2018 (1) TMI 937 - AT - Income Tax

Appellate Tribunal Upholds Deletion of Rent Estimation; CIT(A) Decision Supported by Law

ITO WD 1 (2) (2) Mumbai Versus Shri Sudheer Omprakash Bahl

The Appellate Tribunal upheld the deletion of the estimation of rent made by the Assessing Officer under section 23 of the Income Tax Act. The Tribunal ... Estimation of rent made by the AO - annual rental value of the said flat u/s. 23 - 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 appellant. That being so, the case of Tip Top Typographies cited by the appellant's representative as well as of Moni Kumar Subba, and the ratio thereof cited approvingly by the Hon'ble High Court in the appellant's own case, covers the facts of the appellant'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 in considered opinion, the rent actually received by the appellant shall be taken to be the actual rent for tax purposes. - Decided against revenue. Issues:1. Deletion of estimation of rent by the AO.Detailed Analysis:The appeal before the Appellate Tribunal ITAT Mumbai involved the grievance of the Revenue regarding the deletion of the estimation of rent made by the Assessing Officer (AO). The appellant, who is the proprietor of a restaurant and owner of a flat in Mumbai, had let out the flat to a bank with certain terms and conditions. The AO determined the Annual Value of the flat under section 23 of the Income Tax Act to be a specific amount, which was charged to tax. However, the CIT(A) deleted this addition based on previous judicial decisions and observations. The CIT(A) considered the appellant's contentions, previous judicial rulings, and the material on record. The CIT(A) relied on the decision of the Hon'ble ITAT in the appellant's own case for previous assessment years, where it was held that notional interest on an interest-free deposit cannot be the sole factor in determining fair rent under section 23(1)(a) of the Act.The CIT(A) further noted that the AO had not appropriately considered comparable instances of rent in the locality while determining the fair rent. The CIT(A) determined the fair rent based on a comparable case and concluded that the AO's estimation was not in accordance with the law. The CIT(A) also referred to the decision of the Bombay High Court in the appellant's case for earlier assessment years, where it was held that the Revenue cannot reject the rent determined by the parties without cogent and satisfactory material indicating fraud or collusion. The CIT(A) found that there was no such evidence in the present case and hence, upheld the deletion of the addition.The Appellate Tribunal observed that the CIT(A) had correctly followed the order in the appellant's own case for previous years and that the appeal filed by the Revenue against the Tribunal's order had been dismissed by the High Court. Therefore, the Tribunal found no reason to interfere with the CIT(A)'s decision and dismissed the appeal of the Revenue. The Tribunal pronounced the order in the open court on 18/01/2018.