TMI Blog2010 (1) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 - DELHI High Court) – Held that:- rent paid being in excess of standard rent fixed, no further amount can be considered as the market rent to determine the value of benefit under section 2(24)(iv), order of the CIT(A) is upheld and revenue's grounds are rejected. - IT Appeal Nos. 6373 and 6703 (Mum.) of 2007 and 1524 to 1527 (Mum.) of 2008 - - - Dated:- 19-1-2010 - D.K. Agarwal, B. Ramakotaiah, JJ. Arvind Sonde for the Appellant Vikram Gaur for the Respondent JUDGEMENT The Judgment was delivered by:- B. Ramakotaiah, Accountant Member:- 1. These appeals are by the assessee and revenue for various assessment years. Since common issues are involved, these are heard together and are being decided by this common order. This case was originally heard on 14-10-2009 and since certain receipts were to be verified it was posted again for clarification on 4-12- 2009. The assessee has filed originally paper book containing 114 pages and on 4-12-2009 filed the details of bank accounts evidencing the payment of rent in the respective years. These details were considered. 2. The main issue is with reference to the assessment for assessment year 2003-04 in ITA Nos. 6373 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th in law and in facts by treating the assessee as a protected tenant. The Assessing Officer has very clearly brought out vide paras 3.3 to 3.10 of his assessment order that the assessee was neither a protected tenant nor was it that he could not have been evicted. 2(i) On the facts and in the circumstances of the case, ld. CIT(A) erred both in law and in facts by deleting the addition of Rs. 4,50,000 made under section 2(24)(iv) of the Act. 2(ii) On the facts and in the circumstances of the case, ld. CIT(A) erred both in law and in facts by treating the assessee as a protected tenant. The Assessing Officer has very clearly brought out vide paras 3.3 to 3.10 of his assessment order that the assessee was neither a protected tenant nor was it that he could not have been evicted." Issue of value of benefit on purchase of flat:- 4. Briefly stated, assessee has purchased a residential flat admeasuring 1,350 sq.ft. situated in Maker Tower-A, Cuffe Parade, Mumbai from M/s. Semcon Electronics (P.) Ltd. (SEPL) for a consideration of Rs. 10,00,000 whose book value was Rs. 1,14,44,394. Since the assessee was a Director in the abovementioned company, the Assessing Officer was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit or perquisite and the assessee neither obtained a benefit nor perquisite being a protected tenant under the Maharashtra Rent Control Act. Accordingly, there should not be any addition under the Act as the assessee had paid more than the amount fixed under the Maharashtra Rent Control Act, 1999. While accepting that the assessee was a protected tenant under the Rent Control Act and further that the Stamp Authorities also have accepted the fact that the said tenancy is genuine and assessee a protected tenant the learned CIT(A), however, did not accept the value of Rs. 10,00,000 paid. He was of the opinion that the property was purchased by the assessee-company on 2-7-1990 for a price of Rs. 62.78 lakhs whereas the assessee became a protected tenant being in occupation as tenant from October, 1994. Accordingly, the property was free hold in 1994 and taking the cost inflation index of Rs. 62.78 lakhs he arrived at the actual market value of the property as in 1994 at Rs. 89.35 lakhs and he arrived at the benefit at a round sum figure of Rs. 80,00,000 to be considered as benefit under section 2(24)(iv) of the Act. The assessee is aggrieved on the confirmation of Rs. 80,00,000 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Bombay High Court wherein it was accepted that the assessee was protected tenant. He has referred to various para in the said order to prove that the assessee is protected tenant. With reference to the application of provisions of section 2(24)(iv), the learned counsel has conceded that the provisions are applicable in principle, however, it was submitted that the value of the property in the case of a protected tenant is to be determined on the basis of the Maharashtra Rent Control Act and the Bombay Stamp Authority also has accepted the market value of Rs. 6,00,000 being 112 times of the rent being paid as per the Bombay Stamp Act. It was submitted that since the assessee has paid Rs. 10,00,000 as market value, i.e., more than Rs. 6,00,000 determinable, there is no question of any benefit received in this regard. He further submitted that the Stamp Authority has accepted the value, the Hon'ble Bombay High Court has accepted that the assessee is a protected tenant and further referring to the assessment order passed in the case of the company the same Assessing Officer has accepted the sale value at Rs. 10,00,000 and, accordingly, determined the loss so arrived at in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 67,16,731. The same has been accepted by the revenue. 10. Before us the dispute is as to whether the provisions of section 2(24)(iv) applies to the transaction of purchase of flat by the assessee from SEPL and with regard to the quantification of the value of the benefit. 11. The assessee's contention was that he was a protected tenant under the Maharashtra Rent Control Act. To that extent there is no doubt about assessee being protected tenant. We have also considered the rent receipts placed on record along with the details of the bank account furnished. Further contention was that the value as paid by the assessee was accepted by the Stamp Authorities and so since the amount paid was in excess of the amount payable at Rs. 6 lakhs there is no benefit to the assessee. 12. The contention that the assessee being a protected tenant, hence, the fair market value as determined by the Stamp authorities could only be considered as the value of the property and the assessee having paid more, no benefit accrued cannot be accepted for the following reasons:- (i) Under the Maharashtra Rent Control Act, 1999, the assessee cannot be vacated from the premises but that does not mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a decree holder against the company. The suit was instituted in 1984 being Suit No. 1353 of 1984. The said person has filed an Execution Application No. 447 of 2006 to execute the decree and as a part of execution process property was attached. By that time the property was already transferred to the assessee by SEPL and, accordingly, the assessee applicant prayed for raising order of attachment. The facts were set out in the order of the Hon'ble High Court in Dharamdas Manilal Jhaveri's case (supra) and by para 2 in page 2 and it was stated that the assessee was appointed as the lifetime Chairman of the Board of Directors of the company and para 3 states that vide agreement dated 2-7-1990, the property was purchased for the purpose of providing residential accommodation to the assessee and his family. Vide para 4 it is also stated that the company decided to lease out the said flat at a monthly rent of Rs. 5,000 in or around October, 1994. These facts indicate that the assessee being lifetime Chairman of the Board of Directors of the company has purchased the said property for the residence of himself and his family and, accordingly, the contention of the Assessing Officer that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no application for arriving at the value of benefit under section 2(24)(iv). We have also considered that provisions of section 17(2) for valuation of perquisites has no application and the assessee also contested the same before the Assessing Officer that the valuation for the purpose of perquisites cannot be determined for valuing the benefit under section 2(24)(iv). Likewise each provision has a significance in computation of total income and provisions of section 50C have to be invoked while determining the loss or gains after the sale of the property in the case of seller's computation. In view of the provisions of section 50C, the Assessing Officer assessing the company had no option than to accept the claim by the assessee-company. This does indicate that the assessee-company has certainly suffered loss and passed on the benefit in the form of an offer given by the assessee who is an interested person being the Promoter Director of the company. Accordingly, we are of the view that the valuation to be considered under section 50C cannot be taken as value for the purpose of section 2(24)(iv). 15. The Hon'ble Madras High Court in the case of S. Varadarajan (supra) relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue market value constituted a benefit within the meaning of section 2(24)(iv) of the Act. The Tribunal was not justified in deleting the additions." The principles established by the Hon'ble Madras High Court do indicate that the difference between the market value of the property and the registered value has to be considered as a benefit under the provisions. 16. Since there is evidence that the assessee has obtained the property less than the books value, this amount can safely be considered as a benefit obtained by the assessee. Accordingly, the Assessing Officer is directed to adopt the difference between the book value as per the books of SEPL and the amount paid by the assessee as a benefit obtained by the assessee. As the valuation fixed by the CIT(A) on the market value as in 1994 has no basis for consideration at the time of sale, the same cannot be considered as a correct valuation. The order of the CIT(A) is, therefore, modified and the benefit is restricted to the amount of net book value at the beginning of the year less the amount of consideration paid by the assessee. To that extent, the assessee's grounds are partly allowed. 17. Revenue's ground in objecting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able value of the said flat as determined by the BMC which is only Rs. 6,679 per annum and, thus, it is much lower than the actual rent of Rs. 60,000 per annum paid by the appellant. 2.3 Considering these facts and the decisions of the Supreme Court mentioned above, the undersigned is of the view that the addition of Rs. 4,50,000 made by the Assessing Officer is not sustainable and, therefore, the same is directed to be deleted. Therefore, the ground to this extent is allowed." 19. The revenue contested the action of the CIT(A). Referring to the benefit in rent paid, covered by the other ground in the revenue's appeal, the learned D.R. submitted that the fair market value estimated by the Assessing Officer was reasonable and according to the provisions, so the addition made by the Assessing Officer is to be restored. The learned counsel submitted that the municipal rateable value, accordingly to the BMC Regulations, was only Rs. 6,678 per annum whereas the assessee has paid rent of Rs. 60,000 per annum. Accordingly, there is no perquisite arrived at the hands of the assessee which can be brought to tax. To that extent he supported the order of the CIT(A). 20. As far as determ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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