TaxTMI 
TaxTMI 
2018 (5) TMI 1898
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.... Tax(A) erred in confirming the addition of Rs. 6,30,000/- overlooking the submissions made by the Appellant and various case laws quoted therein." 3. Briefly stated facts are that the assessee has a Flat at 41, Sealand Co-operative Housing Society Ltd, Caffe Parade, Claba, Mumbai-05 admeasuring 2850 Sq. Ft. area. The assessee has declared rent from this flat at the rate of 50,000/- per month and declared the same under the head of income from housing property for the relevant AY 2012-13 at Rs. 6 lacs. The AO during the course of assessment proceedings noticed that the rental income shown by the assessee is very low and hence, he required the assessee as to why rental income should not be determined at fair market value in term of section 23 (1)(a) of the Act. The AO gathered information through net sites and noted that the property of this size is available at a rent of Rs. 2 to 3 lacs in the same area and in the same locality. Accordingly, he estimated the deemed rent at the rate of 2 lacs per month. Accordingly, the AO computed the income chargeable to tax under head income from house property at Rs. 24 lacs as fair market rent under section 23(1)(a) of the Act and afte....
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....therefore confirmed by CIT(A) under section 23(1)(c) is without any basis and he stated that both the authorities below agreed that the property is covered under rent control Act as the Bombay is governed by rent Control Act and CIT(A) also agreed that the ALV of the property is more than the rateable value as determined by BMC. The learned Counsel for the assessee in view of this argued that once the property value is determined by Rent Control Act and ALV declared by assessee is in excess of market rateable value of BMC, no further fair market value of the property for the purpose of deemed rent under section 23(1)(a) or 23(1)(c) can be estimated. The learned Counsel for the assessee relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Tip Top Typography [2014] 368 ITR 330 (Bombay), wherein held as under:- "46. We have and after careful reading of the provision in question and the conclusion of the Full Bench of the Delhi High Court councluded that a different view cannot be taken. We respectfully concur with the view taken in this Full Bench decision of the Delhi High Court. 47. We are of the view that where Rent Control Legislation is applicable and ....
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....that before the Assessing Officer determines the rate by the above exercise or similar permissible process he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other considerations makes it unreasonable must precede the undertaking of the above exercise. After the above ascertainment is done by the Officer he must, then, comply with the principles of fairness and justice and make the disclosure to the Assessee so as to obtain his view. 48. We are not in agreement with Shri Chhotaray that the municipal rateable value cannot be accepted as a bona fide rental value of the property and it must be discarded straightway in all cases. There cannot be a blanket rejection of the same. If that is taken to be a safe guide, then, to discard it there must be cogent and reliable material. 49. We are of the opinion that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Offic....
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....cense does not create any interest in the property. Therefore, it is not as if the security deposit being made, it will be necessarily refundable after the third year and not otherwise. Everything depends upon the facts and circumstances in each case and the nature of the deal or transaction. These are not matters which abide by any fixed formula and which can be universally applied. Today, it may be commercially unviable to enter into a lease and, therefore, this mode of inducting a 'third party' in the premises is adopted. This may not be the trend tomorrow, therefore, we do not wish to conclude the matter by evolving any rigid test. 52. We have also noted the submissions of Shri Ahuja. We are of the opinion that even in the cases and matters brought by him to our notice, it is evident that the Assessing Officer cannot brush aside the rent control legislation, in the event, it is applicable to the premises in question. Then, the Assessing Officer has to undertake the exercise contemplated by the rent control legislation for fixation of standard rent. The attempt by the Assessing Officer to override the rent control legislation and when it balances the rights between th....