TaxTMI 
TaxTMI 
2012 (8) TMI 182
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Shadan Educational Society Building hearing MCH No. 6-2-979/1 to 8 and 6-2- 980 adneasuring 3037 sq yds sutyated at Raj Bhavan Rd, Khairtabad, Hyd Rs. 18.50 Lajkhs per month @ Rs. 10/- per sq.feet 2 Page 33 to 36 of annexure A/SES/KHAI/02 22-04- 2006 Smt. Shadan Tahniath w/o Dr. Md Vizarath Rasool Khan -do- 12 floor building bearing MCH NO. 6-2-978, "Azmath Nishan'. Raj Bhavan Rd, Khairtaba3d, Hyd Rs. 18.50 Lajkhs per month @ Rs. 10/- per sq.feet 3 Page 38 to 41 of annexure A/SES/KHAI/02 22-04- 2006 Sh. Md. Saqib Rasool Khan, S/o Dr Md Vizarath Rasool Khan -do- 9 floor building bearing MCH NO. 6-2-977, admeasuring 1200 sq yards, at Raj Bhavan Rd, Khairtabad, Hyderabad Rs. 5.40 Lakhs per month @ Rs. 10/- per sq.feet 4. The above property had been given to the assessee society in the year 1984 wherein the assessee constructed buildings and has been running an educational institution for the minority students. The land offered by Dr. Mohd. V. Rasool Khan and his family members is not as a donation and the said land is not transferred to the society. The land was only offered for construction of the buildings to start educational i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ucational institutes the society over a period, constructed multi-storied complexes, on subsequently acquired plots by Dr. Mohd. Vizarath Rasool Khan and his family members, with its own funds. It is pertinent to mention here that the building owned by Smt. Shadan Tahniath and the plots owned by Dr. Vizarath Rasool Khan, Mohd Sarib Rasool Khan and Mohd Saquib Rasool Khan were never transferred to the Society in any manner. The Society was allowed to enjoy the property from 1984/1991 to 31.03.2006 without any payment of any rent or other benefit to the owners of the properties. The society enjoyed the properties of the owners, free of cost, up to 31.03.2006. It is further submitted that the Society, had an oral understanding with the owners of the land that the society will enjoy the properties for a reasonable period free of cost, by developing its own infrastructure with its own funds, according to its needs and after expiry of a reasonable period the society will have to vacate the properties. In case it is not vacating the properties, the society will be charged with a reasonable rent prevailing in the market. The Society enjoyed the properties of the owners for a period more th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res were developed on the properties with the funds of the Society, therefore, simply assumed that the owners are not eligible for rent. 8. On these properties, the society over a period of time invested the amounts towards construction as under: S. No. Assessment year Amounts spent by the society (Rs.) 1. 1989-90 24,28,069 2. 1990-91 - 3. 1991-92 12,70,292 4. 1992-93 32,12,502 5. 1993-94 49,42,731 6. 1994-95 48,27,658 7. 1995-96 45,98,747 8. 1996-97 - 9. 1997-98 69,00,520 10. 1998-99 57,73,569 11. 1999-00 1,29,15,906 12. 2000-01 24,71,588 13. 2001-02 58,15,892 14. 2002-03 1,01,58,948 15. 2003-04 1,11,11,469 16. 2004-05 32,18,555 17. 2005-06 7,67,500 18. 2006-07 31,00,000 19. 2007-08 - Total 8,35,13,949 9. As per the above statement, the society spent about Rs. 8.35 Crores and odd and enjoyed the properties perpetually over a period of 22 years without paying any rent. This amount was claimed as application of funds by claiming the deductions as available in the I.T. Act. According t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... while deciding the writ for verifying whether the rent paid is reasonable or not observing that "it is only if the rent paid is more than the prevailing market rates can the recipient of the rent/rental advance be said to have benefited thereby." A copy of the judgment is placed on record. Accordingly it was requested to allow the expenditure of Rs. 5,02,80,000/- paid to the owners of the properties towards rents. 11. According to the assessee, the Assessing Officer rejected the claim of expenditure only on the basis that the investment for the construction is made by the society, therefore, assumed that the claim of payment of rent is not allowable. The fact of ownership of the land and also the fact of non- payment of rent for over a period of 1989 to 31.03.2006 and from 1.4.1997 to 31.3.2006 was brought to his notice, but, the issue was not examined. It was also submitted that the value of the property on which rent is paid is about Rs. 80 Crores. The reasonability of the rent can also be decided taking into consideration of the rent being paid by the tenants in the adjacent buildings. The following are the facts with regard to value of the property, whether a reasonable ren....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rasool Khan, Mohd. Mohd. Saquib Rasool Khan and Mohd. Aazib Rasool Khan. 1196 Rs. 25,00,000 26.09.1994 9 floors building having 54000 sft built up area. 5,40,000 3. Property at 6-2-90, Khairatabad, Hyderabad purchased from Sri Omprakash Agarwal & Geetha Bai by Dr. Mohd. Vizarath Rasool Khan, Mohd. Mohd Sarib Rasool Khan. 2262 Rs. 70,00,000 02.11.1993 Cellar + ground + 10 floors, + Malgies, built up area 185000 sft. 18,50,000 Property (8 Malgies) at Rajbhavan Road, bearing MCH Nos. 6-2- 979/1,2,3,4,5,6,& 7, Khairatabad, Hyderabad purchased from Smt. Kabeerunnisa, Mtullah Airaj and Smt. M. Padmavathi by Mohd. Sarib Rasool Khan 377 Rs.17,00,000 1.1.1994 21.7.1995 21.11.1996 13. He submitted that the society had enjoyed the free lands for constructing the educational institution and also in position to cater the needs of many students since 1984. The society grew by leaps and bounds and the society which was started as a small educational institution; now it is a big institution to cater education in various fields like engineering, medicine, bachelor of education and various other subjects. Since 1984 the society ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... TVS Showroom right side. 4. Buildings facing the main road starting from Hotel Ayodhya junction H.No. 6-2030 Petrol Bunks both sides. Khairatabad Junction, right side ICICI Bank left side Institute of Engineering. 5. Lakdikapool X Road, Dwaraka Hotel Both sides. Home Science College and any other buildings facing main roads, H. No. 6-1- 87 Both sides Lakidikapool x Roads Both sides Jalavihar Both sides (BPPA) Dr. Car (HUDA). 6. Nirankari Bhavan Junction both sides. 7. Road facing Lunmibi Park Both sides. 8. NTR Park Back side CIRCLE NO. X Zone No. IV Sub-Zone No. IV-B Localities/Areas included in zone/sub-zone S. No. Number & Name of the Locality Door Nos./Land Marks From To Sub-Zone-IV-B 2. 050-Khairatabad 1. Khairatabad Post Office (H. Nos. 6- 1-1067) (both roads) Railway Gate, Khairatabad. 2. Dwaraka Hotel (H.No. 6-1-1061) (Both side road) Khairatabad Library; H. No. 6-1-360 3. Big Bass Hotel, Opp. Shadan College (either side) Chintal Basthi, Khairatabad and any other buildings internal roads excluding main roads of Zone IV-A. CIRCLE NO. X Zone No. IV Sub-Zone No. IV-C Localities/Areas included in zone/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 28.80 25.60 6.40 4.80 - 5.20 4.00 2.40 2. Ground and 1st Fl. 9.60 4.80 3.00 12.00 6.00 4.00 9.60 4.30 2.90 12.00 9.00 6.00 40.00 36.00 32.00 8.00 6.00 - 6.50 5.00 6.40 3. Other Floors 8.60 4.10 2.50 10.80 5.10 3.40 8.60 3.70 2.50 10.00 7.30 5.10 36.00 30.60 27.20 7.20 5.50 - 5.50 4.30 2.50 4. Parking 2.00 1.80 - 2.25 1.80 - 2.00 1.80 - 2.00 1.80 - - - - 2.00 1.80 - 2.00 1.60 - Madras Terraced or Jackarch roofed or stone slabs or slates roofed buildings 4.80 1.50 1.50 6.00 3.00 2.00 4.80 1.50 1.50 7.50 5.50 4.00 25.00 22.50 25.00 4.00 - - 3.50 2.50 1.50 Mangalore tiled buildings or asbestos roofed or GI roofed buildings 3.00 1.50 1.00 3.50 2.00 1.50 3.00 1.50 1.00 6.00 4.50 3.00 - - - 3.25 - - 2.50 2.00 1.00 Country tiled building 2.50 1.00 0.50 - - - 2.50 1.00 0.50 - - - - - - - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or determining the rent. According to AR, considering the value of property, the payment of rent at Rs. 5.02 cores is very reasonable as it worked out to Rs. 6.5% per annum compared to the value of the property. It is also not disputed that this amount is subject to TDS u/s. 194-I of the Income-tax Act and the recipients have paid the tax on it. It is also brought to our notices that for the A.Y. 2008-09 the Assessing Officer has himself allowed the claim of rent vide assessment order dated 31st December, 2010. It is also brought to our notice that in the building situated adjacent to this building, PCH-E Zone in the ground floor is paying Rs. 66 per sq. ft. from the year 2007. In the same building the top floor was rented at Rs. 25 per sq. ft. On the other side to the assessee, Indian Overseas Bank is functioning in the ground floor which is paying Rs. 35 per sq. ft. since 1995. In the same building the other tenants at 6th floor are paying Rs. 50 per sq. ft. since 1988. Considering the above facts, in our opinion, the property being situated at the heart of the city, charging of rent at Rs. 10 per sq. ft. is very reasonable and there is no basis for the lower authorities to reduc....