TMI Blog2017 (1) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... for he reasons unknown to us. This kind of half-backed attempt of AO in taxing the income of property is unsustainable in law. Also Revenue has not considered the fact of valid incorporation APPL and object of the said company. Without any sustainable reasons, the profits of the said company are taken as the basis for taxing 50% of the ALV of the said Mansion in the hands of the assessee. In the process, the profits are twice-taxed i.e. once in the hands of the assessee partly and then in the hands of the APPL. In this regard, AO has not granted any relief to the said company. Rather, same is taxed twice and he denied the tax credit too while reassessing in the hands of the assessee. Actually, assessee raised this as the ground of appeal without prejudice. Thus, the approach of the Revenue in dealing with the whole issue is deplorable and legally unsustainable. We find, the AO / CIT (A) has allowed certain percentage of business income of the APPL as expenses and allowed the same before taxing the rental income in the hands of the assessee. As such, AO / CIT (A) failed to justify the said percentage with any data or comparable cases. Whole of this exercise of the officers lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se are that the assessee owns 50% share in a building named Munshi Manor‟, which was called Gandhi Mansion‟ earlier, and the other 50% share is owned by the assessee‟s uncle. The said property has Ground plus 4 floors (G + 4). The ground and the second floors were let out to Ashoka Guest House, a proprietorship concern. The first and third floors were let out to Sanjay Munshi (HUF). Fourth floor was let out to Ravikanth Munshi. The said Ashoka Gust House, Sanjay Munshi HUF and Ravikanth Munshi subleased the respective premises to a private limited company named M/s. Alt Property Pvt Ltd (APPL) which is substantially owned by the assessee. The yearly rents paid by the said three lessees ie Ashoka Gust House, Sanjay Munshi HUF and Ravikanth Munshi are ₹ 16,380/-; ₹ 2,988/- and ₹ 14,655/- respectively. Assessee owns 50% of the above yearly rent ₹ 17012/-. The said G + 4 floors were sub-leased by these three entities to M/s. Alt Property Pvt Ltd which in turn started exploiting the said property by way of service centre. As a part of its business, the ground and first floors were let out by the APPL to South African Consulate for yearly rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property is outside the ambit of Maharashtra Rent Control Act, 1999. Accordingly, the income earned by the company M/s. Alt Property Pvt Ltd is considered as the ALV of the property and ignored the municipal rateable values before reassign the 50% of ₹ 59.90 lakhs as ALV of the said property to the extent of its share. The assessment for the AYs 2008-09; 2009-10; 2010-11 and 2011-12 were also assessed / re-assessed or pending for assessments. Ld AR submitted that the assessments for the AYs 2008- 09 and 2011-12 are finalised in the lines mentioned above for the earlier AY 2007-08 and the matters are pending for adjudication before the Division Bench of the Tribunal. He also submitted that the re-assessments for the AYs 2009-10 and 2010- 11 are still pending before the AO. The Tribunal has given the date of hearing for AYs 2008-09 and 2011-12 as 29.3.2017. So far as the re-assessment for the AY 2007-08 is concerned, the assessed income of the assessee is determined at ₹ 28,83,410/-, which is arrived at after treating his 50% share of the business income of ₹ 25,45,750/- earned by M/s. Alt Property Pvt Ltd. The said amount of ₹ 25.45 lakhs is arrived at after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Without prejudice, Ld Counsel for the assessee submitted that he has no objection for taxing the same in the re-assessment as done by the AO / CIT (A). However, Ld AR objected to the failure of the AO in giving credit to the taxes by M/s. Alt Property Pvt Ltd on the sum, which is now taxed in the hands of the assessee as income from house property‟. Further, Ld Counsel for the assessee also mentioned without prejudice that the CIT (A) erred in granting deduction of increased percentage of 30% towards expenses, when the expenses claimed are genuine. Ld Counsel for the assessee argued for further increase. Further, Ld Counsel for the assessee submitted that the rental arrangement between the assessee and N.K. Munshi on one side and Ashoka Guest House, Sanjay Munshi HUF and Ravikanth Munshi on the other, is dated prior to the Maharashtra Rent Control Act, 1999 and therefore, it is binding on the Department to accept the rateable value as per the municipal records for computing the ALV of the property. It is another contention of the assessee that the rental / lease documents among the concerns are undisputed by the Revenue. In that case, the suspicion of collusiveness for tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Munshi Manor. The documents signed among the parties are created and the arrangement constitutes self-serving documents . It is the responsibility of the Revenue to delve into the original intention of the assessee and its arrangements. It is only the responsibility of the AO to bring out the real rental value (ALV) of the Munshi Manor for tax purposes as per the provisions of section 23(1)(a) of the Act. However, conceded to the fact that the assessee deserves to the tax credit paid by the company M/s. Alt Property Pvt Ltd, which substantially owned by the assessee. The original rent arrangement by the assessee, with Ashoka Gust House, Sanjay Munshi HUF and Ravikanth Munshi, is original and final one as they are different entities of the same person. Shri Ravikanta Munshi is a passive tenant in the whole claim of arrangement. Drawing out arrention to the shareholding of M/s. Alt Property Pvt Ltd, Ld DR submitted that the said company owned by the assessee. In that case, the intrinsic value of the property in terms of rent is the income offered by the company out of the exploitation of the said Munshi Manor. Therefore, the AO is justified in considering ₹ 59.90 lakhs as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said property for business based on the principles laid down for the same. The business income earned by the company out of the said principles cannot constitute the intrinsic rental value of the said Mansion. In our view, the rental value of the building is conceptually different from that of the building when the same is used for commercial profits. Commercial profits of the company cannot be equated with the rental value ALV of the property alone. It has the element of profit motive of the businessman and the skilled employees of any organization. It has human element involving decisions of the management / employer and individuals. Rental value of the property is not synonymous with the business profits earned out of the property. From this point of view, the profits of the APPL minus same percentage of expenses do not constitute the ALV of the said Mansion. Therefore, based on this reasoning, we dismiss the relevant conclusions of the AO / CIT (A). 7. Further, we find the Revenue has not taxed / re-assessed the other 50% of the said Mansion for he reasons unknown to us. This kind of half-backed attempt of AO in taxing the income of property is unsustainable in law. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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