2017 (6) TMI 548 - AT - Income Tax

Tribunal dismisses Revenue's appeal on rent addition under Income Tax Act

The Tribunal dismissed the Revenue's appeal against the deletion of the addition made by the Assessing Officer under section 23(1)(a) of the Income Tax ... Income from house property - Addition of ALV under section 23(1)(a) - Held that:- It cannot be denied that there is no relationship whatsoever between the Licensor and the Licensee, viz. the Induslnd Bank in the present case, nor is there any finding that there are any suspicious circumstances or any fraud or collusion surrounding the Leave & License arrangement entered into by the assess. That being so, the case of Tip Top Typographics [2014 (8) TMI 1002 - BOMBAY HIGH COURT] as well as of Moni Kumar [2011 (3) TMI 497 - DELHI HIGH COURT] and the ratio thereof cited approvingly by the Hon’ble High Court in the assessee's own case, covers the facts of the assessee's case. On the facts of the present case, the conditions precedent to resort to enquiry or adoption of the prevailing rateable value are absent. In view of the same, and considered opinion, the rent actually received by the appellant shall be taken to be the actual rent for tax purposes. Respectfully following the Hon'ble Bombay High Court in appellant one's case order the estimation of rent done by the AO is not justifiable one. Accordingly, direct the AO delete the addition - Decided against revenue. Issues Involved:Appeal against deletion of addition made by AO under section 23(1)(a) of the Income Tax Act, 1961.Analysis:1. The Revenue appealed against the CIT(A)'s decision to delete the addition made by the Assessing Officer (AO) under section 23(1)(a) of the Income Tax Act. The Revenue raised two grounds challenging the CIT(A)'s decision. The first ground questioned the correctness of deleting the addition of a specific amount under 'Income from House Property' based on the High Court order in the assessee's previous cases. The second ground challenged the fair rent determination by the AO under section 23(1)(a) of the Act.2. The assessee's representative argued that the CIT(A) relied on the Bombay High Court's consistent decisions in the assessee's previous cases and allowed the claim based on those decisions. The High Court emphasized that the determination of Annual Letting Value should only occur in cases involving fraud, collusion, or attempts to manipulate rent. The representative cited the Tip Top Typography case to support the argument against adopting rateable value over actual rent received.3. The Tribunal reviewed the High Court's decision in the assessee's previous case and noted the absence of any suspicious circumstances, fraud, or collusion in the current case. Consequently, the Tribunal found that the AO's estimation of rent was not justifiable. Following the High Court's decision, the Tribunal directed the AO to delete the specific addition, thereby allowing the appeal in favor of the assessee.4. During the appeal hearing, the Departmental Representative (DR) failed to challenge the CIT(A)'s findings. Consequently, the Tribunal, in line with the Bombay High Court's decision, dismissed the Revenue's appeal.5. Ultimately, the Tribunal pronounced the order on 09-06-2017, dismissing the Revenue's appeal against the deletion of the addition made by the AO under section 23(1)(a) of the Income Tax Act, 1961.