TaxTMI 
TaxTMI 
2012 (12) TMI 365
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....sessment years 2005-06 and 2006-07, consolidated order dated 21.2.2012. 4. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. The CIT(A) has decided both the issues of this appeal by observing as under: "4.1 Ground challenging the disallowance of Rs. 54,85,558/- on account of purported payment of excess rent: 4.1.1. In the course of the assessment proceedings the Addl. CIT noticed that the appellant company had claimed rent payment of Rs. 1,60,92,000/- and paid interest-free deposit of Rs. 4,25,00,000/- to one of its sister concerns i.e M/s TIPL in relation to the following properties taken on rent in earlier years. The break-up of the property-wise rent and deposit was found to be as under: Property Particulars and Location Rent paid per annum Interest-free paid for the property Anand Estates Flat Nos. 15, No. 189 A, Sane Guruji Mahalakshmi, Mumbai-13 Area 3,525 sq.ft. Rs.25,56,000/- Rs. 90,00,000/- Elphinstone Cricket Club, 17, Murzban Road, 4th Floor, Fort, Mumbai-l 5,000 sq.ft. Rs.90,00,000/- Rs. 1,50,00,000/- Usha Sadan, Flat No.9, A Block, Colaba, Mumbai (Residential property)- Area 2,000 sq.ft .. ren....
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....(d) Amolak Ram Khosia Vs. CIT (e) Dr. Balbir Singh Vs. MCD (1985) 152 1TR 388 (S.C) The Addl.CIT has inferred from the ratio laid down by the Hon'ble Apex Court in the afore cited cases that the Rent Control Act provides for fixation of a standard rent and that a landlord cannot charge a higher rent from the tenant in breach of the Rent Control Legislation. The Addl.CIT went on observing that the Rent Control Legislation recognized 8.5% return on investment as a measure of the standard rent. In this regard the Addl.CIT placed reliance on the judgement of the Hon'ble LT.A.T, Mumbai Bench in the case of ITO Vs. M/s. Chem Mech Private Limited 82 ITD 427 (Mum.). In the instant case, the landlord i.e. M/s. TIPL was found by the Addl.CIT to have shown an investment of Rs. 15,70,52,835/- in respect of the impugned let out properties. 8.5% thereof worked out to Rs. 1,33,49,490/- which, according to the Addl.CIT, constituted the standard rent. Since the appellant was found to have paid an aggregate rent of Rs. 160,92,000/-/-, the excess rent paid in this regard was computed by the Addl.CIT at Rs. 27,42,510/ -. At the same time, the Addl.CIT also endeavoured to find out the fair market ren....
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.... 4.1.3 The arguments put forward by the learned A.R. have carefully been examined vis-a-vis the contention raised by the Addl.CIT in the assessment order. All the facts and figures and evidences tendered by the appellant during the appellate proceedings of the earlier years have been examined by my predecessor in detail. My predecessors have found force in the appellant's arguments and accordingly held that the rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance. Since the facts in this assessment year remain unchanged, find no reason for deviating from the stand taken in the appellate proceedings of earlier assessment years. 4.1.4. Further, Appellant has given documentary evidence that Hansa Vision has vacated the premises in March 2007. 4.1.5. This matter of disallowance has been going on from Assessment Year 1996-1997 onwards. The ITAT has also allowed from 1996-1997 to 2004-2005 in line with CIT order and rejected the Department's appeal against my predecessor's order. In other words, by following the earlier years' appellate orders and also considering the ITAT order, I delete the addition of Rs.....
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.... been provided by the JCIT in the body of the order. As per the said calculation, the disallowable interest worked out to Rs. 28,40,983/- [Rs.26,95,075/- for the Mumbai properties + Rs. 1,45,908/- for the Delhi property] which was, however, restricted to the actual amount of interest paid by the appellant during the relevant accounting year i.e. Rs. 1,84,302/- which thus represented the disallowance made by the JCIT under this head. 4.2.2. In the course of the appellate proceeding, the learned A.R. have submitted the following: "The deposits paid by the appellant company are in tune with the market reality. It may kindly be appreciated that wherever the deposits are slightly high, the extent of rent paid is low and wherever the rent is high, the deposit has been low. In Mumbai where the Pagadi system is prevalent, prevalent, rents and deposits always work in proportion to each other. The A. 0 has considered only one year's deposit, irrespective of the amount of rent paid. The appellant, as a prudent enterprise, thought it fit to pay rental deposits at a reasonable level after taking into account the advantages flowing out of the business premises occupied by it at vantage prime l....
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.... Excess rent deposit = The deposit made by the appellant (Rs.90,00,000/-) - 12 months' rent (Rs.25,56,000/-) = Rs. 64,44,000/- (b) Fort Property, Mumbai:- Excess rent deposit = The deposit made by the appellant (Rs.1,50,00,000) - 12 months' rent (Rs.90,00,000/-) = Rs. 60,00,000/-. (c) Pusa Road Property, New Delhi:- Excess rent deposit = The deposit made by the appellant (Rs.75,00,000/-) -12 months' rent (Rs.43,56,000/-) = Rs. 31,44,000/-. Thus the aggregate excess deposit works out to Rs. 1,55,88,000/-. The interest at the rate of 12% per annum on the said excess deposit works out to Rs.18,70,560/-. My predecessor has disallowed this interest amount in prior assessments and the appellant has appealed against my predecessor's order and obtained favourable order from the jurisdictional Appellant Tribunal from 2001-2002 to 2006-07. In other words, by following the ITAT order, I delete the addition of Rs.1,84,302/- made by the A.O. The grounds of the appellant in this regard thus succeed." 5. We find that in assessment years 2005-06 and 2006-07, in I.T.A.Nos.1249 & 1250/Mds/2010, the Tribunal has decided both the issues in favour of the assessee by observing as under: "4. We ha....
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.... in Mumbai were governed by the provisions of the Rent Control Legislation. While dwelling upon the provisions of the Rent Control Legislation, Addl.CIT has placed reliance on the judgement of the Hon'ble Apex Court in the following cases for the purpose of determining the reasonable annual value of the properties governed by the said provisions:- (a)Dewan Daulat Rai Kapur Vs. New Delhi Municipal Corporation and another 122 ITR 700 (SC). (b) Corporation of Calcutta Vs. Smt. Padma Devi AIR 1962 S.C 151. (c) Sheila Kaushik Vs. CIT (d) Amolak Ram Khosia Vs. CIT (e) Dr. Balbir Singh Vs. MCD (1985) 152 1TR 388 (S.C) The Addl.CIT has inferred from the ratio laid down by the Hon'ble Apex Court in the afore cited cases that the Rent Control Act provides for fixation of a standard rent and that a landlord cannot charge a higher rent from the tenant in breach of the Rent Control Legislation. The Addl.CIT went on observing that the Rent Control Legislation recognized 8.5% return on investment as a measure of the standard rent. In this regard the Addl.CIT placed reliance on the judgement of the Hon'ble I.T.A.T, Mumbai Bench in the case of ITO Vs. M/s. Chem Mech Private Limited 82 ....
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....es in support of his rebuttal. On the basis of the evidences filed, the learned A.R. have sought to prove that no two properties can be compared with each other, unless they are identical in respect of the location, the facilities available and the period of tenancy, etc. He pointed out that the properties selected by the department in Mumbai and Delhi for the sake of comparison were not at all at par with the properties taken on rent by the appellant from M/s. TIPL, because they differed significantly on various counts. 4.1.3 The arguments put forward by the learned A.R. have carefully been examined vis-a-vis the contention raised by the Addl.CIT in the assessment order. All the facts and figures and evidences tendered by the appellant during the appellate proceedings of the earlier years have been examined by my predecessor in detail. My predecessors have found force in the appellant's arguments and accordingly held that the rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance. Since the facts in this assessment year remain unchanged, find no reason for deviating from the stand taken in the appellate proceed....
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....2-03. While doing so, the JCIT had again referred to the comparable cases of M/s. Hansa Vision Private Limited and M/s. A.M.D. Plast Private Limited in relation to the Mumbai and Delhi properties. By relying upon the figures of advances given by the Mumbai and Delhi-based comparable companies, the JCIT computed the excess interest-free deposit made by the appellant company with M/s. TIPL in relation to the let out properties and calculated the interest thereon at the rate of 12% per annum. The detailed working has been provided by the JCIT in the body of the order. As per the said calculation, the disallowable interest worked out to Rs. 28,40,983/- [Rs.26,95,075/- for the Mumbai properties + Rs. 1,45,908/- for the Delhi property] which was, however, restricted to the actual amount of interest paid by the appellant during the relevant accounting year i.e. Rs. 14,48,265/- which thus represented the disallowance made by the JCIT under this head. 4.2.2. In the course of the appellate proceeding, the learned A.R. have submitted the following: "The deposits paid by the appellant company are in tune with the market reality. It may kindly be appreciated that wherever the deposits are sli....
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....group concern exceeding 12 months' rent. Accordingly, in the appellate proceedings for the AYs. 2001-02, 2002-03 and 2003- 2004, my predecessor had worked out the excess rental deposits and computed the disallowable interest at the rate of 12% thereon. also find no infirmity in the said finding of my predecessor-in-office and accordingly, the excess rent deposits in respect of the above mentioned three properties are computed as under):- (a) Mahalakshmi Property. Mumbai:- Excess rent deposit = The deposit made by the appellant (Rs.90,00,000/-) - 12 months' rent (Rs.25,56,000/-) = Rs. 64,44,000/- (b) Fort Property, Mumbai:- Excess rent deposit = The deposit made by the appellant (Rs.1,50,00,000) - 12 months' rent (Rs.90,00,000/-) = Rs. 60,00,000/-. (c) Pusa Road Property, New Delhi:- Excess rent deposit = The deposit made by the appellant (Rs.75,00,000/-) -12 months' rent (Rs.43,56,000/-) = Rs. 31,44,000/-. Thus the aggregate excess deposit works out to Rs. 1,55,88,000/-. The interest at the rate of 12% per annum on the said excess deposit works out to Rs. 18,70,560/-. My predecessor has disallowed this interest amount in prior assessment years and the appellant has a....
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.... parties we find that identical issues have come up for consideration before this Tribunal in the case of the same Assessee in ITA Nos.283/Mds./04, 965,2804/Mds./05 & 392/06 and 438/04, 1810/05, 167 & 519/06 for the Asst. Years 1996-97, 2001-02, 2002-03 & 1997- 98 and this Tribunal by its order dated 30th November 2007, has elaborately dealt with the issues in paras 23 to 31 of above Order. For better appreciation, we reproduce here below paras 23 to 31 of the above order:- "23. We have considered the rival submissions carefully in the light of the material on record. We find that during the Asst. Year 2001-02 though rent was found to be reasonable but the deposits were held to be unreasonable by the Assessing Officer and part of which was allowed by the C.I.T.(Appeals) and some parts were confirmed by the C.I.T.(Appeals). However, the Assessing Officer has proceeded to determine the excessive deposit mainly on the basis of historical cost of properties which is not fair. The rent value of the property would depend on the date on which such premises are taken on rent and not on the actual cost of the property. In the Asst. Year 2002-03, the Assessing Officer has taken two instance....
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.... 1. TIPL(Anand Estates,Flat No.15,No.189A,Sa ne Guruji Marg, Chinchpokli, Mumbai-13 Mahalakshmi 3525 213000 2556000 60 12000000 2556000 1133280 87 65-85 2. TIPL (Elphinstone Cricket Club,No.17,Murzb an Road, Fourth Floor, Fort, Mumbai-1)-Fort 5000 617500 7410000 124 30000000 7410000 2710800 169 140-180 3. TIPL (Usha Sadan,Flat No.9,A Block Coloba, Bombay COLOBA 2000 10000 120000 5 3000000 120000 345600 19 40-8 4. TIPL(Kshitij, Flat No.12,First floor, 47,Napean Sea Road, Mumbai-6 NAPEAN SEA ROAD 1700 15000 180000 9 8000000 180000 938400 55 5. TIPL (17,Pusa Road, New Delhi 17) 8900 357500 4290000 40 10000000 4290000 685200 47 Total 21125 1213000 14556000 57 63000000 14556000 5813280 This chart dearly shows that even when interest on deposit taken at 12% is considered then rent for various properties works out to Rs. 87,169,19,55 and Rs.47 per sq. ft This is comparable to the prevailing market rates as reported by two independent Real Estate agents and shown in last column of the above chart which has not been controverted before us end, therefore the deposit cannot be held to be excessive 31. In any case the Hon'ble Supreme Court in the case....