2018 (3) TMI 1078 - AT - Income Tax

Addition of notional Annual Letting Value on closing stock of flats / spaces - deemed to to be let out or used for own occupation - Held that - As decided in case of CIT Vs. Ansal Housing Finance & Leasing Co. Ltd. 2012 (11) TMI 323 - DELHI HIGH COURT ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax - While there can be no quarrel with the proposition that occupation can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers was that occupation of one s own property, in the course of business, and for the purpose of business, i.e. an active use of the property, (instead of mere passive possession) qualifies as own occupation for business purpose. - Decided is answered in favour of the revenue.

Summary

Issues:
1. Addition of notional Annual Letting Value on closing stock of flats/spaces
2. Disallowance of advance rent/lease money for Wind Power Project

Analysis:

Issue 1: Addition of notional Annual Letting Value on closing stock of flats/spaces
The appeal was filed against the order confirming the addition of notional Annual Letting Value (ALV) of ?5,19,11,202 on closing stock of flats/spaces. The appellant argued that the decision of the CIT(A) was based on the Hon'ble Delhi High Court's judgment, which did not consider all relevant facts. The CIT(A) upheld the addition based on the legal position established in the case of CIT vs. Ansal Housing Finance & Leasing Co. The appellant raised alternate grounds regarding the arbitrary and excessive rates adopted to assess ALV, which were not adjudicated upon by the CIT(A). The Tribunal directed the CIT(A) to reconsider the alternate grounds raised by the appellant. The issue was decided against the appellant based on the legal principles applied post the judgment in Ansal Housing Finance & Leasing Co. Ltd.

Issue 2: Disallowance of advance rent/lease money for Wind Power Project
The disallowance of ?4,68,000 as 1/20th of advance rent/lease money for a Wind Power Project was challenged. The CIT(A) upheld the disallowance following the order for the Assessment Year 2008-09. However, the Tribunal allowed a similar appeal in the Assessment Year 2008-09, stating that the expenditure was revenue in nature. The Tribunal directed the CIT(A) to reconsider the issue in light of the decision for the Assessment Year 2008-09. The Tribunal set aside the CIT(A)'s decision regarding the disallowance and directed a fresh decision based on the Tribunal's previous ruling.

In conclusion, the appeal was partly allowed, with the Tribunal directing the CIT(A) to reconsider both issues in light of relevant legal principles and previous rulings. The judgment provided detailed analysis and legal interpretations to support the decisions made.