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TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 401
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.... by assessee. On further examination, AO noticed that as per the lease agreement dated 26/09/2001 effective from 01/04/2001, assessee is to receive licence fee of Rs. 32,40,000 for utilization of leased premises and furniture & fittings, out of which, Rs. 16,20,000 was towards premises and balance amount towards furniture & fittings. He further noticed that total built up area of licensed premises was 1,35,000 sq.ft. He also noticed that as per the lease agreement, in addition to the licence fee, licensee/lessee shall provide a refundable deposit of Rs. 2 crores to assessee. AO was of the view that as assessee derives benefit out of interest free deposit , it should form part of the annual letting value of the property. He noted that otherwise, assessee would have paid interest at substantial rates had it not been an interest free deposit in pursuance to the lease agreement. Working out the interest deemed to be received by assessee at 12% per annum amounting to Rs. 24 lakhs, AO computed ALV of the leased premises at Rs. 40,20,000 as against Rs. 16,20,000 declared by assessee. Accordingly, AO computed the income from house property at Rs. 28,14,000 after allowing statutory and othe....
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....ixed at Rs. 97,34,832 with effect from 01/04/2005. Learned CIT observed, if the interest of Rs. 22 crore is considered, ALV will be much higher, AO having ignored the deposit of Rs. 22 crores and the GHMC order fixing the ALV at Rs. 97,34,832, order passed by AO is erroneous and prejudicial to the interests of revenue. In response to the fresh query raised by learned CIT, assessee submitted that as AO has examined the issue of interest free deposit while fixing ALV, learned CIT cannot reconsider the issue again. It was submitted by assessee that as per the lease agreement, the area leased out is only 1,35,000 sq.ft. whereas in the GHMC order, ALV has been fixed on 2,34,423 sq.ft. Further elaborating, it was submitted by assessee that certain area was reclaimed by assessee and converted into hospital area. Assessee recomputed the proportionate ALV on 1,35,000 at Rs. 56,06,115 and submitted that ALV fixed by AO at Rs. 40,20,000 was short by only 16,06,115, which according to assessee, represents the rent received on furniture and fixtures. Subsequently in course of proceeding before learned CIT, assessee submitted loan agreement dated 25/06/2002 and contended that as the loan agreeme....
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....far as second issue whether the amount received towards furniture and fixtures is to be treated as business income, learned CIT observed that AO has totally gone wrong while treating it as business income, hence, the decision of AO is not in accordance with law, as such, assessment order is erroneous and prejudicial to the interests of revenue. Relying upon various decisions, learned CIT finally concluded that AO having not considered the issues referred to by him in the proceeding u/s 263, assessment order is erroneous and prejudicial to the interests of revenue. Accordingly, he set aside the assessment order by issuing the following directions to AO: "8. The AO shall duly consider all the case laws referred to above and also take into consideration the deposit of Rs. 22 crores in fixing the ALV including the GHMC valuation and reframe the assessment. The fair rental value cannot be less than the municipal value fixed. He should tax the income relating to fittings and fixtures under the head other sources and not as business income. After giving necessary opportunity, he is to reframe the assessment keeping in view the above directions and case laws referred above." 6. Being agg....
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....by GHMC in its order dated 25/05/07, ALV computed in respect of 1,35,000 sq.ft., will be Rs. 56,66,601 whereas the AO has fixed ALV even at much higher figure. In these circumstances, assessment order passed cannot be considered to be erroneous and prejudicial to the interests of revenue. In support of such contention, ld. AR relied upon a decision of Hon'ble Delhi High Court, Full Bench, in case of CIT Vs. Moni Kumar Subba, 333 ITR 38 (Del.). 10. Ld. DR on the other hand submitted that as assessee has received interest free deposit of Rs. 22 crores, which has been completely ignored by AO while completing assessment, assessment order is not only erroneous but also prejudicial to the interests of revenue. Ld. DR submitted that even AO has also failed to examine the valuation made by GHMC, which is much higher than the ALV fixed by AO. Therefore, as there is evidence to show that ALV fixed by AO is much less than the actual ALV as per the evidence brought on record, assessment order has been rendered erroneous and prejudicial to the interests of revenue and ld. CIT has correctly revised it u/s 263 of the Act. 11. We have heard the parties and perused the orders of the departmental....
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.... 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; or c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable; Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation-For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot r....
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....ay also record that even the Bombay High Court in the case of CIT vs. J.K. Investors (Bombay) Ltd. (2001) 168 CTR (Bom) 189 : (2001) 248 ITR 723 (Bom) categorically rejected the formula of addition of notional interest while determining the 'fair rent' in the following manner : "..........Before concluding we may point out that under s. 23(1)(b), the word 'receivable' denotes payment of actual annual rent to the assessee. However, if in a given year a portion of the actual annual rent is in arrears, it would still come within s. 23(1)(b) and it is for this reason that the word "receivable" must be read in the context of the word 'received' in s. 23(1)(b). In the light of the above interpretation, notional interest cannot form part of the actual rent as contemplated by s. 23(1)(b) of the Act. We once again repeat that whether such notional interest could form part of the fair rent under s. 23(1)(a) is expressly left open." 14. It is, thus, manifest that various Courts have held a consistent view that notional interest cannot form part of actual rent. Hence, there is no justification to take a different view than what has been stated in Asian Hotels Ltd [201....