TMI Blog2020 (7) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... owing claim for expenditure incurred towards professional fees - On a perusal of the records, we find that there is no material available on record which would substantiate the claim of the assessee that the professional fees as claimed by him was incurred for availing certain professional services in the course of his business. In fact, the assessee except for harping on his claim that the aforesaid expenses were incurred in lieu of professional advice for issues relating to litigation, tax appeals, accounting and compliances in the course of his business, had however failed to fortify the same on the basis of any corroborative material. - Matter restored before AO for verification. Addition towards the Annual Lettable Value ( ALV ) of a property owned - property jointly owned by the assessee alongwith his brother - HELD THAT:- As per Sec. 23(1), the actual rental receipt as per clause (b) shall be taken as the ALV of a property only where the same is found to be in excess of the notional lettable value contemplated in clause (a). In the case before us, the assessee had failed to explain as to why the notional lettable value of the property of ₹ 1,80,000/-( share) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee that the property in question during the year under consideration was let out and the unrealized rent was to be recovered from the lessee/licensee viz. HCRMP, therefore, such amount of unrealized rent would be brought to tax in the hands of the assessee u/s 25AA of the Act in the year of receipt. - Held that:- in terms of our aforesaid observations we uphold the view taken by the CIT(A) that as the property in question was inherently incapable of being let out during the year under consideration because of the legal constraint imposed by the High Court, therefore, the reasonable rent for which it might be let-out could not be computed. As a consequence, since the computation provisions u/s 23 failed the charging provisions u/s 22 would also fail. As such, the deletion by the CIT(A) of the addition upheld. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - ITA No. 2043/Mum/2017, ITA No. 1915/Mum/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rav Palace (₹ 2,83,920/-);(c). STPP Mathura (₹ 1,40,000/-); and (d) Veena Souk (₹ 4,50,36,444/-) : ₹ 4,36,97,743/- [(after 30% deduction u/s 24(a)]. (iii). Disallowance of deduction claimed by the assessee u/s 24(a) i.e @30% of the rent received from letting out of space for mobile tower : ₹ 2,25,000/-. After inter alia making the aforesaid additions/disallowances the income of the assessee was assessed by the A.O vide his order passed u/s 143(3), dated 30.03.2015 at ₹ 5,18,47,130/-. 4. Aggrieved, the assessee assailed the assessment order before the CIT(A). After deliberating on the contentions advanced by the assessee the CIT(A) partly allowed the appeal as under: S.No. Particulars Amount of addition/disallowance Before the CIT(A) 1. Disallowance of expenditure claimed against the income from other sources u/s 57(iii) of the Act, viz. (i), Bank charges : ₹ 2,227/-; (ii),. Professional fees : ₹ 13,84,227/-; (iii). Car Expenses : ₹ 59,873/-; (iv). Car Insurance : ₹ 2,10,760/-; and (v). Depreciation on motor car : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total ₹ 32,16,525/- On a perusal of the return of income, we find, that the assessee had claimed the aforesaid expenses u/s 57(iii) of the Act, against his income from other sources . Observing, that the said expenses did not have any nexus with the income that was reflected by the assessee under the head income from other sources , the A.O had called upon him to justify the allowability of the same u/s 57(iii) of the Act. In reply, it was submitted by the assessee that he was engaged in the business of a builder and a developer under the name and style of M/s Sanghavi Associates and during the year was having two ongoing projects viz. (i). Veena Souk ; and (ii). Veena Mall. In the backdrop of the aforesaid facts, it was the claim of the assessee that as he had used the motor car (on which depreciation/expenses were claimed) for travelling for his business purpose, therefore, he was entitled to claim depreciation and other expenses viz. insurance expenses, car expenses pertaining to the said vehicle while computing his taxable income. As regards the claim of professional expenses, it was submitted by the assessee that as the said expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. We find that a similar claim of car depreciation and car expenses was raised by the assessee in his case for A.Y 2011-12, which however was disallowed by the A.O vide his order passed u/s 143(3), dated 28.03.2014, and thereafter was upheld by the CIT(A). However, on further appeal the Tribunal while disposing off the assesse s appeal in ITA No. 2201/Mum/2016, dated 03.12.2019 for A.Y 2011-12 had vacated the aforesaid disallowance of car depreciation and car expenses, observing as under: 22. Upon careful consideration we find considerable cogency in the submission of the assessee. The alternate claim of the assessee that depreciation is to be allowed as it is undisputed that the assessee was engaged in the business, deserves to be allowed on the touchstone of Hon ble Apex Court in the case of Rajendra Prasad Moody (supra). We direct accordingly that the assessee ground raised for depreciation claim is to be allowed. At this stage, we may also observe that the assessee in the course of the proceedings before the CIT(A), had submitted, that the A.O had disallowed 50% of his claim for car depreciation and car expenses while framing the assessment for A.Y 2013-14. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O while framing the assessment in his case for the A.Y 2011-12, vide his order passed u/s 143(3), dated 28.03.2014. On a perusal of the records, we find that there is no material available on record which would substantiate the claim of the assessee that the professional fees as claimed by him was incurred for availing certain professional services in the course of his business. In fact, the assessee except for harping on his claim that the aforesaid expenses were incurred in lieu of professional advice for issues relating to litigation, tax appeals, accounting and compliances in the course of his business, had however failed to fortify the same on the basis of any corroborative material. Be that as it may, we find that the matter in all fairness requires to be restored to the file of the A.O, who is directed to verify the allowability of the aforesaid claim of expense raised by the assessee u/s 37 of the Act. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his aforesaid claim of expense on the basis of fresh documentary evidence. Ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expected to let from year to year; or (b) . where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) . where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable. Now, in the case before us the property in question was let out during whole of the year under consideration against which assessee had claimed to have received his share of rent of ₹ 60,000/- ( share). As observed by us hereinabove, the ALV of the aforesaid property which was vacant in the immediately preceding year i.e A.Y 2011-12 was suo motto shown by the assessee u/s 23(1)(a) at ₹ 1,80,000/- ( share of assessee). As per Sec. 23(1), the actual rental receipt as per clause (b) shall be taken as the ALV of a property only where the same is found to be in excess of the notional lettable value contemplated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e without giving any logical reasoning. In fact, we find that though theCIT(A) had reproduced the exhaustive submissions filed by the assessee in context of the aforesaid issue under consideration at Page 28-29 - Para 4.23 - 4.25 of his order, but had failed to adjudicate the same on the basis of a speaking order. In the backdrop of the aforesaid facts, we herein restore the issue to the file of the A.O who is directed to adjudicate the aforesaid claim of the assessee on the basis of a speaking order. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate his aforesaid claim on the basis of fresh material. Ground of appeal No. 3 is allowed for statistical purposes. 10. The appeal of the assessee is partly allowed in terms of our aforesaid observations. ITA No. 1915/Mum/2017 A.Y 2012-13 11. We shall now take up the appeal of the revenue wherein the impugned order has been assailed before us on the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)-3, Thane, erred in deleting not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the authorised representatives for both the parties in context of the issue under consideration and have also perused the orders of the lower authorities and the material available on record. Admittedly, the possession of the aforesaid property was not delivered to the assessee till the end of the year under consideration i.e upto 31.03.2012. In fact, as observed by us herein above, the possession of the property in question was to be delivered in December, 2013. In our considered view, in the very absence of the possession of the property in question having been delivered to the assessee by the builder/developer, there could have been no occasion for computing the ALV of the same within the meaning of Sec. 23 of the Act. In fact, we find that an identical addition of the notional rental income that was made by the A.O in respect of the property in question in the immediately preceding year i.e A.Y 2011-12 was on appeal deleted by the CIT(A). Still further, the appeal of the revenue in context of the issue under consideration for A.Y 2011-12 had also been dismissed by the Tribunal in ITA No. 6003/Mum/2016, dated 03.12.2019. The Tribunal while upholding the order of the CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al complex (admeasuring 3200 sq. meters) known as Vena Souk situated at Mahavir Marg, Kandiwali West. It was noticed by the A.O that the construction of the aforesaid complex was completed in the year 2009 and part completion occupancy certificate was received by the assessee on 07.02.2009. The aforesaid complex comprised of two basements, a ground floor, two upper floors and a terrace above the second floor. It was gathered by the A.O that the assessee had entered into a combined agreement for leave and license as well as sale of the property with M/s Home Care Retail Mart Pvt. Ltd (hereinafter referred to as HCRMP ) on 17.02.2006, which was duly registered. Also, the assessee had collected an interest free security deposit from the aforesaid party amounting to ₹ 4,02,11,111/-. (ii). On account of alleged breach of contract on the part of the assessee the aforesaid HCRMP filed an arbitration petition against the assessee before the Hon ble High Court of Bombay. Subsequently, on 30.01.2012, the Hon ble Supreme Court passed an order allowing the assessee to lease out the said property for a tenure of five years and further directed that the Court Receiver shall appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was to be recovered from the lessee/licensee the ALV of the property was to be determined as per Sec. 23(1)(b), as the actual rent claimed by the assessee i.e ₹ 40,21,000/- p.m was more than the notional rent determined by the A.O. Accordingly, as the entire amount of rent was unrealized the annual value of the property was therefore to be determined at nil, subject to the condition that the amount of rent recovered in the subsequent years would be brought to tax in the hands of the assessee u/s 25AA of the Act.; (d). that as pursuant to the directions of the court a court receiver was appointed as receiver of the property and possession of the same was vested with him and not the assessee, therefore, the notional lettable value of the property could not have been computed u/s 23(1)(a) of the Act and brought to tax in the hands of the assessee u/s 22 of the Act.; and (e) that the amount of interest free security deposit of ₹ 4,01,11,111/- that was received by the assessee from HCRMP was invested by him in fixed deposits, bonds etc from where substantial income was earned and offered for tax under the head income from other sources . In the backdrop of his aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruction of the property and the occupation certificate could be obtained only in July 2009. The lessee HRMPL contended that the construction was not completed as per the agreement and asked the appellant to complete the construction work before handing over possession. The appellant refused the claim and issued a notice of termination of the agreement on 19/02/2010. The lessee HRMPL thereupon took recourse to legal proceedings and approached the Bombay High Court. The honourable court vide its order dated 23/07/2010 restrained the appellant from giving out the impugned property to any party other than HRMPL or part with the possession of the property or create any rights in the property in favor of a third party till disposal of the arbitration proceedings. The appellant and HRMPL both filed claims and counter claims before the arbitrator. HRMPL claimed for specific performance of the agreement and monetary damages for not handing over the possession of the property in May 2007 as stipulated in the leave and license agreement. The appellant on the other hand claimed for the license fee from 2009 as per the agreement and also compensation for breach of the contract by HRMPL. The arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the suit before the City Civil Court and unless a final determination is made thereon, the question of the assessee becoming the owner of the building does not arise. In the facts and circumstances, the CIT(A) as well as the Tribunal have upheld the assessee's contention on the ground that since the dispute between the assessee and the sub-tenant has arisen out of a contract, which is pending adjudication before a Civil Court, it cannot be held that there is an automatic forfeiture of the lease, and as such, the assessee cannot be held to have become the owner of the building in question. In this context, the Tribunal has also rightly held that the right of an assessee in regard to a matter in dispute in a Court of law would get transformed into real and permanent one only when the Court finally expresses its opinion. Till then, it is an inchoate or uncertain right. It is further clear that in case of forfeiture under s. 111(g) of the Transfer of Property Act, the Court has a discretionary power to intervene and give relief against forfeiture as provided under ss. 114 and 114A of the Transfer of Property Act. Therefore, till the issue is finally decided in the civil proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the assessee had not fully parted with the ownership rights and, therefore, continued to be the owner of the property, i.e., the building known as Nirmal . Hence, he contends, the assessee is liable to tax under s. 22 on the annual value of the property as determined in accordance with s. 23, irrespective of what the assessee collects from its shareholders (who, according to learned counsel, are nothing but tenants) and irrespective of the label attached to such receipts. 14. The contention raised by Dr. Balasubramanian appears attractive at first blush but, on closer examination, falls to the ground. Even assuming that after the shareholders were allotted the floor space area and the right of occupancy thereof was completely transferred to the shareholders, the assessee still retained some residuary or vestigial rights of ownership, there are two difficulties in the way of the contention being accepted. First, the Revenue had made no attempt to identify, quantify or evaluate such residuary rights of ownership. The second and more formidable difficulty is that the Revenue is not able to show that the residuary or vestigial rights of ownership were of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty in his own right. Applying the aforesaid ratio to the facts recorded by the Tribunal, it is apparent that there is no infirmity in the view taken by the Tribunal which requires this Court to interfere. The Tribunal was justified in law in deleting the income from property known as Jadhav Bungalow considering the fact that the assessee herein is not in a position to exercise his right as an owner, at least for the years under consideration. 9. Referring to the above learned CIT(A) concluded that in the present case also the court had passed an injunction on 23/07/2010 restraining the assessee from creating any charge on the property or parting with the possession of the property. It was only on 11/11/2011 that the court permitted the receiver to let out the property. Thus during the previous year the property could not have been let out, and hence charge u/s 22 would not be attracted in the case. Hence, he concluded that the AO was apparently wrong in ignoring the material facts and bringing to tax the notional rent of the property. 10. Learned CIT(A) further noted that the assessee has also claimed and furnished copies of the asst. Orders of the subsequent years to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid observations we uphold the view taken by the CIT(A) that as the property in question was inherently incapable of being let out during the year under consideration because of the legal constraint imposed by the High Court, therefore, the reasonable rent for which it might be let-out could not be computed. As a consequence, since the computation provisions u/s 23 failed the charging provisions u/s 22 would also fail. As such, the deletion by the CIT(A) of the addition of ₹ 4,50,36,444/- is upheld by us. Ground of appeal No. 1 2 are dismissed in terms of our aforesaid observations. 14. Ground of appeal No. 3 being general is dismissed as not pressed. 15. The appeal of the revenue is dismissed. 16. Before parting, we may herein deal with a procedural issue that though the hearing of the captioned appeal was concluded on 05/03/2020, however, this order is being pronounced after the expiry of 90 days from the date of conclusion of hearing. We find that Rule 34(5) of the Income-tax Appellate Tribunal Rules, 1962, which envisages the procedure for pronouncement of orders, provides as follows: (5) The pronouncement may be in any of the following manners:- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate bench of the Tribunal viz. ITAT, Mumbai F Bench in DCIT, Central Circle-3(2), Mumbai Vs. JSW Limited Ors. [ITA No. 6264/Mum/18; dated 14/05/2020, wherein it was observed as under: Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. The epidemic situation being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that In case the limitation expired after 15.03.2020 then the period from 15.03.2020 till the date on which the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made time bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly . The extraordinary steps taken suo motu by the Hon ble High Court and Hon ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for prono ..... X X X X Extracts X X X X X X X X Extracts X X X X
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