TaxTMI 
TaxTMI 
2020 (12) TMI 869
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....he order of Ld. Commissioner of Income Tax (Appeals), Central VI, Mumbai order dated 28/02/2002. The effective grounds read as under: - 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in redirecting the assessing officer to fix the quantum of rental value of house property by rejecting the claim of the appellant. 2. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in holding that letting out of house property by the appellant is not covered by the Rent Control Act. 3. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs. 17,01,000/- in respect of trading loss. 4. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not adjudicating ground no.6 before him regarding levy of interest u/s 234A, 234B and 234C of the I.T. Act. 2. The Ld. Sr. Counsel for assessee, Shri Percy Pardiwala, while advancing arguments on merit, placed on record the decision of coordinate bench of th....
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....late proceedings, assessee, inter-alia, drew attention to the favorable first appellate orders for AYs 1996-97 & 1997-98. However, Ld. CIT(A), taking a different view, held that it was not a case of genuine loss. Although the shares were capital investment but the same were given the treatment of stock-in-trade without any basis. Hence, the action of Ld. AO in disallowing the trading loss was to be upheld. Aggrieved, the assessee is in further appeal before us by way of ground no.3. 6. We find that revenue assailed the order of learned first appellate authority in AYs 1996-97 & 1997-98 in allowing the trading loss. However, the coordinate bench of the Tribunal, vide para-14 of the order, upheld the order of Ld. CIT(A) and dismissed the grounds raised by the revenue. Reliance was placed on the decision of Hon'ble Bombay High Court in Kesavdas Ranchhod Das V/s CIT (1972) 83 ITR 1, the decision of Hon'ble Apex Court in CIT V/s Sutlej Cotton Mills Supply Agency Ltd. (1975) 100 ITR 706 as well as Chainrup Sampatram V/s CIT (1953) 24 ITR 481 while arriving at such a conclusion. The bench held that an inactivity or lull in the business of the assessee for some years cannot con....
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....a guiding test of reasonableness. An inflated or deflated rate of rent based on fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness. 7.3 In assessee's case, such other consideration exists and therefore a reasonable rent of the property was to be determined. The same was estimated as 12% of interest free deposit of Rs. 3 Crores received by the assessee. Accordingly, an amount of Rs. 36 Lacs was to be added to the income of the assessee as rental income. However, the same was to be added on protective basis since it was held that the asset was never acquired by the assessee. 7.4 During appellate proceedings, the assessee has relied upon the favorable first appellate orders for AYs 1996-97 & 1997-98. However, Ld. CIT(A) chose to differ from the same by observing as under: - 6.1 I have carefully considered the facts of the case, order of assessment and the submission of the learned representative of the appellant. The basic issue involved is the computation of income under the head 'Income from House Property' in terms of section 23(1) of the I.T. Act. The Assessing Officer has taken into account ....
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....inion, cannot be held to be the sum for which the property might reasonably be expected to let from year to year. Such sum, in view of the peculiar facts of the case, can be determined considering the various factors which govern the reasonableness of a sum which can be expected in the open market. The governing factors are the following : i) Area of the flat. The present flat is about 2400 sq.ft. It consists of 3 bed rooms with attached bath and toilets, a dining hall, a sitting room, a kitchen and a servant quarter with attached toilet. It also has two covered car parking space. ii) Location of the property. The property is located in one of the prestigious area of the city i.e. Malabar Hill near the Nepean Sea Road. The building is sea facing. iii) The cost of the property. As can be seen from the agreement, the cost of the property at the time of purchase by the assessee was of more than Rs. 6 crores. iv) It cannot be ignored that the amount of Rs. 3 crores received by the appellant has direct connection with letting out of the property. In normal course, nobody would give such huge amount interest free. While determining the Annual Value thi....
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.... per annum purely on the basis of the amount of interest free deposit is not justified. At the same time, I beg to differ with my learned predecessor that the amount declared by the appellant can be accepted as a sum for which the property might reasonably be expected to let from year to year. Ground of appeal No. l of the appellant is therefore, rejected. The Assessing Officer is directed to fix the quantum considering the above factors and the principles discussed above. Upon perusal of the above, it is evident that Ld. CIT(A), while agreeing that notional interest could not be adopted as ALV of the property, chose to take a contrary view than taken in earlier years. The reason for the same is stated to be the fact that the property was neither rented out nor leased out but it was an arrangement in the nature of leave & license. Thus, the assessee denies the applicability of Rent Control Act. Consequently, the receipts would be neither rent nor lease rent but license fees. Since this arrangement would not be governed by the prevalent Rent Control Act, the Standard Rent as per municipal valuation cannot be held to be the sum for which the property might reasonably be expecte....
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..... The Ld. AO could not brush aside the rent control legislation. Therefore, the order of Ld. CIT(A) was upheld and the ground raised by revenue were ultimately dismissed in para-13. The said decision was followed mutatis-mutandis in AY1997-98. 10. Thus in the backdrop of aforesaid decision of the Tribunal, it is quite evident that Ld. CIT(A) has rightly concluded that estimation of ALV on the basis of notional interest could not be upheld in the eyes of law. However, the same time, the findings that the property would not be subjected to Rent Control Legislation is bereft of any evidence on record. The income so earned notwithstanding the nomenclature of rental / lease rental or license fees, all are assessable under the head Income from House Property and subjected to similar computations. No difference has been carved out in law in all these different streams of income. The assessee nowhere denied the applicability of Rent Control Act to the stated stream of income. Therefore, the facts of the case are squarely covered by the earlier decision of the Tribunal in assessee's own case for AYs 1996-97 & 1997-98. There is no change in material facts. No contrary decision is on....
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....peal stand allowed in terms of our above order. Assessee's Appeal-ITA No.2822/Mum/2006 for AY 2001-02 15. In this year, an assessment was framed u/s 143(3) on 16/03/2004 wherein similar trading loss of Rs. 20.33 Lacs was disallowed and the rental income was determined @8% of interest free deposit. Upon further appeal, Ld. CIT(A) confirmed the disallowance of trading loss by following appellate orders for AYs 1998-99, 1999-2000 & 2000-01. Regarding rental income, the appellate orders for AYs 1998-99, 1999- 2000 & 2000-01 were followed and similar directions were given. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 16. Since the facts as well as issue of rental income in assessee's appeal is pari-materia the same as in AY 1998-99. Therefore, our findings as well as adjudication therein shall mutatis-mutandis apply to this year also. The Ld. AO is directed to re-compute correct interest u/s 234A, 234B & 234C in accordance with law. 17. Resultantly, all these appeals stand allowed in terms of our above order. Assessee's Other Appeals 18. In AY 2002-03, the assessment was framed u/s 143(3) on 11/01/2005 wherein the rental inc....