2018 (2) TMI 1584

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...., assessee is owner of a building which was let out to various persons on commercial basis. The ground floor and first floor are leased out to various companies for their showrooms, whereas assessee has second, third and fourth floors which are useful for hotel business alone. Assessee has offered the rental receipts to an extent of Rs. 1.07 Crores and also other receipts like rents on furniture and fixtures in the hotel and interest etc. to an extent of Rs. 11,85,241/-. Against this, assessee has claimed various expenditures in the P&L A/c. However, in the income tax computation, assessee has offered the rent received under the head 'income from house property' and other receipts under the head 'business', claiming various expenditures. AO....

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....d on the decision of the Hon'ble High Court of Bombay in the case of CIT Vs. Tip Top Typography [368 ITR 330] (Bom) and other cases. 4. Ld.CIT(A), however, did not consider any of the arguments and agreed with the AO by stating as under: "6. I have carefully considered the facts of the case, the assessment order and the submissions made by the appellant. The appellant in the original computation of income and revised computation of income disclosed the rental income and after claiming depreciation and expenses as per Profit & Loss account arrived at business loss. On careful verification of the facts of the case, assessment order, profit & loss account and balance sheet of the appellant, I am also in agreement with the Asses....

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....ectors in this company. 7. Ld.DR, however, submitted that the reduction in rent is not proper and further AO has the power to arrive at the annual value of building let out and relied on various case law including CIT Vs. Dr. K.M. Mehaboob (75 taxmann.com 254)] (Kerala) and CIT Vs. Parasmal Chordia [233 ITR 147] (Madras) to submit that in a case where fair rent was not fixed, AO has the power to arrive at the annual rent receivable by assessee with reference to Section 23(1). It is also submitted that where buildings are let out to firms or companies in which they are interested, AO has power to redetermine the annual value [CIT Vs. Dr. K.M. Mehaboob (75 taxmann.com 254)] (Kerala) (supra). 8. In response the Ld. Counsel submitted that....

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....to redetermine the annual value. Moreover, the said party is an interested party, being a unit having common persons. Whether the said firm is interested party from the beginning or became a sister concern only during the year is not on record. As seen from the order of the AO, he has not considered the issue in the correct perspective. The building is subject to let out only to a hotel business as it contains rooms and also restaurant. The ground floor and first floor building, having road frontage and using for show room purposes, may fetch a higher rent but that does not indicate that all the floors in the building will fetch the same rent. Therefore, in our view, adoption of Rs. 100/- per sq. ft., is not only arbitrary but also without ....