TaxTMI 
TaxTMI 
2017 (2) TMI 805
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.... No. 2, Prabhat Nagar, Patel Estate Road, Jogeshwari (West), Mumbai. The assessee is engaged in the business of editing and Telecine of films and studio. It is also engaged in leasing out its properties. The assessee has given some portions of its building to two companies named M/s. Rem Nord Research Laboratories Pvt. Ltd. and M/s. Visage Studio. The assessee had given 18400 square feet to M/s. Rem Nord Research Laboratories Pvt. Ltd. at a rental rate of Rs. 16 per square feet. The assessee had also received interest free security deposit of Rs. 2.5 crores from the above said concern. M/s. Visage Studio was given 17500 square feet on the terms and condition that 50% of gross receipts earned by way of hiring of studio would be collected as rent by the assessee. The assessee declared rental income of Rs. 88,09,375/- from M/s. Visage Studio, being its share from hiring income. The assessing officer noticed that the above said amount of Rs. 88,09,735/- was arrived at after deducting assessee's share in Commission expenses of Rs. 12,60,000/-. The AO took the view that the agreement entered between the assessee and M/s Visage Studios does not provide for deduction of Commission expenses....
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....xpenditure on the reasoning that they are not related to earning of house property income or editing income. 9. In the appellate proceedings, the learned CIT(A) confirmed determination of rental income from M/s. Visage Studio and also disallowance of expenses. With regard to rental income determined in the case of M/s. Rem Nord Research Laboratories Pvt. Ltd., the learned CIT(A) held that the Assessing Officer should have determined rental income as per agreement entered between the assessee and M/s Rem Nord Research and not on the basis of rental income earned from M/s Visage studios. Accordingly he deleted the addition made by the Assessing Officer. Aggrieved by the decision taken by the learned CIT(A), both the parties are in appeal before us. 10. We shall first take up the appeal filed by the assessee. The first issue relates to the determination of rental income receivable from M/s Visage Studios. The assessee has shown net receipt of Rs. 88,09,675/- as its share of income from leasing of studios. There is no dispute with regard to the fact that the studios were rented out by M/s Visage Studios only and not by the assessee, meaning thereby the gross income from renting of st....
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....is no misunderstanding between the parties on the terms and conditions of the agreement, in our view, the tax authorities may not be justified in interpreting the agreement in a different manner. As contended by Ld A.R, the assessing officer has not brought any material on record to show that there was suppression of share of income. It is also not the case of the AO that the rent received from M/s Visage studio was less than the fair market value. 14. In view of the above, we are unable to agree with the view taken by Ld CIT(A) as well as the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the enhancement made by him. 15. The next issue contested by the assessee relates to the disallowance of expenses claimed under the head Security charges, Depreciation and Interest. The Ld A.R submitted that the assessee is a private limited company and these expenses have been incurred in the normal course of running the company. He further submitted that similar expenses claimed in the past have been allowed by the AO. 16. We heard the rival contentions and perused the record. There is no dispute with regard to the fact that the assessee ....
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.... one was entered on 2/12/2006 upto 31/3/2010. The Ld. AO during the course of the assessment proceedings find that the property which was given on leave and license agreement to M/s. Visage Studioz in the year 2005 carries a very high rental value as compared to one that has been given to Ram Nord Research Laboratories P. Ltd. Accordingly, the Ld. AO determined the rental value of the property at the rate of Z.18400 per square and calculated the rent receivable on the basis of such computation and made the addition accordingly. 3.3.2 The finding of the Ld. AO that rear part of the property carries a high rental value in the year 2005 and the rate received by the assessee should be applied ipso facto to the property given on leave and license basis in the year 1995 cannot be held as logical. Firstly, the property that was given on leave and license in the year 1995 was on the basis of prevailing rent at that point of time and the department had accepted that valuation. Secondly, the licensee in the first case is using the property for its own business while the Visage Studioz is giving the property on further hire basis to other parties for a short duration by providing sets and o....
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....;ble full bench of Delhi, while relying on the decisions of CIT vs. Asian Hotels Ltd. (2008) 215 CTR (Del) 84, CIT vs. J.K. Investors (Bombay) Ltd. (2001) 168 CTR (Born) 189, IT vs. Satya Co., Ltd. (1997) 140 CTR (Cal) 569 and Kashi Prasad Kataruka vs. CIT 1976 CTR (Pat) 95 has held as under :- "Operative words in s. 23(1)(a) are "the sum for which the property might reasonably be expected to let from year to year". These words provide a specific direction to the Revenue for determining the 'fair rent'. The AO, having regard to the aforesaid provision is expected to make an inquiry as to what would be the possible rent that the property might fetch. Thus, if he finds that the actual rent received is less than the 'fair/market rent' because of the reason that the assessee has received abnormally high interestfree security deposit and because of that reason, the actual rent received is less than the rent which the property might fetch, he can undertake necessary exercise in that behalf However, by no stretch of imagination, the notional interest on the interest-free security can be taken as determinative factor to arrive at a 'fair rent'. Provisions of s. 2....