TaxTMI 
TaxTMI 
2022 (11) TMI 77
X X X X Extracts X X X X
X X X X Extracts X X X X
....t No.7B in building called "Manek", as returned by the Appellant. 2. The learned Commissioner of Income-tax (Appeals) erred in holding that the rateable value determined under Municipal law is not binding on the Assessing Officer. The appellate submits that this finding of the learned Commissioner (Appeals) is contrary to a catena of decisions of the Supreme Court. 3. Both the lower authorities erred in ignoring the rateable value certificate produced by the appellant. 4. The learned Commissioner of Income-tax (Appeals) erred in holding that the provisions of the Maharashtra Rent Control Act, 1999, are not applicable to this property. 5. The Appellant submits that the annual letting value in respect of Flat No.7B in building called "Manek" estimated by both the lower authorities at Rs.24,00,000/- is erroneous. The Appellant submits that the Assessing Officer be directed to adopt the annual letting value, as retried by the Appellant. 6. Without prejudice to the above, in any event, the adopting of the annual letting value at Rs.24,00,000/- is highly excessive and arbitrary, and the same requires to be reduced substantially. 7. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d ld. AO to determine the annual letting value of the flat by following Comparative Method Of Valuation. 08. Consequent to that, the learned Assessing Officer determine the annual letable value at Rs.2,52,000/- per month. During this year, the learned Assessing Officer held that assessee would reasonably fetch Rs.2 lacs per month if the property is let out from year to year. Accordingly, the income from house property was estimated at Rs.24 lacs and after granting deduction on 1/4th for repairs of Rs.6 lacs net income from house property was considered at Rs.18 lacs. Consequent to that assessment order under Section 143(3) read with section 250 of the Act was passed on 31st December, 2008. 09. Assessee challenged the same before the learned CIT (A) who passed the appellant order on 12th December, 2010. The learned CIT (A) upheld the order of the learned Assessing Officer. The reasoning given by the learned CIT (A) shows that the area of the flat is 2400 sq. ft and the flat is situated in one of the Posh area of Bombay known as Malabar hills. The building is sea facing and situated on 7th floor. Thus, according to him, the rent of Rs. 5,000/- is not reasonable rent. Therefore,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nse amount of Rs.5,000/- as received by the assessee was nothing but reimbursement of municipal taxes & maintenance charges etc. In other words, the assessee did not show any rent in lieu of the leased property. Accordingly, in terms of Section 23(1)(a) of the Act, the annual value of the property would be the sum for which the property might reasonably be expected to be let out from year to year. The test of reasonableness in terms of the decision of Hon'ble Apex Court in Corporation of Calcutta Vs Smt. Padmadevi AIR 1962 SC 151 would be - a bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based on fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness. 7.3 In assessee's case, such other consideration exists and therefore a reasonable rent of the property was to be determined. The same was estimated as 12% of interest free deposit of Rs.3 Crores received by the assessee. Accordingly, an amount of Rs.36 Lacs was to be added to the income of the assessee as rental income. However, the same w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the applicability of Rent Control Act in its case. It has been emphatically submitted that the appellant has not leased out the said premises. It has been submitted that the appellant has only been granted the license to use the premises to Dr. Saraiya on payment of certain compensation. By this submission, it is clear that the receipt of Rs.5,000/- p.m. is not treated by the appellant either as rent in its simple term or in the nature of lease rent. The appellant has termed it as License fee. As the arrangement is not governed by the prevalent Rent Control Act, the standard rent as per the Municipal valuation, in my considered opinion, cannot be held to be the sum for which the property might reasonably be expected to let from year to year. Such sum, in view of the peculiar facts of the case, can be determined considering the various factors which govern the reasonableness of a sum which can be expected in the open market. The governing factors are the following : i) Area of the flat. The present flat is about 2400 sq.ft. It consists of 3 bed rooms with attached bath and toilets, a dining hall, a sitting room, a kitchen and a servant quarter with attached toilet. It also....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d opinion, cannot be applied in such cases. 6.3 It is an undisputed fact in the present case that the amount of Rs.5,000/- was not fixed in accordance with the Rent Control Act. The AO is therefore, directed to get the necessary information about the prevailing rent in the area for a similar building. The Assessing officer, for this purpose, may also consider the market rent fixed by CPWD for its properties allotted to the Govt. Servants. The quantum of rental value needs to be fixed considering all the above factors. In my considered opinion, the action of the AO in determining the annual value at Rs.36 lakhs per annum purely on the basis of the amount of interest free deposit is not justified. At the same time, I beg to differ with my learned predecessor that the amount declared by the appellant can be accepted as a sum for which the property might reasonably be expected to let from year to year. Ground of appeal No. l of the appellant is therefore, rejected. The Assessing Officer is directed to fix the quantum considering the above factors and the principles discussed above. Upon perusal of the above, it is evident that Ld. CIT(A), while agreeing that notional ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest could not be included in annual rental value. 9. The stand of Ld. CIT(A), on both the issues was assailed by revenue in AY1996-97 before cited decision of this Tribunal. The co-ordinate bench, vide para-12 of the order, confirmed the stand of Ld. CIT(A) that the ownership was not dislodged by giving the same on leave & license basis to Dr. Saraiya and the assessee was eligible for deduction u/s 54F. Regarding fixation of ALV of the property, relying upon the decision of Hon'ble Bombay High Court in CIT V/s Tip Top Typography (2014)368 ITR 330, the bench held that the ALV so determined by Ld. AO could not be sustained. The Ld. AO could not brush aside the rent control legislation. Therefore, the order of Ld. CIT(A) was upheld and the ground raised by revenue were ultimately dismissed in para-13. The said decision was followed mutatis-mutandis in AY1997-98. 10. Thus in the backdrop of aforesaid decision of the Tribunal, it is quite evident that Ld. CIT(A) has rightly concluded that estimation of ALV on the basis of notional interest could not be upheld in the eyes of law. However, the same time, the findings that the property would not be subjected to Rent C....