Assistant Commissioner of Income Tax – Central Circle – 23, Versus M/s Oberoi Construction Pvt. Ltd., & M/s Oberoi Reality Ltd., Formerly known as Kingston Properties P. Ltd.
Income Tax
2012 (8) TMI 582 – ITAT, MUMBAI – TMI
ITAT, MUMBAI – AT
Dated:- 16-6-2012
ITA 4330 to 4334 & 4309 /M/2011
Income Tax
SHRI DINESH KUMAR AGARWAL AND SHRI RAJENDRA JJ.
Revenue by : Shri A.C. Tejpal
Assessee by : Shri R. Muralidhar
O R D E R
PER BENCH.
All these appeals preferred by the Revenue are directed against the separate order dated 29-3-2011 in the case of Oberoi Construction Pvt. Ltd. for A.Y. 2007-08 and separate orders dated 22-3-2011 in the case of Oberoi Realty Ltd. for assessment years 2002-03, 2003-04, 2004-05, 2005-06 & 2006-07 passed by the ld. CIT (A) – 40, Mumbai. Since facts are identical and issues involved are common, all these appeals are disposed of by this common order for the sake of convenience.
ITA No. 4330/Mum/2011 (A.Y. 2007-08)
2.
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peal:-
“a. On the facts and circumstances of the case and in law, the CIT(A) failed to appreciate that the Annual Value as offered by the assessee was grossly understated and the A.O. was justified in determining Fair Market Value in terms of Sec. 23(1)(a) by re-computing annual letting value of the property of the basis of circumstantial evidenced.
b. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition made at Rs. 88,33,333/- being notional annual letting value, which could form a part of “Annual Letting Value of the property”, in terms sec. 23(1)(a) of the I.T. Act, 1961.
c. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in holding that the rateable value under the Municipal Laws has to be mandatorily adopted as annual value u/s 23(1)(a), disregarding the facts that the actual rental received were totally disproportionate considering the value of the property.”
5. The brief facts of the above issue are that during the
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f rent on due date, tenant will not misuse the property and tenant will not damage the premises or make any unauthorised alteration. He further observed that the security deposit is refundable upon vacation of the property by the tenant. Accordingly the assessee received a rental income of Rs. 31,66,667/- for the 12 months and offered the same for tax under the head “income from House Property”.
He further observed that the rateable value as per the Mumbai Municipal Corporation (MMC) is Rs. 1,58,372/- whereas the assessee has earned rent of Rs. 31,66,667/- for 12 months which is much higher than the Municipal valuation. Accordingly, the A.O. keeping in view the acceptance of interest free deposit determined the annual rateable value of R. 1,20,00,000/- by taking monthly license fees of Rs. 10,00,000/- and computed the income from house property as under:-
Annual Letting out value
Rs. 1,20,00,000/-
Property tax paid
(-) Rs. 96,774/-
Rs. 1,19,03,226
Deduction u/s 24(a) of
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under:-
1
Oberoi Constructions Ltd. Vs. DCIT-CC-23 (ITA No.4366&4367/M/2011
2
Reclamation Realty India Pvt. Ltd. vs. DCIT 10(1)(ITA No. 1411/M/2007
3
DCIT 19(3) v. Vaishnav S. Puri (HUF))(ITA No. 70 46/4382/4747/M/2008
4
ITO 9(3)(2) v. Sphinx Hotels & Properties Pvt. Ltd. (ITA No. 4191/M/2007)
He, also placed on record the copy of the above orders. He, therefore, submits that the order passed by the ld. CIT(A) be upheld.
9. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the rateable value of the property as per Municipal Corporation is Rs. 1,58,372/- whereas the assessee has shown rent of Rs. 31,66,667/- for 12 months which is much higher than the annual municipal valuation.
10. In Oberoi Constructions Ltd. (supra) the Tribunal after considering the provisions of section 23 and the decision of the Tribunal in the case of Recla
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taking the gross ALV at Rs. 1,20,00,000/- under the head income from house property and accordingly we are inclined to uphold the findings of the ld. CIT(A) in deleting the addition made by the A.O. The grounds taken by the Revenue are, therefore, rejected.
ITA No. 4331/Mum/2011 for A.Y. 2002-03 (By Revenue)
ITA No. 4332/Mum/2011 for A.Y. 2003-04 ( -do- )
ITA No. 4333/Mum/2011 for A.Y. 2004-05 ( -do- )
ITA No. 4309/Mum/2011 for A.Y. 2005-06 and ( -do- )
ITA No. 4334/Mum/2011 for A.Y. 2006-07. ( -do- )
12. The common grounds No 'a' and 'b' taken by the Revenue in all these five appeals, except difference in amounts, taken from ITA No. 4331/M/2011 for A.Y. 2002-03 are as under:
“a. On the facts and circumstances of the case and in law, the CIT(A) erred in holding that the provisions of section 2(22)(e) of the I.T. Act 1961 is not applicable in the case of assessee company without appreciating the facts that the deemed dividend has to be taxed on
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,000
2
Ranvir Oberoi
100 4,00,000
10 20,000
3
Santosh Oberoi
100 5,00,000
10 10,000
Total
300 20,00,000
30 60,000
From the above, the A.O. observed that Mr. Vikas Oberoi held 55% of the shares in the assessee company and 50% of the share in the company M/s NDCPL. He further observed that M/s NDCPL is not engaged in the business of giving loans and advance. Thus according to the A.O. all the conditions in respect of treating the monies advanced by M/s NDCPL to the assessee as deemed dividends as per the provisions of section 2(22)(e) were satisfied. On being asked, it was inter alia submitted by the assessee that the amount received by KPPL were not withdrawn/appropriated by the share holders of the company for personal benefits or interest, therefore, the present case falls beyond the clutches of section 2(22)(e) of the Act. However, the A.O. did not accept the assessee's explanation. According to the A.O. Mr. Vikas Oberoi is beneficial share holder of KPPL which ha
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re Private Limited (supra), the order passed by the ld. CIT(A) in deleting the addition be upheld.
17. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee company is not holding any share in NDCPL i.e. neither the assessee company is a registered share holder nor beneficial share holder in the said company.
18. In Bhaumik Colour (P.) Ltd. (SB) (supra), it has been held (para 41, at page 27 of 118 ITD):
“On the first question : Deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than shareholder.
On the second question: The expression 'shareholder' referred to in section 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is registered shareholder but not the beneficial shareholder then the provisions
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lowing the above decisions, we hold that the provisions of section 2(22)(e) are not applicable to the case of the assessee and accordingly we are inclined to uphold the findings of the ld. CIT(A) in deleting the addition made by the A.O. The grounds taken by the Revenue are, therefore, rejected.
20. Common grounds of appeal No. 'c', 'd' & 'e' taken from ITA No. 4331/M/2011 for A.Y. 2002-03 except difference in figures read as under:-
“c. On the facts and circumstances of the case and in law, the CIT(A) failed to appreciate that the Annual Value as offered by the assessee was grossly understated and the A.O. was justified in determining Fair Market Value in terms of Sec. 23(1)(a) by re-computing annual letting value of the property of the basis of circumstantial evidences.
d. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition made at Rs. 19,44,793/- being notional annual letting value, which could form a part of “Annual Letting Value of the prope
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