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TMI Blog2007 (10) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of of the case and in law, the Hon'ble ITAT was justified in holding that the annual letting value has to be determined with reference to the annual rent received by the assessee and not what has been received by its tenants from the ultimate users? "C. Whether on the facts and in the circumstances of of the case and in law, the Hon'ble ITAT was correct in upholding the order of the CIT (A) in holding that the capital gains of Rs.19,74,489/- are not to be taken into account while computing the profits liable to be taxed u/s.115JA of the I.T. Act 1961 and that the decision of the Hon'ble Bombay High Court in CIT v. Veekaylal Investment Co. P. Ltd. case [ 2001] 249 ITR 597 was not applicable?" 2. In so far as question "C", our attention is invited to the judgment of the Supreme Court in Apollo Tyres Ltd. vs. Commissioner of Income-tax (2002) 255 ITR 273. The question framed therein which is similar to the Question "C" has been answered in favour of the assessee and against the Revenue. In the light of that the question of law as framed would not arise. 3. We may now consider questions "A" and "B", as they are inter-related. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount so received or receivable." 7. It is submitted that in the hands of the owner the annual value can only be determined in terms of clauses (a) and/or (b). The properties are situated in a place where the provisions of the Rent Control Act was applicable. The rent paid by the assessee and its tenant in fact was more than the standard rent. In these circumstances it is submitted that the annual value would be in terms of the Agreement. Dealing with the contention urged on behalf of the Revenue that the contract between its tenant and Reliance is sham. It is submitted that the finding of the A.O. was reversed in Appeal by the Commissioner (Appeals). The Revenue did not challenge the same before the Tribunal. Once that was not an issue before the Tribunal it is now not open to the Revenue to raise the questions that the contract was a sham. Questions "A" and "B" do not arise from the order. 8. We have given our anxious consideration to the matter. Considerable time was spent as to whether there has been a departure from the ratio decadenti in McDowell and Co. Ltd. vs. Commercial Tax Officer , [1985] 154 ITR 148 (SC) in the case of Union of India and Anr. vs. Azadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... McDowell's case (1985) 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity." (emphasis supplied). 12. The Supreme Court has thus explained as to how it is understood the law laid down in McDowell (1985) 154 ITR 148 (SC). There is, therefore, no departure from the law laid down in McDowell Co. Ltd., (1985) 154 ITR 148 (SC). in Azadi Bachao Andolan . [2003] 263 ITR 706. (s.c). In our opinion, therefore, the ratio of McDowell (1985) 154 ITR 148 as understood by the Supreme Court in Azadi Bachao Andolan, [2003] 263 ITR 706 (SC). is the law, considering that that is how the Supreme Court understood the rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised before the Tribunal the finding of fact recorded by the Commissioner (Appeal) stood confirmed. From the judgment of the Tribunal the issue which is sought to be now contended or canvassed of sham contract or a colourable device on the ground that the intermediary is a an alter ego of RIL was not in issue. It is not the case of the Revenue that the intermediary was another face of the Assessee and consequently the Agreement entered into with the tenant by the Assessee was a colourable device. In these circumstances considering Section 23, what is assessable to tax is the income received from the tenant falling either under sub-section (a) or (b) of Section 23(1). The compensation received by the tenant would be taxable in the hands of the tenant. Appeal would lie on substantial question of law from the order of the Tribunal in respect of the matters which were taken up before it and/or on a pure question of law based on undisputed material on record. That is not the case over here. 17. We may also note that Section 23 before its amendment by Finance Act, 2001 with effect from 1st April, 2001 read as under:- "23(1) For the purposes of Section 22, the annual value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have to be given different meaning. In our opinion it is not possible to give a meaning wider amplitude than what is contained in Section 23(1)(a). The Legislature has substituted the provision and brought in Section 23(1)(b) to cover the part of the annual value which otherwise would not fall with the tax ambit before its amendment. In that context the expression "receivable" would mean that though the annual value is fixed in terms of the Agreement even though it is not received in the relevant year, yet the same would be assessable to tax in terms of the illustration given on behalf of the assessee. The contention, therefore, as urged on behalf of the Revenue on the construction or expression "receivable" will have to be rejected. 21. The issue whether the contract between Reliance and the intermediary tenant is a sham cannot be gone into as the question would not arise in the absence of it being in issue raised before the Tribunal. That question as framed does not therefore arise. Further as noted earlier it is not the contention of Revenue that the contract between the assessee and the tenant is sham. The annual value would and be the value in terms of that contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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