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TMI Blog2020 (7) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... n, car insurance expenses and car expenses to the extent of 50% of the claim that was raised by him. Disallowing claim for expenditure incurred towards professional fees - On a perusal of the records, we find that there is no material available on record which would substantiate the claim of the assessee that the professional fees as claimed by him was incurred for availing certain professional services in the course of his business. In fact, the assessee except for harping on his claim that the aforesaid expenses were incurred in lieu of professional advice for issues relating to litigation, tax appeals, accounting and compliances in the course of his business, had however failed to fortify the same on the basis of any corroborative material. - Matter restored before AO for verification. Addition towards the Annual Lettable Value ( ALV ) of a property owned - property jointly owned by the assessee alongwith his brother - HELD THAT:- As per Sec. 23(1), the actual rental receipt as per clause (b) shall be taken as the ALV of a property only where the same is found to be in excess of the notional lettable value contemplated in clause (a). In the case before us, the assessee had faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lized rent in the year of receipt - Vacany allowance - it has been the claim of the assessee that the property in question during the year under consideration was let out and the unrealized rent was to be recovered from the lessee/licensee viz. HCRMP, therefore, such amount of unrealized rent would be brought to tax in the hands of the assessee u/s 25AA of the Act in the year of receipt. - Held that:- in terms of our aforesaid observations we uphold the view taken by the CIT(A) that as the property in question was inherently incapable of being let out during the year under consideration because of the legal constraint imposed by the High Court, therefore, the reasonable rent for which it might be let-out could not be computed. As a consequence, since the computation provisions u/s 23 failed the charging provisions u/s 22 would also fail. As such, the deletion by the CIT(A) of the addition upheld. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,40,000/-); and (d) Veena Souk (₹ 4,50,36,444/-) : ₹ 4,36,97,743/- [(after 30% deduction u/s 24(a)]. (iii). Disallowance of deduction claimed by the assessee u/s 24(a) i.e @30% of the rent received from letting out of space for mobile tower : ₹ 2,25,000/-. After inter alia making the aforesaid additions/disallowances the income of the assessee was assessed by the A.O vide his order passed u/s 143(3), dated 30.03.2015 at ₹ 5,18,47,130/-. 4. Aggrieved, the assessee assailed the assessment order before the CIT(A). After deliberating on the contentions advanced by the assessee the CIT(A) partly allowed the appeal as under: S.No. Particulars Amount of addition/disallowance Before the CIT(A) 1. Disallowance of expenditure claimed against the income from other sources u/s 57(iii) of the Act, viz. (i), Bank charges : ₹ 2,227/-; (ii),. Professional fees : ₹ 13,84,227/-; (iii). Car Expenses : ₹ 59,873/-; (iv). Car Insurance : ₹ 2,10,760/-; and (v). Depreciation on motor car : ₹ 15,59,438/-. ₹ 32,16,525/- Disallowance upheld by CIT(A) 2. Addition made by A.O of notional lettable value of property owned by the assessee viz. Shreenath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for his business purpose, therefore, he was entitled to claim depreciation and other expenses viz. insurance expenses, car expenses pertaining to the said vehicle while computing his taxable income. As regards the claim of professional expenses, it was submitted by the assessee that as the said expenses were incurred in lieu of professional advice for issues relating to litigation, tax appeals, accounting and compliances in the normal course of his business, therefore, the same were allowable u/s 37 of the Act. However, the A.O was not inclined to accept the aforesaid explanation of the assessee primarily for three reasons viz. (i). that as the assessee had claimed the expenditure under the head Income from other sources , therefore he was required to justify the allowability of the same with reference to the provisions of Sec. 57(iii) of the Act; (ii). that the assessee had failed to establish any nexus between the aforesaid expenses and the income earned under the head other sources as was required per the mandate of Sec. 57(iii) of the Act; and (iii). that as the assessee had shown a meagre business income of ₹ 69,107/-,therefore, the aforesaid expenses could not be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation claim is to be allowed. At this stage, we may also observe that the assessee in the course of the proceedings before the CIT(A), had submitted, that the A.O had disallowed 50% of his claim for car depreciation and car expenses while framing the assessment for A.Y 2013-14. Accordingly, by way of an alternative claim, it was fairly submitted by him before the CIT(A) that to maintain the principle of consistency a part relief as regards the aforesaid expenses may be allowed on similar lines. As is discernible from the assessment order for A.Y 2013-14, the A.O had disallowed 50% of the assessee s claim for car depreciation and car expenses primarily for the reason that he had not furnished any evidence with regard to maintenance of any log book. As the fact situation during the year under consideration in context of the aforesaid issue before us remains the same, therefore, after principally agreeing with the view taken by the Tribunal as regards the entitlement of the assessee towards claim for car depreciation and car expenses, we accept the alternative claim of the assessee and restrict the disallowance of car depreciation, car insurance expenses and car expenses to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his aforesaid claim of expense on the basis of fresh documentary evidence. Ground of appeal No. 1 is partly allowed in terms of our aforesaid observations. 8. We shall now advert to the claim of the assessee that the CIT(A) had erred in sustaining the addition made by the A.O towards the Annual Lettable Value (for short ALV ) of a property owned by him viz. Flat No. 503, Shreenath Tower, Kandiwali West. We shall deal with the addition made by the A.O as regards the aforesaid property, as under: (A). Flat No. 503, Shreenath Tower, Kandiwali West : (i). It was observed by the A.O that the aforesaid property admeasuring 1000 sq. ft was jointly owned by the assessee alongwith his brother Sh. Hitesh Sanghavi. In the return of income for the year under consideration the assessee had shown his share of rental receipt from the aforesaid property at ₹ 60,000/-. Observing, that the assessee had offered his share of rental receipt from the said property for the period relevant to the immediately preceding y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 1,80,000/- ( share of assessee). As per Sec. 23(1), the actual rental receipt as per clause (b) shall be taken as the ALV of a property only where the same is found to be in excess of the notional lettable value contemplated in clause (a). In the case before us, the assessee had failed to explain as to why the notional lettable value of the property of ₹ 1,80,000/-( share) that was adopted by him as the ALV of the property in the immediately preceding year i.e A.Y 2011-12 was not to be adopted for the year under consideration. As such, we are of the considered view that as the rent of ₹ 60,000/- ( share) received by the assessee during the year under consideration is less than the notional lettable value of the aforesaid property which during the year under consideration can safely be taken at ₹ 1,80,000/-, therefore, its ALV has to be taken as per Sec. 23(1)(a) at ₹ 1,80,000/-. We thus finding no infirmity in the view taken by the CIT(A) uphold the same. Ground of appeal No. 2 is dismissed. 9. We shall now take up the grievance of the assessee that the CIT(A) had erred in upholding the disallowance of deduction of ₹ 2,25,000/- that was clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the impugned order has been assailed before us on the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)-3, Thane, erred in deleting notional rent u/s 23(4) of the properties at fair market as per the provisions of section 23(1)(a) r.w.s 23(4) of the I.T Act. 2. The appellant prays that the order of the Ld. CIT(A)-3, Thane may be set-aside and that of the A.O be restored. 3. The appellant craves leave to add, alter or amend any or all of the above ground/grounds which may be necessary 12. The revenue has assailed before us the deletion by the CIT(A) of the addition that was made by the A.O towards notional lettable value of two properties owned by the assessee viz. (i). Gaurav Palace (₹ 2,83,920/-); and (ii). Veena Souk (₹ 4,50,36,444/-). We shall deal with the addition that was made by the A.O as regards the aforesaid properties, as under: 12.1 Flat - Gaurav Palace: (i). In the course of the assessment proceedings it was observed by the A.O that the assessee had purchased the aforesaid flat vide an agreement dated 23.06.2003 that was registered on 17.07.2009 for a consideration of ₹ 25,35,000/-. Ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration for A.Y 2011-12 had also been dismissed by the Tribunal in ITA No. 6003/Mum/2016, dated 03.12.2019. The Tribunal while upholding the order of the CIT(A) had observed as under: Apropos Rental income of Gaurav Palace : 14. On this issue the Assessing Officer noted that there was contradictory submission by the assessee that the house was completed or not. Hence, he computed rental income for the same. Upon assesse s appeal learned CIT(A) accepted the assessee submission that assessee has not received the possession of the said property hence there was no question of letting out the same. In this regard learned CIT(A) observed as under :- The A.O still went ahead with the addition stating that there was contradiction in the appellant s different replies and the appellant had shown this property in his balance sheet. I find that the AO s approach is not in conformity with the principles of natural justice. The assessee had categorically stated that he was not in possession of the impugned flat. The appellant had also filed a letter of the builder of the property to the effect that the possession would be handed over in 2013. The A.O could not have discarded these d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessee to lease out the said property for a tenure of five years and further directed that the Court Receiver shall appoint the assessee as his agent. Further, the Hon ble Apex court granted liberty to the assessee to give the property on leave and licenses basis and receive the rent/license fee as an agent. In the backdrop of the aforesaid facts, the A.O observing that the property in question during the year was a constructed property in respect of which the O.C was received by the assessee way back on 07.02.2009 i.e in the F.Y 2008-09, and the same was in a condition to be let out as per the directions given by the Hon ble Supreme Court in its order, therefore, held a conviction that the notional lettable value of the said property was liable to be computed as per the provisions of Sec. 23(1)(a) r.w Sec. 23(4) of the Act. As the assessee despite sufficient opportunity failed to provide the fair market rent of the aforesaid property under consideration, therefore, the A.O worked out the same at ₹ 4,50,36,444/- viz. [Annual Return @10% of cost (+) Annual maintenance and repair charges @12% of annual return]. (iii). On appeal, the CIT(A) concluded that the A.O could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial income was earned and offered for tax under the head income from other sources . In the backdrop of his aforesaid observations the CIT(A) deleted the addition that was made by the A.O towards notional lettable income of the property in question. (iv). Being aggrieved, the revenue has assailed before us the deletion by the CIT(A) of the addition of an amount of ₹ 4,50,36,444/- that was made by the A.O towards notional lettable income of the aforesaid property under consideration. We find that a similar addition of the notional lettable value of the property in question that was made by the A.O while framing the assessment in the assesse s own case for the immediately preceding year i.e A.Y 2011-12, vide his order passed u/s 143(3), dated 28.03.2014, was on appeal deleted by the CIT(A), vide his order dated 12.07.2016. On further appeal by the revenue, the Tribunal while disposing off the appeal of the revenue vide its order passed in ITA No. 6003/Mum/2016 for A.Y 2011-12, had after deliberating at length on the order of the CIT(A) in context of the issue under consideration had upheld the same by observing as under: Apropos rental income of Veena Souk : 3. Brief fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 2009 as per the agreement and also compensation for breach of the contract by HRMPL. The arbitration proceedings took a long time. In between the High Court appointed a court receiver to take possession of the property. The applicant finally could get back possession of the property as an agent of the court appointed receiver only after the order of the Supreme Court to this effect on 30/01/2012. It is only after the SC order that the appellant was able to rent out the property to a third party w.e.f 2/7/2012. The arbitration award was finally issued on 31/12/2013. 5. Thereafter learned CIT(A) granted relief to the assessee on two counts. Firstly he held that the impugned amount can be said to be unrealised rent for this he held as under: It may be clarified her that the conditions mentioned in Rule 4 regarding unrealized rent are all fulfilled in the appellant case. The relevant Rule is reproduced below: Unrealized rent. 4. For the purposes of the Explanation below sub-section (1) of section 23, the amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, till the issue is finally decided in the civil proceedings, the right of the assessee is inchoate in nature. We are, therefore, in full agreement with the view taken by the Tribunal in holding that no house property income in the case of the assessee can be added under s. 22. 4.11.8 Thus if we assume that the property Veena Souk was in fact leased out to HRMPL, but no rent could be realised by the appellant due to pending litigation, the annual value of the property would be Nil during the previous year. 6. Secondly he held that the said property could not be let out during the period. He observed that the A.O has however proceeded on the premise that the property was not let out during the year and hence annual value has to be determined under section 23(1)(a). He observed that assuming the A.O to be correct in holding that the property was not let out during the year, one may examine what will be the annual value of the property as per section 23(1)(a). That this has to be the sum for which the property might reasonably be expected let from year to year . So one has to determine the reasonable sum which a property under litigation and subject matter of an injunction order woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of ownership were of such nature as could be let out. In our view, unless the property owned by the assessee is of such nature as could be let out, the charge under s. 22 of the Act cannot be attracted. In our view, if the property is of such nature that it is inherently incapable of being let out and the assessee is the owner thereof, then the charge under s. 22 of the Act cannot arise. What is necessary for the charge under s. 22 of the Act to arise is that the property be inherently capable of being let out. 15. In this connection, we may refer to the judgment of the Supreme Court in CIT vs. Official Liquidator, Palai Central Bank Ltd. (1984) 43 CTR (SC) 164 : (1984) 150 ITR 539 (SC), to which our attention was invited by Mr. Dastur, learned counsel for the assessee. The Supreme Court, in Palai Central Bank's case (supra), cited with approval its earlier judgment in CIT vs. B. C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC), and held that, under the scheme of the IT Act, 1961, charge of tax will not get attracted unless the case or transaction falls under the governance of the relevant computation provisions. The Supreme Court observed: character of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee s claim that the property Veena Souk could not have been let out due to pending litigation and its annual value therefore would be nil, was accepted by the Assessing Officer in A.Y 2013-14 etc. That principle of consistency requires that same position is accepted in this year as well. 11. Learned CIT(A) held that in view of the above discussion it is held that the annual value of the property Veena Souk would be Nil during the previous year and hence the addition made by the AO deserves to be deleted. 12. Against this order Revenue has filed appeal. 13. We have heard both the counsel and perused the records. We find that learned CIT(A) has taken a well reasoned and correct view of the matter. Facts narrate above clearly indicate that the said property was under dispute and a court judgment was operative in the impugned period and the property could not be let out. Revenue itself has subsequently accepted that annual value of this property was to be taken as nil. Hence, we do not find any infirmity in the order of learned CIT(A) and uphold the same. 13. We have perused the aforesaid observations drawn by the Tribunal while disposing off the appeal of the revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. As such, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein it was inter alia, observed as under: We, therefore, direct the Presi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown . Hon ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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