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.

2012 (8) TMI 582 – ITAT, MUMBAI – TMI – – Addition of income from house property – AO stated that Annual Value as offered by the assessee was understated – CIT (A) deleted the addition – Held that:- As decided in DCIT Versus Reclamation Realty India (P) Ltd. [2010 (11) TMI 477 – ITAT, MUMBAI] the rateable value under the Municipal law has to be adopted as annual value u/s. 23(a) & that the A.O. has grossly erred by calculating the annual let out value by estimating the market value of the property at ₹ 1,20,00,000/- ignoring the fact that the Municipal Rateable Value given by the Government Authority i.e Mumbai Municipal Corporation at ₹ 1,58,372/ against revenue.



Treating the monies advanced to assessee as deemed dividends – Held that:- 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 & the expression ‘shareholder’ referred to in section 2(22)(e) re

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entical 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. Briefly stated facts of the case are that the assessee company is engaged in the business of realty developer. Search & seizure action u/s 132(1) of the Income Tax Act, 1961 (the Act) were undertaken at the premises of Oberoi Group of assesses on 19-7-2007. In response to notice u/s 153A, the return was filed declaring total income of Rs. 4,24,37,950/-. However, the assessment was completed at an income of Rs. 4,93,33,790/- including addition of income from house property Rs. 83,32,258/-, under the normal provisions of the Act and at an income of Rs. 71,40,25,930/- u/s 115JB of the Act, vide order dtd. 24-12-2009 passed u/s 153 r.w.s. 143(3) of the Act. 3. On appeal, the ld. CIT(A) while sustaining the addition of share issue expenses Rs. 2,12,500/- deleted the addition made under the head income from house property Rs.

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hat 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 course of assessment proceedings, it was inter alia observed by the A.O. that the assessee in the year April, 2004 had rented out its flat on the 4th floor in Beachwood House, Juhu Tara Road, Juhu, Mumbai along with the terrace and swimming pool to M/s Aventis Pharma Ltd. (APL) which is an Multinational Pharmaceutical Company for a monthly rent of Rs. 1,00,000/- for the first 10 months which was later extended for a further period of 3 months at the rate of Rs. 10,83,333/- per month. The extension of license period was made following the specific request of the tenant. The total area of the flat given on lease was admeasuring approx. 3,500 sq. ft. with use of the terrace and swimming pool. As per the agreement, the assessee has received a refundable security deposit amounting to Rs. 3,50,00,000/. He further observed that the asses

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ouse 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 the I.T. Act 1961 @ 30% (-) Rs. 35,70,968 Total income in respect of property let out to APL Rs. 83,32,258/- ============= 6. On appeal the ld. CIT(A) following the decision of the Tribunal in DCIT v. Reclamation Realty India Pvt. Ltd. in ITA No. 1411/Mum/07 for A.Y. 2004-05 dtd. 26-11-2010, Hon ble High Court decision in CIT v. Prabhabai Bansali (141 ITR 419 (Cal) & M.V. Sonavala v. CIT (177 ITR 246 (Bom) held that the addition cannot be made in respect of notional return under the head Income from House Property and accordingly directed the A.O. to delete the addition. He also directed to reduce the permissible deduction u/s 24(a) of the Act by taking the revised annual value of the property. 7. At the time of hearing, the ld. D.R. supports the order of the A.O. 8. On the other hand, the ld. Counsel for the assessee, at the outset, submits

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uctions Ltd. (supra) the Tribunal after considering the provisions of section 23 and the decision of the Tribunal in the case of Reclamation Realty India Pvt. Ltd. (supra) wherein it has been held that we find that the Bombay High Court which is the jurisdictional High Court has held that the rateable value under the Municipal law has to be adopted as annual value u/s. 23(a) of the Act , has held that the A.O. has grossly erred by calculating the annual let out value by estimating the market value of the property at Rs. 7 crores and at the same time ignoring the fact that the Municipal Rateable Value given by the Government Authority i.e Mumbai Municipal Corporation at Rs. 1,55,310/-, is much lower than the actual rent received by the assessee and accordingly upheld the order passed by the ld. CIT(A) in deleting the addition made by the A.O. Similar view has been taken by the Tribunal in other cases cited supra. 11. In the absence of any contrary material or distinguishing feature brou

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ee company without appreciating the facts that the deemed dividend has to be taxed on advances or loan to any concern as defined in Explanation 3(a) to section 2(22)(e), in which common shareholder is a member or a partner and such a shareholder has a substantial interest as defined in Explanation 3(b) of section 2(22)(e). b. On the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 74,06,226/- being deemed dividend within the meaning of section 2(22)(e) of the I.T. Act 1961. 13. The brief facts of the above issue are that from the balance sheet of the assessee as at 31-3-2002, the A.O. observed that the assessee has credited share application money of Rs. 1,40,03,700/- from M/s New Dimension Consultants P Ltd. (NDCPL). He further observed that the share holding pattern of the assessee company and M/s NDCPL as at 31-3-2001 and 31-3-2002 was as under:- Sl No Name of the shareholder No. of shares held in assessee 31.3.01 31.3.02 No. of shares

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i is beneficial share holder of KPPL which has received advance in the garb of share application money of Rs. 74,06,226/- from NDCPL of which Mr. Vikas Oberoi is a beneficial share holder and hence the provisions of section 2(22)(e) are applicable and accordingly he made an addition of Rs. 74,06,226/- to the total income of the assessee. 14. On appeal the ld. CIT(A) while relying on the decision of Hon ble jurisdictional High Court in CIT vs. Universal Medicare Private Limited (2010) 324 ITR 264 (Bom) held that the appellant company is not holding any shares in NDCPL, hence, the addition cannot be made in the hands of the appellant company and accordingly deleted the addition made by the A.O. 15. At the time of hearing the ld. D.R. supports the order of the A.O. 16. On the other hand the ld. Counsel for the assessee submits that since the assessee company is not holding any share in NDCPL therefore in view of the decision of Special Bench of the Tribunal in ACIT v. Bhaumik Colour (P.)

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ial shareholder then the provisions of section 2(22)(e) will not apply. 19. In CIT V/s Universal Medicare Private Limited (2010)324 ITR 263 (Bom), their Lordships after considering the aforesaid decision of the Special Bench of the Tribunal has held (page 269, Placitum 10): ………..The definition does not alter the legal position that dividend has to be taxed in the hands of the share- holder. Consequently in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which the assessee is sought to be taxed in the present case in respect of the amount of Rs. 32,00,000 is that there was a dividend under section 2(22)(e) and no other basis has been suggested in the order

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of Annual Letting Value of the property , in terms sec. 23(1)(a) of the I.T. Act, 1961. e. 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. 21. At the time of hearing both the parties have agreed that the facts of the above issue are similar to the facts of the case in ITA No. 4330/Mum/2011 for A.Y. 2007-08, therefore, the plea taken by them in the said appeal may be considered while deciding the above grounds of appeals. 22. Having carefully heard the submissions of the rival parties and perusing the material available on record and in absence of any distinguishing feature brought on record by the parties, we direct the A.O. to follow our findings recorded in paras 9 to 11 of this order. We hold and order accordingly. The

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