TaxTMI 
TaxTMI 
2014 (4) TMI 549
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....Tamrind India Pvt. Ltd. (Akar Capital Advisory Pvt. Ltd.), w.e.f., 01.11.2007, on a monthly rent of Rs.9,00,600/-. The tenure of the agreement was upto 31.10.2010, with both the parties constrained to determine the agreement prior to 31.10.2009, i.e., before the expiry of 24 months. The same was accompanied by an interest free deposit of Rs.1,08,07,200/-, which was to continue during the license period, liable to be refunded on the handover of the vacant possession of the rented premises. The assessee returned gross rent at Rs.54,26,882/- on the basis of the rent received. The Assessing Officer (A.O.), however, applied the contracted rate for the period of 12 months, further adding notional interest @ 8% (p.a.) on the security deposit, assessing the gross rent at Rs.1,16,71,776/-. The assessee had further claimed deduction for Rs.66,55,662/- on account of municipal taxes paid, of which Rs.65,74,551/- related to an earlier period, i.e., from 2001 to 2007. The same was, therefore, allowed only for the period pertaining to financial year 2007-08, i.e., Rs.42,616/-. 3.2 The assessee challenged the assessment on all counts. The ld. CIT(A) decided the same thus: Issue No. 1 - De....
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....ree security deposit, the assessee would have fetched higher amount of rent and the assessee has accepted the security deposit in order to pay the huge amount of municipal taxes of earlier years and has compromised for lesser rate of rent to compensate the taxes from security deposit. (iv) On the facts and in the circumstances of the case and in law, whether the ld. CIT(A) is right in directing the AO to allow deduction of property tax of earlier years paid without appreciating the fact that the assessee has not declared any income from the impugned property for the A.Ys. 2002-03 to 2007-08. (v) The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.' 4. We have heard the parties, and perused the material on record. The primary facts, i.e., as stated, being not in doubt or dispute, we shall proceed directly to address and decide the two issues raised by the Revenue for our adjudication. Issue # 1(supra) 4.1 Section 22 of the Act brings to the charge of tax the annual value of a house property of which the assessee is the owner, except where used for the purpose of his business, under the he....
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....sit money, etc. would find reflection in computing the income of the assessee under other heads of income. Reference for the same may also be made to the decision, inter alia, in the case of CIT vs. J. K. Investors (Bombay) Ltd. [2001] 248 ITR 723 (Bom.). No constraint, however, is applicable in arriving at the hypothetical rent u/s.23(1)(a), except, as afore-noted, of it being fair and reasonable in-as-much as the mandate of the provision is to determine the 'fair rent'. That would though not imply adding the notional interest per se, so that it cannot be added as such, as done by the A.O., but being the relevant consideration, duly considered in evaluating the fair rent. Reference in this context may be made to the decision, among others, in the case of Dewan Daulat Rai Kapoor vs. NDMC [1980] 122 ITR 700 (SC), wherein it stands explained that the fair rent is to be arrived at by taking into account all the relevant factors, viz. the location of the property, including the demand and supply position in relation thereto; the rent of similar property in the neighbourhood; cost of construction, the rateable value as worked out by the municipal authorities, etc. The rent im....
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.... by the hon'ble court, even as noted by the A.O. at pgs.3-4 of the assessment order, reproducing the last para of the decision thereat. If the cost of land or the market value of the property let, so that a reasonable return (or yield) on investment could be considered as a reasonable measure of the rent at which the property can reasonably be regarded as let from year to year, we see no reason why the same, i.e., the interest at the normative rate on the deposit money, could not be taken into account in computing the fair rent u/s. 23(1)(a). Reference in this regard may be made to the decision in the case of Emtici Engineering Ltd. vs. Asst. CIT [1997] 58 TTJ 27 (Ahbd.) wherein 8% of the cost was considered as a reasonable measure of annual value. The matter is principally and primarily factual. Why, in a particular case there may be a decline in rent or even constancy therein accompanied by interest-free deposit in spite of the property prices showing an upward trend, so that the rent implication of the said deposit is eminent or patent. In fact, the hon'ble Punjab & Haryana high court, noticing such clear instances, justified the inference of interest @ of 9% as a part o....
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....nt. The relief on account of vacancy would ensue only in scenario 'A'. This is as the rent contractually receivable (i.e., at Rs.100 per month) would under scenario 'B' be less than the fair rental value (@ 110 per month) even in case of non-vacancy. Though this may appear inequitable, it is to be noted that this is a concomitant of the substitution of the erstwhile deduction by way of a vacancy allowance u/s.24 by allowing corresponding relief in computing the annual value (AV) itself. The AV, as explained hereinbefore, seeks to bring to tax the inherent rental capacity of a property, which may or may not bear reflection to the net rent received in the facts of a given case. On the other hand, we may have an instance of a property actually let only for a month (say). As such, where falling under scenario 'A', its AV would stand to be assessed at Rs.110/- as against the fair rent of Rs.1,200/-. It is also trite that hardship in a particular case is no reason for not observing the clear mandate of the provision. The hon'ble court in the case of Vivek Jain vs. Asst. CIT [2011] 337 ITR 74 (AP), as well as the tribunal in cases such as Ramesh Chand vs. IT....
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....e lower authorities. The same is relevant in-as-much as no annual value could possibly be assessed u/c. IV-C of the Act if the subject property (or part thereof) was being used or retained for the purposes of her business by the assessee. If so, municipal tax could not be factored in computing the AV for the current year. Our second observation in the matter is that the demand may include, besides tax, interest or other charges as well, having been raised for several years together. The proviso to section 23, however, speaks only of taxes levied by a local authority. The composition of the demand raised being not on record, the same warrants being confirmed only in respect of municipal tax as included therein, i.e., to the extent of 50% in-as-much as only 50% of the demand has been actually paid. The assessee could though press the other charges, if so desired, under any other provision of law relating to the assessment of income as income from house property. Accordingly, subject to these verifications by the A.O., we confirm the order of the ld. CIT(A). Further, we find that the amount stands paid by the assessee in protest on the directions of the hon'ble court. The sa....