AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1710
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....ct of which completion certificate is also not received from local municipal authorities is assessable under the head 'Income from House Property'. 3. That without prejudice to the ground No. (2) above the ld. CIT (A) is wrong and has erred in law in not accepting plea of the appellant company that 2355.50 sq. ft. area of fourth floor was unauthorized constructed area and therefor cannot be let out. 4. That the ld. CIT (A), is further wrong and has erred in law in arbitrarily working out average monthly rent of Rs. 77.22 sq. ft. in respect of unsold area and thereby confirming determination of ALV of said area at Rs. 1,16,79,435/-. 5. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them." Ground No. 1 is regarding disallowance of expenses. 2. The assessee company is engaged in the business of real estate development. The assessee in collaboration has developed a commercial complex at Bhagwan Dass Road, Jaipur known as 'Silver Square' which is held as stock-in-trade. During the course of assessment proceedings, the AO asked the assessee to produce the books of account along with vouchers to verify t....
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....ineness of the expenditure claimed. The assessee failed to produce the requisite supporting evidence. Even before the ld. CIT (A), the assessee did not produce the vouchers in support of the claim of expenditure. However, we find that it is not the case of the AO that the expenditure is excessive. Keeping in view the nature of business activity of the assessee and further the nature of expenditure as claimed by the assessee is also not disputed to be incurred wholly and exclusively for the purpose of business of the assessee, therefore, in the facts and circumstances of the case, we are of the considered view that the disallowance on account of not filing the proper vouchers in support of the claim shall be restricted to 10% instead of 20%. We direct the AO accordingly to restrict the disallowance to 10% of the expenditure. Ground No. 2 is regarding notional income assessed by the AO under section 23(1)(a) in respect of unsold stock-in-trade. 5. The assessee after construction of the commercial complex had let out a portion at ground floor. However, the remaining part of the constructed complex remained un-let out and was held as stock-in-trade for the purpose of sale. The AO i....
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....hich is temporary structure having roof of tin shed/fibre sheet. Further, it is an unauthorized structure as it is beyond the sanctioned plan and Nagar Nigam has not regularized the said construction at 4th Floor of the complex. Therefore, the annual letting value cannot be determined in respect of such unauthorized construction as the same cannot be let out in the absence of the Completion Certificate of the authority. Rather, a litigation is going on in respect of the said construction as the Municipal Authorities have proposed to demolish the said construction at 4th Floor. He has further contended that after this development of unauthorized construction and subsequent demolition action by the local authorities, the tenant M/s. Country Club (India) Ltd. at the 4th Floor had vacated the premises and thus the 4th Floor part of the complex cannot be considered for the purpose of determination of ALV and consequent income under the head Income from House Property. 6.1. On the other hand, the ld. D/R has submitted that the AO as well as the ld. CIT (A) has decided this issue by following the decision of Hon'ble Delhi High Court in the case of CIT vs. Ansal Housing Finance and Leasi....
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....floor had already vacated the premises after the local authorities have proposed to demolish the said construction. Thus in view of the fact that the 4th floor of the property is facing the demolition action by the local authorities for being unauthorized, the ALV of such property cannot be determined by considering the rent for which the ground floor of the property or the other portion of the said complex was let out. The income from house property is measured as annual value of the property and section 23(1) contemplates the manner in which annual value of the property has to be determined. Since the property in question is newly constructed property and has never been let out, therefore, the provisions of section 23(1)(a) envisages the method for determining the ALV of such property. The AO has to determine the sum for which the property might reasonably be expected to fetch the rent from year to year. Thus the fair market rent as expected to be fetched by the property by letting out from year to year is the relevant facts to be taken into consideration. There is no method provided in the Income Tax Act for determination of the reasonable rent expected to be fetched by the prop....
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.... vacant by the assessee but it is because of the fact and circumstances that the said space could not be let out despite the best efforts of the assessee, the benefit of vacancy under section 23(1)(c) would be available to the assessee. For ready reference, we quote the provisions of section 23(1) as under :- "23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be- (a) the 57sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let57 and the actual rent57 received or receivable57 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" There is no dispute on the point that the property was vacant during the whole of the previous year and, therefore, owing to such vacancy the sum ....