Shri Chhotaray that the municipal rateable value cannot be accepted as a bona fide rental value of the property and it must be discarded straightway in all cases. There cannot be a blanket rejection of the same. If that is taken to be a safe guide, then, to discard it there must be cogent and reliable material.
49. We are of the opinion that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced that the case before him is suspicious, determination by the parties is doubtful that he can resort to enquire about the prevailing rate in the locality. We are of the view that municipal rateable value may not be binding on the Assessing Officer but that is only in cases of afore-referred nature. It is definitely a safe guide.
50. We have broadly agreed with the view taken by the Full Bench of the Delhi High Court. Hence, the issue of determination of the "fair rental value" in respect of properties not covered by or covered by the Rent Control Act is to be undertaken in terms of the law laid down in the Full Bench decision of the Delhi High Court.
51. We quite see the force in the arguments of Ms. Vissanjee that ordinarily the license fee agreed between the willing licensor or a willing licensee uninfluenced by any extraneous circumstances would afford reliable evidence of what the landlord might reasonably be expect to get from a hypothetical tenant. She has in making this submission, answered the issue and summed up the conclusion as well. Then, it is but natural and logical that in the event, the transaction is influenced by any extraneous circumstances or vitiated by fraud, or the like that the Assessing Officer can adopt a "fair rent" based on the opinion obtained from reliable sources. There as well, we do not see as to how we can uphold the submissions of Mr. Chhotaray that the notional rent on the security deposit can be taken into account and consideration for the determination. If the transaction itself does not reflect any of the afore stated aspects, then, merely because a security deposit which is refundable and interest free has been obtained, the Assessing Officer should not presume that this sum or the interest derived therefrom at Bank rate is the income of the assessee till the determination or conclusion of the transaction. The Assessing Officer ought to be aware of several aspects and 16 ITA 323/M/14 matters involved in such transactions. It is not necessary that if the license is for three years that it will operative and continuing till the end. There are terms and conditions on which the leave and license agreement is executed by parties. These terms and conditions are willingly accepted. They enable the license to be determined even before the stated period expires. Equally, the licensee can opt out of the deal. A leave and license does not create any interest in the property. Therefore, it is not as if the security deposit being made, it will be necessarily refundable after the third year and not otherwise. Everything depends upon the facts and circumstances in each case and the nature of the deal or transaction. These are not matters which abide by any fixed formula and which can be universally applied. Today, it may be commercially unviable to enter into a lease and, therefore, this mode of inducting a 'third party' in the premises is adopted. This may not be the trend tomorrow, therefore, we do not wish to conclude the matter by evolving any rigid test.
52. We have also noted the submissions of Shri Ahuja. We are of the opinion that even in the cases and matters brought by him to our notice, it is evident that the Assessing Officer cannot brush aside the rent control legislation, in the event, it is applicable to the premises in question. Then, the Assessing Officer has to undertake the exercise contemplated by the rent control legislation for fixation of standard rent. The attempt by the Assessing Officer to override the rent control legislation and when it balances the rights between the parties has rightly been interfered with in the given case by the Appellate authority. The Assessing Officer either must undertake the exercise to fix the standard rent himself and in terms of the Maharashtra Rent Control Act, 1999 if the same is applicable or leave the parties to have it determined by the Court or Tribunal under that Act. Until, then, he may not be justified in applying any other formula or method and determine the "fair rent" by abiding with the same. If he desires to undertake the determination himself, he will have to go by the Maharashtra Rent Control Act, 1999. Merely because the rent has not been fixed under that Act does not mean that any other determination and contrary thereto can be made by the Assessing Officer. Once again having respectfully concurred with the judgment of the Full Bench of the Delhi High Court, we need not say anything more on this issue.
17 ITA 323/M/14
53. Thus, apart from the three aspects namely of a municipal valuation, of obtaining interest free security deposit and the properties being covered by the Maharashtra Rent Control Act but no standard rent thereunder is fixed, our attention has not been invited to any other case. Suffice it to hold that in those cases and to which our attention is not invited the principles laid down in the decisions of the Hon'ble Supreme Court and referred to by the Full Bench of the Delhi High Court would govern the enquiry."
We are of the considered view that the interest of justice will be best served, if the orders of the CIT(A) be set aside and the matter be restored to the file of the A.O. for determination of ALV of the properties of the assessee in accordance with Section 22 and 23 of the Act by following the guidelines given by the Hon'ble Bombay High Court in the case of Tiptop Typography (supra). We order accordingly.
9. In the result, the appeal filed by the Revenue is allowed for statistical purpose.
Order pronounced in the open court on 30th November, 2015.
आदे श क घोषणा खुले #यायालय म% &दनांकः 30-11-2015 को क गई ।
Sd/- sd/- -
(AMIT SHUKLA) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मुंबई Mumbai; &दनांक Dated 30-11-2015
[
व.9न.स./ R.K., Ex. Sr. PS
18 ITA 323/M/14
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आय:
ु त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आयु:त / CIT- Concerned, Mumbai
5. =वभागीय 9त9न?ध, आयकर अपील य अ?धकरण, मुंबई / DR, ITAT, Mumbai H Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या=पत 9त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai