TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 394
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....g of immovable properties. During the year, assessee has declared rental income of Rs..76,01,000/-, dividend of Rs..1,61,600/- and share of profit from M/s Lalco Services Apartments, LLP Mumbai of (Rs..14,98,991/-). The Assessing Officer observed that assessee has computed rental income at Rs..45,66,730/- under the head income from house property and business loss at Rs..43,71,875/ which were set off against rental income, thereby determining total income at Rs..1,94,855/-The Assessing Officer observed that assessee has given on rent its 24 flats owned by it, located at Kalpataru Estate Building Off village Majas, Jogeshwar-Vikhroli Link Road, Andheri(E), Mumbai. Assessee claimed that it has rented out one furnished flat to M/s. Anmol rice Mills Pvt Ltd., (not a related party) and the rent received from them is Rs..60,000/- per month. Further, Assessing Officer observed that assessee given on rent 23 unfurnished flats at same location to its related sister concern M/s Lalco Services Apartment LLP at the rate of Rs..25,000/- per month. 4. The Assessing Officer observed that assessee has received rent from unrelated entity at a higher rate vis-à-vis rent received from its rel....
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....e above relationship, it can be safely concluded without any doubt that the rent received for 23 flats given to sister concern's are at lower value than the market value/fair value. 6. Further, Assessing Officer observed that related sister concern M/s.Lalco Service Apartment LLP has sub-letted the above properties to the non-related entities at the higher rate and offered its income under the head 'Business Income. Assessing Officer observed from the balance sheet, profit & loss account and income tax return of Ms. Lalco Service Apartment LLP, that turnover is reported at Rs..9.72 crore against which expenses have been claimed at Rs..9.58 crore and other income is reported at Rs..32.73 lakhs. It is taken on record that the partnership firm M/s. Lalco Service Apartment LLP has claimed loss of Rs..50,69,297/- during the FY 2013-14. 7. The Assessing Officer observed that vide order sheet noting dated 28.12.2016, the assessee was asked to submit details of actual value of furniture so that the actual value of unfurnished flats can be determined. However, he observed that assessee has not furnished any information. Further, he observed that the difference between rent received fr....
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....ny possesses residential flats in 2 Buildings namely 1A & 1B in Kalpataru Estate, Jogeshwari. Out of which are bare shell flats are given to its partnership firm "Lalco Service Apartment LLP" to run its business of renting out service apartments for which Lalco Service Apartment LLP pays Rs 25,000/- per month towards rent. Flats in 1B building are let out by the Appellant itself, The flats in 1A are unfurnished and let out to Lalco Service Apartment LLP for which it earns consistent income of Rs 25000/- per month and 1B are furnished apartment let out. Appellant has entered into Limited Liability Partnership in the name and pattern of Lalco Serviced Apartment LLP, in order to earn regular and consistent income due to market inconsistencies in fetching regular income. In addition to the regular income. The Appellant is entitled to earn a share of Profit or Loss from LLP Business, making it eligible for fetching more income per flat. Appellant has thereby let-out 23 owned Flats in building 1A to LLP and earns 25,000/- per month per flat, plus the proportionate income fetched by LLP through subletting Further LLP sub-lets Furnished Apartment wherein Furniture belongs to VK Lalco Pvt L....
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....3 flats to sister concern Lalco Service Apartment LLP is solely and exclusively for the purposes of evasion of tax and thus, the same has been disregarded due to its sham nature and act of colourable device. In view of the above, the addition of Rs 5,37,500/- per flat on annual basis is made. Similar addition has been made by the AO in the case of the Assessee's sister concern M/s Lalco Textiles & Investment Co pvt Ltd for AY 2014-15 and facts of the case are exactly similar to the instant case. Thus, the Total addition for the under receipt of rental income by the assessee works out to Rs 5,37,500/- x 23= 1,23,62,500/-" The above comments of the Ld AO are not tenable as per law and failed to provide the basis on which the addition has been made and calculated on adhoc basis. It is also to be noted that as per above para calculation of Fair rental by Ld AO computed based on the order passed in case of Lalco Textiles & Investment Co Pvt ltd (Assessee's sister concern) Assessment Order of Lalco Textiles Investment Co Pvt Ltd is attached herewith marked as Annexure I. In view of the above we submit that the assessing officer was not justified in comparing rent received from ....
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....id detail that the AO was compelled to make an estimate. The AO has taken on record that the partnership firm M/s. Lalco Service Apartment LLP has claimed loss of Rs. 50,69,297/- during the FY.2013-14. This is a very intricate planning, whereby, huge amount of rent is being earned but no taxes are being paid on the same, at any stage by any of the parties involved. The appellant company has rented out 23 flats to its sister concern, has claimed all benefits of Section 24 of the IT Act, the sister concern has further earned money on renting out in turn, showed huge business expenses and claimed loss, I do not find any reason to interfere with the AO's order on this issue. In view of the above discussion, appeal on Ground no.1 is dismissed." 11. With regard to Ground No. 2, assessee has submitted before Ld.CIT(A) as under: - "Grounds of Appeal No. 2 Assessing Officer's Contention vis-a-viz Appellant's reply 7) The Ld AO disallowed the claim made by Appellant in respect of municipal taxes of Rs 10.77, 100% while computing the income under the head house property before claiming the deduction u/s 24 of the IT Act stating that property tax has not been paid by the app....
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....ion of rent u/s. 23(1a) of the Act and in this regard he submitted that assessee holds 23 flats in two societies and these flats were given on lease to sister concern LLP. He also submitted that the above LLP was formed by assessee and other relatives. Further, he submitted that assessee hold 24 flats out of which one flat was leased out to M/s.Anmol rice Mills Pvt. Ltd., and receives rent of Rs..60,000/- per month and submitted that this flat was furnished. In this regard Ld. AR of the assessee relied on the case of another shareholder i.e. Anita Nanvwani wherein the Coordinate Bench in ITA.No. 7410/Mum/2018 dated 20.01.2020 wherein in the similar circumstances the rental income at Rs.. 35,000/- per month was held to be fair rent against the actual rent received by the assessee of Rs..25,000/- per month. Since facts are exactly similar he relied on this case. 15. In order to bring the facts are similar he brought to our notice Para No. 4.4 of the Assessment Order wherein the assessee is in receipt of Rs..25,000/- per month whereas Assessing Officer has estimated the same the difference of Rs..5,37,500/- per annum basis. 16. On the other hand, Ld. DR brought to our notice Para No....
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....shing made by the assessee in furnishing of flats leased out to M/s.Hover India Automotive and M/s.Anmol rice Mills Pvt. Ltd., and we also observe that the carpet area of all the flats are more or less similar and from the record we observe that Assessing Officer has made an addition of Rs..69,790/- per month for each flat (Rs..44,790/- + Rs..25,000/-). We observe that assessee has leased out Rs..1,50,000/- and Rs..60,000/- respectively to the unrelated parties the average comes to Rs..1,05,000/-. Since Assessing Officer has determined the monthly rent of Rs..69,790/- which is less than Rs..1,05,000/-, in our considered view which seems to be proper in absence of any information of furnishing of flats. The case of relative on which Ld. AR relied heavily are distinguishable as it is relating to individual and held only few flats. Whereas in this case, the assessee itself a company and the business carried on by the LLP can also be carried on by the assessee itself. Therefore, we are inclined to sustain the additions made by the Assessing Officer and accordingly, Ground No.1 raised by the assessee is dismissed. 18. With regard to Ground No. 2 which is in respect of municipal taxes, ....