Judgment:
The appeals are filed by the revenue and Cross Objections by the assessee. They are directed against a consolidated order of CIT (A) dated 13-10-2000 for assessment years 1997-98 and 1998-99. Grounds of appeal filed by the revenue for both the years are identical except difference in figure mentioned in ground No. 1. The figure mentioned in ground No. 1 for assessment year 1998-99 is Rs. 4,13,660. The grounds of appeal filed by the revenue for assessment year 1997-98 read as under : "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting addition of Rs. 4,19,068 made by the assessing officer.
2. (a)On the facts and in the circumstances of the case and in law, the learned CIT (A) failed to appreciate that to determine the ALV the nature of payments which have to be deducted from the rent received/receivable are specified in section 23 and therefore assessing officer has rightly deducted the municipal taxes and did not deduct other expenses.
(b) On the facts and in the circumstances of the case and in law, the learned CIT (A) erred to appreciate that the assessee is not entitled for any deduction other than what have been specifically mentioned in section 24 and therefore assessing officer has rightly disallowed other expenses such as maintenance charges, lease rent etc.
3. On the facts and in the circumstances of the case and in law, the decisions followed by the CIT (A) are distinguishable on facts and therefore they are not applicable to the instant case." In the Cross Objections filed by the assessee, as stated by the learned counsel of the assessee that these are only supporting the order of CIT (A). In the present case, the assessee has been assessed as an Association of Persons. Its source of income is rent earned by it from the Bank of India in respect of a premises situated at Nariman Point, Bombay. The computation as submitted by assessee for the respective years as per pages 19 & 21 are as under To be taxed in hands of Co-owners income as shares are determined assessable income As against the above computation, the assessing officer computed the income of assessee as under The computation of income made by the assessing officer was agitated in the appeals filed before the CIT (A) who has deleted the addition. The revenue is aggrieved hence in appeal. As mentioned earlier, the C.Os have been filed to support the order of CIT (A).
The above-mentioned property is subject to rent agreement entered into between the assessee and Bank of India. The copy of the said agreement is in the shape of letter issued by the Bank of India dated 2-6-1981 which is placed at pages 16 to 18 of the paper book. The relevant clauses are 3, 4 and 14 which are reproduced below : "(3) Rent Rs. 13.90 per sq.ft. per month for the 3rd floor area inclusive of ground rent, property tax, municipal government and other rates, taxes, cesses and assessments and all other outgoings but excluding water and electricity charges. Terrace area on the 3rd floor free of any charges whatsoever.
(4) Taxes and All existing municipal and government and other rates, Outgoings : taxes, cesses, assessments and outgoings to be borne by you. Any further increase in taxes and any new taxes, rates, assessments in respect of premises to be leased to us after the date of occupation by us of the premises will be borne by us. You will pay all outgoings and increases therein payable to the Society or to any other party.
(14) Car Parking: You shall also provide reserved parking space to us for Facility : 2 cars against monthly charges to be mutually agreed." A chart has also been produced before us to show that against the computation made by the assessee, what is the effect of order of assessing officer and CIT (A). For the sake of convenience, the said chart in respect of both the years is reproduced below : At the time of hearing, the learned Departmental Representative contended that the assessing officer was right in disallowing car parking charges, water charges, municipal and other charges paid by the bank to the assessee and had rightly computed the income of the assessee. As against the same, the learned CIT (A) has wrongly allowed the claim of the assessee as there is no provision in the Income Tax Act which permits such allowance.
On the other hand, the learned authorised representative of the assessee referred to the agreement entered into between assessee and the bank and contended that excluding the existing municipal and government and other rates, taxes, cesses, assessments and outgoings, any increase thereto was the liability of the bank as per clause 4 of the agreement. He further referred to clause 14, according to which, car parking facility against monthly charges also to be provided by assessee to the bank. He contended that all the amounts disallowed by the assessing officer were reimbursement of the amount paid by the assessee in respect of property rented out to the bank. All these were outgoings, therefore, allowable and has rightly been held allowable by the CIT (A). He further pleaded that the rent received by the assessee in the present case is more than the annual letting value fixed by Municipal Corporation/standard rent. Therefore, the actual rent being in excess of Municipal Corporation/standard rent, all the expenses and outgoings have to be excluded from the rent receivable and the net of the amount should be considered to be the income of the assessee. This only has been done by CIT (A), therefore, the order of CIT (A) should be upheld.We have carefully considered the rival submissions in the light of material placed before us. It is the contention of the assessee that the actual rent received by it is in excess of fair rent or standard rent under the rent control legislation. If this contention of assessee is correct, then the house property income has to be determined under the provisions of section 23(1)(b), otherwise the house property income has to be assessed under section 23(1)(a). Section 23(1)(a) & (b) being relevant provisions applicable for deciding the present controversy are reproduced below : "23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be (a) the sum for which the property might reasonably be 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;" It will be relevant to reproduce below the observations of jurisdictional High Court in the case of CIT v. J.K. Investors (Bombay) Ltd. (2001) 248 ITR 723 (Bom) relating to the above provision of Income-tax : "In this matter, we are required to consider the scheme of taxation of income from house property. Section 22 says that the measure of income from house property is its annual value. The annual value is to be decided in accordance with section 23. Sub-section (1) of section 23, by virtue of the amendment with effect from the assessment year 1976-77, has two limbs, namely, clauses (a) and (b). Clause (a) states that the annual value is the sum for which the property might reasonably be expected to be let from year to year. Clause (b) covers a case where the property is let and the actual rent is in excess of the sum for which the property might reasonably be expected to be let from year to year. In other words, insertion of clause (b) by the Taxation Laws (Amendment) Act, 1915, covers a case where the rent for a year actually received by the owner is in excess of the lawful rent which is known as the fairrent or standard rent under the rent control legislation. The provisions of section 23(1)(a) of the Income Tax Act apply both to owner-occupied property as also to property which is let out and the measure of valuation to decide the annual value is the standard rent or the fair rent. However, section 23(1)(b) only applies to cases where the actual rent received is more than the reasonable rent under section 23(1)(a) of the Act and it is for this reason that section 23(1)(b) contemplates that in such cases the annual value should be decided on the basis of the actual rent received." It is not disputed by revenue that only section 23(1)(b) is applicable to the present case as it is also not the case of assessing officer as he has computed the house property income as per actual rent received.
In this view of the situation, if the outgoings in respect of which additions have been deleted by CIT (A) were the liability of the assessee, the same should be excluded from the assessable income as the net amount only can be considered which is received by the assessee or is receivable by the assessee as per express provisions of section 23(1)(b). However, this fact has not been ascertained that whether the amounts claimed by the assessee and disallowed by the assessing officer in respect of car-parking, water charges and municipal charges and other charges were the actual liability of the assessee or not. This factual aspect has to be examined as per the terms of agreement as well as keeping in view the factual aspect of the matter. We, therefore, consider it necessary to restore these appeals as well as Cross Objections to the file of assessing officer to determine the fact that whether expenses claimed by the assessee on account of car parking, water charges, municipal charges and other charges (as shown in the charts framed by the assessee and reproduced above) were the liability of the assessee and were outgoings from the assessees rental income shown in respect of the property. If it is so, the same are rightly allowed by the CIT (A) as the assessee is entitled to get the same. The assessing officer will determine the house property income of the assessee in accordance with the above directions. We may point out here that the learned authorised representative. of the assessee also accepted that for the purpose of examining this factual aspect, the matter may be restored to the assessing officer. We order accordingly.
The appeals filed by the revenue and Cross Objections filed by the assessee are considered allowed for statistical purposes.