9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (7) TMI 1249 - AT - Income TaxAssess the house property income on actual receipt basis OR reasonable rent basis - difference of opinion between the ld' JM and the ld' AM - Third Member Appointment - determination of annual letting value of the house property - Whether the standard rent fixed under the Rent Control Act can be adopted as annual value while computing the income from the property for the assessment years 2000-01, 2002-03 and 2003-04 in the case of the assessee - Whether the earlier order of the Tribunal in assessee s own case was necessarily to be followed or not - The ld JM restored the matter to the file of the AO to pass a fresh order in light of the order of the Tribunal decided for earlier year whereas the ld AM was of the view that the computation made by the AO is correct - Three appeals by the department against the order of the CIT(A) relating to assessment years 2000-01, 2002-03 and 2003-04. The assessee, in the returns of income had disclosed annual letting value of the property on the basis of actual rent received. The assessee was asked to explain the discrepancy in the monthly rental of the property. AO noticed that the Municipal valuation of the property was ₹ 38,860 only per annum and since the actual rent received was more than the Municipal valuation, the annual value of the property has been adopted on the basis of actual rent received u/s 23(1)(a). AO adopted the annual letting value of the property on the basis of rent received by the assessee for the four months in the previous year relevent to assessment year 2000-01. For the subsequent years also the same annual letting value of the property has been adopted by the AO. The CIT(A), relying upon the decision of the Hon ble Bombay High Court in the case of CIT v. J.K. Investors (Bombay) Ltd. 1999 (7) TMI 675 - ITAT MUMBAI , held that notional interest on the interest free deposit was not to be taken into account in working out the annual letting value of the property insofar as the Municipal valuation of the property was less than the actual rent received. He accordingly accepted the annual value of the property as declared by the assessee. HELD THAT - It is evident from the plain reading of section 23 that the annual letting value of the house property is first to be determined on notional basis as the amount at which the property might be expected to be let from year to year. It is settled law that where the property is subjected to Rent Control Act, the fair market rent should not exceed the standard rent. The appeals relate to assessment years 2000-01, 2002-03 and 2003-04. The appeal for the assessment year 2001-02 has already been decided by the Tribunal and the issue has been remanded back to the AO for determination of the standard rent to be adopted as the annual letting value for purposes of section 23(1)(a) and assessing the annual letting value of the property in accordance with the provisions of sections 23(1)(a) and 23(1)(b). The earlier Bench of the Tribunal did not consider the fact that the property in question was not subject to Rent Control Act and therefore the annual letting value was not to be restricted to the standard rent as per the Rent Control Act. The ld JM has not doubted the correctness of the decision of the Tribunal in assessee s own case for the assessment year 2001-02 and therefore has followed the same and set aside the issue and directed the AO to determine the standard rent. However, the ld AM has pointed out that the earlier Bench of the Tribunal has ignored the important factor in this case in deciding that the annual letting value of the property u/s 23(1)(a) was to be adopted as the standard rent as per Rent Control Act. Therefore, I agree with the ld AM, that the earlier decision of the Tribunal did not constitute a binding precedent on the facts and in the circumstances of this case. Though in my personal opinion when the earlier decision of the Coordinate Bench is doubted, it is preferable to make a Reference to the Hon ble President for constitution of the Larger Bench, yet in the light of the Third Member decision of the Tribunal in the case of Napar Drugs (P.) Ltd. 2005 (11) TMI 195 - ITAT DELHI-B , the Coordinate Bench can deviate from the earlier decision in certain circumstances and since the present case falls in the exceptions, the course adopted by the ld AM cannot be said to be illegal or highly improper. Admittedly, the assessee, apart from the rent received from Deutsche Bank AG and Bombay Stock Exchange, has received interest free deposits from the tenants. As per the decision of the Bombay Bench of the Tribunal in the case of J.K. Investors (Bombay) Ltd. 1999 (7) TMI 675 - ITAT MUMBAI , the benefit derived by the assessee from the interest free deposit could be taken into consideration for determination of fair rental value u/s 23(1)(a). In my considered view, the benefit derived by the assessee from the interest free deposit could not be more than the lending rate at which the deposits were available in the market at the particular point of time. Even if that is taken into account, the fair rental value of the property does not work out to the amount determined by the AO and confirmed by the ld AM. Therefore, partly agree with the ld. AM that the annual letting value in this case cannot be limited to standard rent but I do not agree with him that the fair rent adopted by the AO is justified. I partly agree with the ld JM that the matter has got to go back to the AO instead of adopting the value determined by the AO. I hold accordingly. Since this case is peculiar insofar as I have partly agreed with ld AM and partly with ld JM, I would like to give the following opinion - That in this case the annual letting value cannot be limited to the standard rent as workable under the Rent Control Act but the fair rental value shall have to be determined. The fair rental value determined by the AO however is not reasonable. The ld JM had proposed to set aside the order of the AO. To that extent I have agreed with him. So however, I have not agreed with him that the standard rent is to be determined and adopted as annual letting value u/s 23(1)(a). The ld AM has held that the standard rent is not to be adopted. I have agreed with him to this extent. So however, I have not agreed with him that the fair rental value has to be adopted as adopted by the AO. The issue shall be set aside and restored to AO for determination of the fair rent to be adopted as the annual letting value. We agree with the findings of the Third Member; accordingly these appeals are to be taken as disposed of in view of the decision of the Third Member. The orders of the ld. JM and ld. AM and the Third Member will be treated as part of this order which are annexed herewith.
Issues Involved:
1. Determination of House Property Income on actual receipt basis vs. reasonable rent basis. 2. Applicability of standard rent under the Rent Control Act for computing annual letting value. 3. Validity of Assessing Officer's computation of annual letting value. 4. Binding nature of prior Tribunal decisions on subsequent benches. Issue-wise Detailed Analysis: 1. Determination of House Property Income on actual receipt basis vs. reasonable rent basis: The department objected to the CIT(A)'s direction to assess House Property Income based on actual receipt instead of reasonable rent, ignoring sections 22 and 23(1)(a) of the Income-tax Act. The Tribunal had previously ruled that the Annual Letting Value (ALV) should be based on the standard rent or Municipal Rateable Value and actual rent received, whichever is higher, as per the Delhi High Court decision in John Tinson & Co. (P.) Ltd. v. CIT. The Tribunal directed the Assessing Officer to compute the ALV accordingly, emphasizing that the reasonable rent can only be the standard rent, and the municipal valuation is synonymous with the standard rent. 2. Applicability of standard rent under the Rent Control Act for computing annual letting value: The Tribunal's prior decision for the assessment year 2001-02 was based on the assumption that the property was covered by the Rent Control Act. However, the learned Accountant Member noted that the property was not subject to the Rent Control Act. The Tribunal in the case of Makrupa Chemicals (P.) Ltd. held that the rateable value determined under Municipal Laws is not binding on the Assessing Officer if it does not represent the correct fair rent. The Tribunal, therefore, concluded that the fair rent must be determined by considering various factors, especially when the property is exempt from Rent Control legislation. 3. Validity of Assessing Officer's computation of annual letting value: The Assessing Officer had adopted the rent received from a foreign company in the earlier year as the basis for determining the fair rental value. The learned Accountant Member agreed with this approach, noting that the property had been let out at a significantly lower rent to Deutsche Bank AG and Bombay Stock Exchange after accepting interest-free deposits. The Tribunal found that the rent received during the first four months of the assessment year 2000-01 was a clear indication of the fair rental value. The CIT(A) had erred in accepting the rental value declared by the assessee based on the judgment in J.K. Investors (Bombay) Ltd., which was misquoted. 4. Binding nature of prior Tribunal decisions on subsequent benches: The Tribunal discussed whether a different view could be taken from a prior decision in the same assessee's case. The learned Judicial Member followed the earlier decision, while the learned Accountant Member argued that the earlier decision did not consider the fact that the property was not subject to Rent Control Act. The Third Member agreed with the learned Accountant Member that the earlier decision did not constitute a binding precedent due to the oversight of a material fact. The Tribunal noted that while the earlier decision should generally be followed, deviations are permissible if there is ample justification, such as new facts or failure to consider important aspects. Conclusion: The Tribunal concluded that the annual letting value should not be limited to the standard rent but should be determined based on fair rental value, considering various factors, including the benefit derived from interest-free deposits. The issue was remanded to the Assessing Officer for re-determination of the fair rent. The Tribunal emphasized the importance of consistency in judicial decisions but allowed for deviations when justified by new facts or oversight of material aspects. The appeals of the department were allowed in part for statistical purposes.
|
