Commissioner of Income-tax, Chandigarh-II v. M/s Punjab State Civil Supplies Corporation Ltd
[Citation -2015-LL-1019-11]

Citation 2015-LL-1019-11
Appellant Name Commissioner of Income-tax, Chandigarh-II
Respondent Name M/s Punjab State Civil Supplies Corporation Ltd.
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 19/10/2015
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags actual rent • annual value • house property
Bot Summary: Still dissatisfied, the assessee filed an appeal before the Tribunal who vide order dated 29.11.2007 allowed the appeal and set aside the order of the CIT(A) and directed the Assessing Officer to delete the impugned addition of 7,00,000/- made on account of income from house property. Learned counsel for the revenue-appellant submitted that the Tribunal was in error as the unrealized rent was to confirm to the requirements as laid down under Rule 4 of the Income Tax Rules, 1962 which have been made in pursuance to GURBACHAN SINGH 2015.11.17 17:06 I attest to the accuracy and authenticity of this document High Court Chandigarh ITA No. 451 of 2008 -3- Explanation to Section 23 of the Act. Explanation For the purposes of clause or clause of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. Learned counsel for the revenue had referred to Rule 4 of the Rules. From a perusal of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal, we notice that no aid was taken by the Assessing Officer either in his order or before the CIT(A) or the Tribunal from the said rule. No argument was raised based on Rule 4 of the Rules and no reference was made by the Tribunal to Rule 4 of the Rules. The revenue could not refer to any material on record to show that the assessee was ever confronted to establish the requirements of Rule 4 of the Rules to claim benefit of unrealized rent.


ITA No. 451 of 2008 -1- IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 451 of 2008 Date of Decision: 19.10.2015 Commissioner of Income Tax, Chandigarh-II ....Appellant. Versus M/s Punjab State Civil Supplies Corporation Ltd., Chandigarh ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE RAMENDRA JAIN. PRESENT: Ms. Urvashi Dhugga, Advocate for appellant. Mr. J.S. Jaidka, Advocate for respondent. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by revenue under Section 260A of Income Tax Act, 1961 (in short Act ) against order dated 29.11.2007 (Annexure A-3) passed by Income Tax Appellate Tribunal, Chandigarh Bench , Chandigarh (hereinafter referred to as Tribunal ) in ITA No. 561/CHANDI/2007, for assessment year 2004-05. appeal was admitted by this Court vide order dated 15.12.2008 for considering question of law proposed in para 5 of appeal which is to following effect:- Whether on facts and circumstances of case and in law, Hon'ble ITAT was correct in not appreciating that Section 25AA is applicable in respect of only that rent which was unrealisable due to circumstances of Rule 4 read with explanation GURBACHAN SINGH 2015.11.17 17:06 I attest to accuracy and authenticity of this document High Court Chandigarh ITA No. 451 of 2008 -2- to Section 23(1) of I.T. Act, 1961? 2. Briefly stated, facts necessary for adjudication of instant appeal as narrated therein may be noticed. assessee filed its return of income on 25.10.2004 for assessment year 2004-05 declaring loss of ` 120,53,19,245/-. said return was processed on 2.3.2005. Thereafter, revised return was filed on 24.1.2005 at same income in which refund claim of TDS at ` 31,66,027/- was made as against claim of ` 28,80,291/- in original return. return was processed on 30.3.2006 and notice under Section 143(2) of Act was issued on 27.8.2006. Thereafter, notice under Section 142(1) along with questionnaire was issued on 3.10.2006. assessee had not declared income of rent of building at Mohali amounting to ` 10 lacs. assessment was framed by Assessing Officer vide order dated 31.10.2006 (Annexure A-1) by making addition of ` 7,00,000/- after allowing deduction at rate of 30% under Section 24(a) of Act. Feeling aggrieved, assessee filed appeal before Commissioner of Income Tax (Appeals) [for brevity CIT(A) ]. CIT(A) vide order dated 12.3.2007 (Annexure A-2) dismissed appeal of assessee. Still dissatisfied, assessee filed appeal before Tribunal who vide order dated 29.11.2007 (Annexure A-3) allowed appeal and set aside order of CIT(A) and directed Assessing Officer to delete impugned addition of ` 7,00,000/- made on account of income from house property. Hence, present appeal. 3. Learned counsel for revenue-appellant submitted that Tribunal was in error as unrealized rent was to confirm to requirements as laid down under Rule 4 of Income Tax Rules, 1962 (for brevity Rules ) which have been made in pursuance to GURBACHAN SINGH 2015.11.17 17:06 I attest to accuracy and authenticity of this document High Court Chandigarh ITA No. 451 of 2008 -3- Explanation to Section 23 of Act. In support of his contention, learned counsel has relied upon judgments in D.C. Anand and sons v. Commissioner of Income Tax, New Delhi (1981) 131 ITR 77 (Del) and D.M. Vakil v. Commissioner of Income Tax (1946) 14 ITR 298 (Bom). 4. On other hand, learned counsel for assessee supported order passed by Tribunal. 5. After hearing learned counsel for parties, we do not find any merit in appeal. 6. solitary question that arises in this appeal is whether rent of building at Mohali amounting to ` 10 lacs was receivable by assessee in this year or not? 7. It would be expedient to refer to Explanation to Section 23 of Act, which reads thus:- 23. Annual value how determined.- (1) For purposes of Section 22, annual value of any property shall be deemed to be- (a) sum for which property might reasonably be expected to let from year to year; or (b) Where property or any of property is let and actual rent received or receivable by owner in respect thereof is in excess of sum referred to in clause (a), amount so received or receivable; or (c) Where property or any part of property is let and was vacant during whole or any part of previous year and owing to such vacancy GURBACHAN SINGH 2015.11.17 17:06 I attest to accuracy and authenticity of this document High Court Chandigarh ITA No. 451 of 2008 -4- actual rent received or receivable by owner in respect thereof is less than sum referred to in clause (a), amount so received or receivable: Provided that taxes levied by any local authority in respect of property shall be deducted (irrespective of previous year in which liability to pay such taxes was incurred by owner according to method of accounting regularly employed by him) in determining annual value of property of that previous year in which such taxes are actually paid by him. Explanation For purposes of clause (b) or clause (c) of this sub-section, amount of actual rent received or receivable by owner shall not include, subject to such rules as may be made in this behalf, amount of rent which owner cannot realise. XX XX XX 8. As per aforesaid Explanation, amount of rent which owner cannot realize is not to be included in clause (b) or clause (c) of sub-section (1) of Section 23 of Act for determining amount of actual rent received or receivable by owner. 9. Tribunal relying upon Section 25AA of Act had held that unrealized rent could not be taxed in year in question but would fall for taxation in year it is so realized even if assessee may not be owner of property in that previous year. We do not find any infirmity in approach of Tribunal as according to Section 25AA of Act as well, unrealized rent cannot be taken to be GURBACHAN SINGH 2015.11.17 17:06 I attest to accuracy and authenticity of this document High Court Chandigarh ITA No. 451 of 2008 -5- taxable in hands of assessee under head income from house property when it is not realizable. 10. Learned counsel for revenue had referred to Rule 4 of Rules. From perusal of orders passed by Assessing Officer, CIT(A) and Tribunal, we notice that no aid was taken by Assessing Officer either in his order or before CIT(A) or Tribunal from said rule. However, no argument was raised based on Rule 4 of Rules and, therefore, no reference was made by Tribunal to Rule 4 of Rules. Moreover, revenue could not refer to any material on record to show that assessee was ever confronted to establish requirements of Rule 4 of Rules to claim benefit of unrealized rent. Accordingly, substantial question of law claimed on that basis does not arise. 11. Adverting to judgments in D.C. Anand and sons and D.M. Vakil's cases (supra) relied upon by learned counsel for appellant-revenue, it may be noticed that principle of law enunciated therein, is well recognized, however, in view of findings noticed hereinbefore, no benefit can be derived by revenue from aforesaid pronouncements. 12. In view of above, there is no merit in instant appeal and same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 19, 2015 (RAMENDRA JAIN) gbs JUDGE GURBACHAN SINGH 2015.11.17 17:06 I attest to accuracy and authenticity of this document High Court Chandigarh Commissioner of Income-tax, Chandigarh-II v. M/s Punjab State Civil Supplies Corporation Ltd
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