Delhi High Court
The Commissioner Of Income Tax vs M/S Fizz Drinks Ltd on 23 November, 2011
Author: Badar Durrez Ahmed
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: November 23, 2011
+ ITA 412/2005
THE COMMISSIONER OF INCOME TAX ..... Appellant
versus
M/S FIZZ DRINKS LTD .... Respondent
+ ITA 638/2005
THE COMMISSIONER OF INCOME TAX ..... Appellant
versus
M/S FIZZ DRINKS LTD .... Respondent
Advocates who appeared in this case:-
For the Appellant : Ms Suruchi Aggarwal, Advocate
For the Respondent : Mr Prakash Kumar, Advocate
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MS JUSTICE VEENA BIRBAL
1. Whether reporters of local papers may be allowed to
see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
BADAR DURREZ AHMED, J (ORAL)
1. These two appeals under Section 260-A of the Income Tax Act, 1961
(hereinafter referred to as the said Act) arise out of the common judgment
of the Income Tax Appellate Tribunal dated 15.09.2004 passed in ITA No
1242/Del/1997 and ITA No 5266/Del/1998 pertaining to the Assessment
Years 1993-1994 and 1995-1996 respectively. The question which arises
for consideration in these appeals is as under:-
"Whether in the cases where the premises are not regulated
by the Delhi Rent Control Act, the reasonable annual letting
value of the property for purposes of Section 23 of the
Income Tax Act, 1961 can be determined with reference to
the standard rent determinable under the Rent Control Act?"
2. The facts in brief are that the assessee had entered into a lease
agreement on 31.01.1990 for letting out 19 flats having a covered area of
16,236 sq. ft. to Usha India Ltd. The assessee charged rent at the rate of
rupee 1 per sq. ft. The same came to ` 1,94,832/- per annum. The lessee
was also required to make an interest free security deposit which was
calculated @ `1,000/- per sq. ft. and on this account the assessee received a
sum of ` 1,62,36,000/-. The Assessing Officer in the course of the
assessment for the assessment year 1993-1994 added the notional interest
calculated @ 16% of the security deposit amount while computing the
annual letting value of the property. According to the Assessing Officer the
annual letting value was ` 27,92,592/- and, after giving the allowable
deductions, the Assessing Officer assessed the income from the house
property at ` 22,34,073/-. The Commissioner of Income Tax (Appeals)
rejected the assessee's appeal and accepted the view taken by the Assessing
Officer.
3. A similar view was taken by the Assessing Officer for the
assessment year 1995-1996. However, the Commissioner of Income Tax
(Appeals) followed the order of his predecessor in respect of the assessment
year 1991-1992 wherein the annual letting value was computed on the basis
of the rateable value fixed by the Municipal Corporation of Delhi for the
purposes of property tax/house tax. Consequently, the Commissioner of
Income Tax (Appeals) directed that the annual letting value should be taken
at ` 4,88,465/- as against the ALV computed by the Assessing Officer.
Consequently, the Commissioner of Income Tax (Appeals) had deleted the
addition of ` 22,97,760/- and substituted the ALV by the sum of
` 4,88,465/-.
4. Aggrieved by the order of the Commissioner of Income Tax
(Appeals) for the assessment year 1993-1994, the assessee filed an appeal
before the Income Tax Appellate Tribunal whereas in respect of the
assessment year 1995-1996, the Revenue filed an appeal before the
Tribunal. Both these appeals, as mentioned above, were decided by the
Tribunal by virtue of its common order dated 15.09.2004.
5. We have heard the learned counsel for the parties and we find that
the question that has been formulated for our decision stands answered by
the Full Bench decision of this Court in the case of Commissioner of
Income Tax v. Moni Kumar Subba (2011): 333 ITR 38 (Delhi) (FB). In
paragraph 4 of the said decision it is held:-
"In a case like this, the standard rent which could be arrived
at applying the formula laid down in the Delhi Rent Control
Act is not applicable, as property in question is not covered
by the Delhi Rent Control Act."
6. It is, therefore, clear that the Full Bench was of the view that once
the property is outside the purview of the Delhi Rent Control Act, 1958, the
annual letting value of the property for the purposes of Section 23 of the
Income Tax Act, 1961 cannot be determined with reference to the standard
rent determinable under the Delhi Rent Control Act. This however, leaves
the question as to how the annual letting value is to be determined and an
indication is given in the Full Bench decision itself in paragraph 17 thereof
which reads as under:-
"Thus the rateable value, if correctly, determined, under the
municipal law can be taken as ALV under Section 23(1)(a) of
the Act. To that extent we agree with the contention of the
learned counsel for the assessee. However, we make it clear
that rateable value is not binding on the Assessing Officer. If
the Assessing Officer can show that rateable value under
municipal laws does not represent the correct fair rent, then
he may determine the same on the basis of material/evidence
placed on record. This view is fortified by the decision of the
Patna High Court in the case of Kashi Prasad Kataruka v.
CIT (1975) 101 ITR 810."
7. In view of this decision of the Full Bench in the case of CIT v. Moni
Kumar Subba (supra), in the present case, the standard rent cannot be taken
as a point of reference for determining the annual letting value of the
property in question inasmuch as the same is outside the purview of the
Delhi Rent Control Act, 1958. We find that in so far as the assessment year
1995-1996 is concerned, the Commissioner of Income tax (Appeals) has
taken the rateable value for determining the annual letting value for the
purposes of Section 23 of the said Act. However, in so far as the
assessment year 1993-1994 is concerned, this exercise has not been done.
Since the position in 1993-1994 and in 1995-1996 would not be very
different, it would be appropriate if we remit the matter to the Assessing
Officer, in respect of both these appeals, for computing the annual letting
value on the basis of the rateable value, as directed by the Full Bench in
paragraph 17 of the said decision, which has been extracted above.
8. We may also point out that the Full Bench categorically decided that
the notional interest on interest free security cannot be taken as
determinable factor to arrive at fair rent inasmuch the provisions of Section
23(1)(a) do not mandate this.
9. Consequently, the question has been answered in the negative and
the appeals stand disposed of as directed above.
BADAR DURREZ AHMED, J
VEENA BIRBAL, J
NOVEMBER 23, 2011
hk
