TMI Blog2012 (6) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% of GMR. The resultant figure will be NMR which is to multiplied by 12.5 to arrive at the value of the property. Basis of determining by the AO of the value of the property at Rs.5,24,61,625/- based on the Income Tax proceedings cannot be sustained as it was based on erroneous claim made by the Assessee while filing its return of wealth. Order of CIT(A) set aside. - WTA No.30/Mum/06, WTA No.04/Mum/08, WTA No.05/Mum/08 - - - Dated:- 30-11-2011 - R S Syal, N V Vasudevan, JJ. For Appellant: Shri Parthsarthi Naik For Respondent: Shri Hariom Tulsyan ORDER Per: N V Vasudevan: WTA No.30/Mum/06, A.Y. 2002-03: This is an appeal by the revenue against the order dated 13/1/2006 of CIT(A), Central 4, Mumbai relating to assessment year 2002-03. The grounds of appeal raised by the revenue read as follows: 1. (a) On the facts and circumstances of the case and in law the Ld. CIT(A) erred in adopting the municipal rateable value of the Agra Building at Rs. 28,942/- for the valuation of property under Schedule III of the W.T. Act after bifurcating the rateable value into two parts viz, legal occupants and illegal occupants without appreciating the fact that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses Court, being Suit No.694/1597 of 1992, for acquiring vacant possession. In view of the pendency of the suit, (stated to be pending till date) the tenancy of Amar Trading Co. was terminated and the assessee is not collecting rent from the tenant or from its illegal sub lessees. 4. The assessee actually received rental income of Rs. 23,308.23 from the following tenants during the previous year (excluding T T Ltd., Amar SSBM Trust and 11 other sub-tenants). - B.P.Gharda co. Rs. 2,168.88 - Farida Sikandar Shah Rs. 7,980.96 - Mannus Fasion Pvt. Ltd. Rs. 3,000.00 - Nadirshah Printers Rs. 3,867.00 - Midas Consultants Pvt. Ltd. Rs. 4,162.01 - S.K.M.K Shah Others Rs. 2,129.38 TOTAL : RS.23,308.23 5. The BMC, vide their letter 07.04.2003, fixed the rateable value of Agra Building at Rs. 781470 and made a demand for municipal taxes with reference to such enhanced rateable value. Consequently, a demand for outstanding taxes was raised by BMC to the extent of Rs. 25,04,612 p.a. for the financial year 2001-02. In order to safeguard its occupation rights, BOB directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipt enclosed) for sum of Rs. 20,67,586/- out of Rs. 51,76,260/-. We request your good self to write a letter to BMC or the authorized tenants M/s. Thomson Taylor of Urmila to produce the copy of receipt for the payment made for BMC Tax directly without our knowledge. They are not cooperating with us in view of legal case filed against them. The property was acquired by Urimila Co. Ltd. on 11.05.1973. The property was 100% occupied by authorized tenants and unauthorized tenants. We have also given you the list of court cases pending against the tenants. We maintain the books of accounts on mercantile method of accounting. Accordingly we have booked the expenses and raised the debit note on the authorized tenants. As on 31.03.2002 amount receivable from them is Rs. 39,57,963.16/-. Except rent income the BMC tax was completely out of pocket, what ever we collect from them we pass on to BMC. On receipt of the property tax bill from BMC it was charged to tenants on no profit no loss basis i.e. out of pocket. We submit that if the rates and taxes added back o our total income due to non payment of tax then, the income credited also to be reversed due to non receipt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property as follows: Rent received as discussed Rs. 52,41,228/- Less: Rent of Juhu property wrongly included Rs. 1,04,280/- Rs. 51,36,948/- Less: Municipal taxes paid Rs. 1,69,500/- Rs. 49,67,448/- Less : 15% of gross maintainable rent Rs. 7,70,542/- Rs. 41,96,906/- Value for Wealth Tax Purpose 41,96,906 x 12.5 Rs.5,24,61,325/- 11. In the income tax proceedings against the order of assessment for AY 02-03, determing income from house property as referred to in para-9 of this order, the Assessee filed appeal before CIT(A). In the said appeal, the assessee submitted that it s original computation of income from house property was not correct. It sought to submit the correct and rectified computation of income from house property, for consideration and adjudication during the appellate proceedings. The Assessee computed its income from house property at Rs. 23,715/- as against Rs.10,969/-, which was originally returned to tax. The said income from house property was computed as under:- Particulars Rs. % of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cupiers share of municipal tax realized by the assessee from its tenants does not form part of the sum for which the property might reasonably be let from year to year within the meaning of section 23(1) of the Income Tax Act, 1961 and the same cannot be assessed as he income of the assessee. The assessee also referred to the provisions of section 146 of the Bombay Municipal Corporation Act, (BMC Act) which deal with the liability for property taxes and lay down the general principle that property taxes shall be levied primarily on the actual occupier of the premises upon which the taxes are assessed. In particular it was pointed out that u/s.146(2) of the BMC Act, which lays down that the liability to municipal tax, if the premises are let, will be that of lessee. If the premises are sublet then the tenant who sub-let the premises will be liable to pay municipal taxes. Thus the Assessee submitted that annual value of the premises attributable to portions which were legally let out by the Assessee alone should be considered as Municipal ratable value of the property for the purpose of computing income under the head Income from House Property u/s.23(1) of the Income Tax Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. In the appellate order I have given the finding that the appellant s income from rent from its Agra Building is only Rs.23,715/- after allowing 30% for repair. Therefore, decision of the AO having been set-aside, it is no more applicable in deciding and arriving at net wealth for the Wealth Tax purposes. 3.10 The AC has in his assessment order himself mentioned that the value fixed by the Municipal Authorities as the gross maintainable rent should be taken to compute the value for wealth-tax purposes. From a perusal of the letter dated 7th April 2003 of the BMC, it is abundantly clear that the value fixed, the rest of the building is Rs,28,9421- and on this basis the value for the wealth-tax purpose could be R3071 2/- I therefore, direct the AC to adopt this figure for wealth-tax purposes. 15. Aggrieved by the order of the CIT(A) the revenue has preferred the present appeal before the Tribunal. 16. At the time of hearing ld. Counsel for the assessee submitted before us that in Income Tax proceedings the Tribunal has already taken the view that annual value has to be arrived at by adopting standard rent under the Rent Control Act as proper yardstick to ascertain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of Schedule III to the Act lays down that NMR shall be calculated by reducing from Gross Maintainable Rent (GMR) an amount of tax levied by the Local Authorities in respect of the property and a sum equal to 15% of the GMR. Rule 5(i) to Schedule III lays down that GMR where the property is let shall be the amount received or receivable by the owner as annual rent or the annual value assessed by Local Authorities in whose area the property is situated for the purposes of levy of property tax or any other tax on the basis of such assessment whichever is higher. 19. In terms of Rule 5(i) of Schedule- III to the Act, GMR in the present case will be received Rs. 7,81,470/- because this is admittedly more than the actual rent received by the assessee from the property. The action of the CIT(A) in bifurcating the maintainable ratable value and attributing part of it to legal occupation and illegal occupation is not within the frame work of Rule 5(i) of the Act. As we have already seen wealth tax is levied on the net wealth on the corresponding valuation date. Net wealth in turn is defined to mean the aggregate value of assets owned by the assessee after reducing debts owed in relation ..... 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