TaxTMI 
TaxTMI 
2025 (11) TMI 472
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....sessing Officer that whole of the property has been let out instead of the third floor claimed by the assessee, is based on surmises and conjectures and accordingly the alleged ALV of the tenanted property worked out at Rs. 1.79 crore instead of Rs. 3,60,000/- is arbitrary, unjust and at any rate very excessive. 2) That merely in the absence of a separate electric meter for the tenanted portion of the property, the whole of the property cannot be' assumed and presumed to have been let out merely because the tenant is the related party and accordingly the income of house property assessable under the Income-tax Act, thereby working out the tenanted value of the whole property is arbitrary, unjust and bad in law. 3) That without prejudice to grounds No. 1 and 2 above, the ALV of the whole property worked out at Rs. 1.79 crore ignoring the standard value of the property is arbitrary, unjust and at any rate very excessive. 4) That the Assessing Officer has erred on facts and under the law in not allowing benefit of self-occupied portion of the property while working out the ALV and accordingly the assessment of income from house property at Rs. 1.79 crore....
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....ant to the order of the Tribunal the AO made assessment once again assessing the ALV of the property at Rs. 1,78,76,700/-. Before us, the Ld. Counsel for the assessee made the following submissions: - "The present appeal is the second inning of the case. 1. The assessee is an old lady and a regular income-tax assessee. The assessee is owner of residential property situated at 23, Kautilya Marg, Chanakyapuri, New Delhi. Since the date of purchase, the property has been occupied as self-occupied property and till date is also living therein. The property consists of four floors (ground and three floors). 2. For the first time, the third floor of the property, which was specifically a terrace comprising of covered area of 2758 sq feet was given on monthly rent of Rs. 30,000/- with effect from 1st April 2011 to one M/s Gyan Enterprises Pvt. Ltd., wherein she holds substantial interest in the company at that point of time. However, the remaining portion of the building remained under self-occupation. 2.1 At the time of lease, the lessee also made a deposit of Rs. 10 crore as a security deposit which would be refundable on expiry of the lease. ....
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.... issue after physically verifying the contention of the assessee regarding having let out only a part of the building. The ITAT in paragraph 6 of its order dated 14th August 2019 observed as under: "6. The Ld. AR before us, had stated that the assessee inadvertently could not make a mention of the fact of having let out only a part of building, whereas the fact remains that only 3rd floor was let out. He has also mentioned that this fact can be verified by deputing officer of the Department. The Ld CIT (A) has not considered this aspect and has dismissed the appeal relying on the lease deed. Therefore, we remit the issue back to the Assessing Officer who should re-adjudicate the issue after physically verifying the contention of the assessee regarding having let out only a part of building. The Assessing Officer is further directed to examine other circumstantial evidences which the assessee may file in support of her contentions and only then he should decide as per law. Needless to say that the assessee will be provided sufficient opportunity of being heard." Second Inning 4.1 In the second inning, the Assessing Officer vide order dated 27th September 2....
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....ch of the portion is actually let out, the direction thereof was issued by the ITAT, had sustained the finding of his predecessor made in the original order merely on the basis that in the building there is no sub-meter for water and electricity which generally happens in the rented property. Such observation by the Assessing Officer is totally based on the assumption and presumption and is in the nature of surmises and conjecture. There is no statutory requirement to install meter or sub-meter in respect of water or electricity in the tenanted property. On the contrary, it depends upon the understanding between the landlord and the tenant. The Assessing Officer cannot enforce such conditions on his whimsical thoughts and cannot be the basis for the assumption that whole building is let out. 5.4. In the fresh assessment order, the Assessing Officer had not contradicted the contention of the assessee that she has occupied the ground floor plus two floors of the building as self-occupied so much so the Assessing Officer did not discuss the statement of Mr. Sushant Kumar, Caretaker of the building which was recorded by the Assessing Officer in compliance to notice u/....
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.... (a) the sum 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 let and the actual rent received or receivable 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: Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.-For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not inclu....
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....Act may also be worked out for the levy of house- tax by local authorities because language in both the Acts remained same. The courts further held that as far as the standard rent is concerned, there is no difference whether the property is let out or self-occupied. The standard rent would remain the same. In the case of Diwan Daulat Rai Kapoor, the Hon'ble Supreme Court was dealing the provision of Section 116 of Delhi Municipal Corporation Act, 1957 wherein the language was identical as that of Section 23 of IT Act. 8. However, with effect from 2003, the provisions relating to levy of house-tax under the Delhi Municipal Corporation Act, 1957 changed and have assigned a different procedure for determination of the ALV on valuation base of the unit. 9. In the present case, the issue arises that what would be the annual letting value of the property. In the instant case, the local authorities, after 2003 have considered the ALV of the whole building at Rs. 27,58,268/- which is very much clear from the house-tax return filed by the assessee and accepted by the local authority. 10. Therefore, in view of the above facts, the ALV of the whole building, as det....
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....ver the ALV has to be taken, that has to be taken only in respect of third floor. 13. As per the provision of, sub-section (2) of Section 23 of IT Act, no income from house property has to be assessed in relation to the self-occupied portion of the building. In the instant case, as already submitted above, the assessee is in self-occupation of ground plus two floors. The tenanted portion constitutes only 2,756 sq feet out of the total area of 14,897 sq feet and accordingly the Assessing Officer be directed to exclude the ALV of the self-occupied portion of the building while assessing the tax. 14. In Assessment Year 2018-19 onwards, whatever the income from partly letting out the property was shown by the assessee has been accepted by the Department u/s 143(1) of the Act and that has attained finality as no action has been taken by the Department either u/s 147/148 nor u/s 263 of the Act. Besides it, the assessment for the Assessment Year 2023-24 has been made as scrutiny assessment u/s 143(3) of the Act and no addition has been made on this issue. Standard Deduction u/s 24 of IT Act and payment of house tax. 14.1 The Assessing Officer, ....
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....en rented out and from January, 2019 onwards the ground floor of the property has been rented out to Gyan Enterprises Pvt. Ltd. Thus, the statement given by the caretaker of the property clearly establishes the fact of the assessee partly letting out of the property and partly used for self occupation. Thus, assessing the entire ALV of the property as income of the Assessee ignoring the self occupied portion is not correct. 9. Coming to the valuation of the property i.e. ALV, we find merit in the submission of the assessee. In the decisions of the Hon'ble Supreme Court in the case of M/s Sheela Kaushish vs. CIT (131 ITR 435) and also Deewan Daulat Rai Kapoor vs. NMBC & Another (122 ITR 700), it was held that in the case of building which is subjected to levy of house tax by the local authorities, standard rent determined by the local authority to levy house tax would be the standard rent and would be considered as annual letting value (ALV) of the property. It is also the submission of the Counsel that for the AY 2018-19 onwards the income from partly letting out of the property was accepted by the Department u/s 143(1) and for the AY 2023-24 assessment was made u/s 143(3) accep....