TMI Blog2012 (8) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... was no material on record to show on what basis the Assessing Officer had reached to the conclusion - no conclusive evidence to show that "P-money" reflects pocket money in the absence of corroborative material to hold that the "P-money" suggests the pocket money – In favor of assessee - ITA No.1113/Hyd/2011, ITA No.1010/Hyd/2011 - - - Dated:- 30-3-2012 - Chandra Poojari, Asha Vijayaraghavan, JJ. For Appellant: Smt K Mythili Rani For Respondents: Shri K Vasant Kunar Shri Mohd Afzal ORDER Per: Chandra Poojari: The above cross appeals are directed against the order of the CIT(A)-VII, Hyderabad dated 31.3.2011 for A.Y. 2007-08. 2. The first ground in assessee's appeal is with regard to allowability of rent paid to the owner of the property by the assessee. 3. Brief facts of the case are that the assessee claimed an expenditure of Rs. 5,02,80,000 towards rental expenditure paid to Dr. Mohd. Vizarath Rasool Khan and his family members. The details of these deeds and their contents are as under: S. No Relevant pages of seized material Date of lease deed Name of the lessor Name of the lessee Premise rented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Representative that the Assessing Officer is not justified to deny the reasonable rental payment for having utilized the lands by the society. 5. Before the Assessing Officer the assessee submitted the Shadan Educational Society was formed in the year 1984-85 for the up-liftment of minorities through education by starting educational institutions. The Society started its first educational Institute i.e. B. Ed. College in 1985, in the building at M. No. 6-2- 978, Khairatabad known as "Azmath Nishan" owned by the secretary of the society Smt. Shadan Tahniath. This property with a land of 2500 sq yards was acquired by Smt. Shadan Tahniath by way of gift from her parents. As the educational institutes expanded and the existing building was not sufficient, a bank loan amounting to Rs. 40,00,000/- was taken by Smt. Shadan Tahniath, for the expansion of the building. Subsequently the society with its own funds further expanded the building known as "Azmath Nishan". Now the building is a 12 storied building. As there was further expansion of the educational institutes managed by the society, the chief promoter and his two sons acquired two more adjacent plots admeasuring 3037 Sq. yard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the rent charged is very reasonable and much lower compared with the rents prevailing in the market. As stated earlier the cost of land is around Rs. 80 crores. To substantiate the same, a copy of sale deed of sale affected by A.P. State Trading Corporation to Reliance for a consideration of Rs. 83 Crores of an equivalent area of land is placed on record. This land is also situated in the same area. 7. A search and seizure operations was taken place in the premises of the assessee on 20.12.2006. During the course of search and seizure, the Department found lease agreements between the Society and Dr. Mohd. Vizarath Rasool Khan and Mohd. Sarib Rasool Khan who are the absolute owners of plot admeasuring 3037 sq. yards, Shadan Educational Society and Smt. Shadan Tahniath who is the absolute owner of H. No. 6-2- 978 known as "Azmath Nishan" and Shadan Educational Society and Mohd Saquib Rasool Khan who is the absolute owner of plot admeasuring 1200 Sq. yards. It is pertinent to mention here that in all these lease deeds it is mentioned that the Lessors are absolute owners and possessors of the buildings. On the strength of these lease deeds the owners of the property were paid Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etually over a long period of time only keeping in view the development of educational object among the educationally backward Muslim community. In this scenario the society started paying rent which is very very low compared to the market rate prevailing in the locality where it is situated. The investment of the society over a period of time is only about Rs. 8.35 Crores, whereas the market value of the owners' properties is about Rs. 80 Crores as on the date when the society started paying the rent. Just because the society invested an amount which is 1/10th of the market value of the property, the owners will not lose the ownership or the right to enjoy the property being the owners. 10. According to the assessee, the reasonableness of rent is to be seen by estimating the probable interest one would get if he has invested securely the value of land. The amount of Rs. 5.02 Crores paid by the society on the value of Rs. 80 Crores gives a rate of around 6.5% and this by no stretch of imagination be said to be more than market rent. The Society paid the rent of Rs. 5.02 Crores per annum from 01.04.2006 onwards after deducting TDS as provided u/s. 194(1) of the I.T Act, the owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mically and educationally backward community as per the report of Justice Saccher Committee. Considering this aspect the owners have charged only Rs. 10/- per sq. ft for the entire area in spite of higher rate prevailing in the market. In this regard it is submitted that the enquiries have been made with the adjacent tenants, the following facts emerged. There is an electronic goods shop in the adjacent building in the name of PCH E Zone, in the ground floor, which is paying Rs. 66/- per sq. ft as per the agreement entered with the owners in 2007. In the same building the tenants at top floor are paying Rs. 25/- per sq. ft. On the other side to the assessee Indian Overseas Bank is functioning at ground floor, which is paying Rs. 35/- per sq. ft since 1995. In the same building the other tenants at 6th floor are paying Rs. 15/- per sq. ft since 1998. 12. The learned AR drew our attention to the details of rent paid to the owners of the properties aggregating to Rs. 5.02 Crores, the details of ownership and other details are furnished here under: S. No. Nature of document Extent of area in sq. yards Cost of acquisition/ date of acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furniture etc. The assessee society has taken only the land from the owners and thereon constructed the building arranged the furniture and other necessary equipments by itself. Therefore, what actually the assessee is paying the rent is only for usage of land. Hence, the claim of the appellant for making the payments at Rs. 10 per sq. ft cannot be rejected as unreasonable. More so, as it could be seen that the owners of the land have not demanded the rents for lands utilized by the society for 22/15 years and paying of Rs. 10 per sq. ft. cannot be considered as exorbitant. Being the society has enjoyed the utilisation of the lands belonged to the land owners for so many years it would be appropriate to pay rent at Rs. 10 per sq. ft. According to the AR, there is no basis for CIT(A) to reduce the same to Rs. 9 per sq. ft. 15. The learned DR drew our attention to the following table as per GHMC Notification: GREATER HYDERABAD MUNICIPAL CORPORATION NOTIFICATION SHOWING THE MONTHLY RENT FIXED FOR SFT OF PLINTH AREA IN CIRCLE-6 (NEW NO. 10) CENTRAL ZONE: RENTAL DATA FOR THE YEAR 2006-07 (See Rule 2(v)) S. No. Number Name of the Locality Doo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea 4. MS Maqtha, Raj Nagar Opp. Raj Bhavan Entire area and any other buildings in lanes and by-lanes. ATER HYDERABAD MUNICIPAL CORPORATION NOTIFICATION SHOWING THE MONTHLY RENT FIXED PER SFT OF PLINTH AREA IN CIRCLE-5 (NEW NO. 10) CENTRAL ZONE: RENTAL DATA FOR THE YEAR 2006-07 (See Rule 2(V)) Category of Buildings Shops Shopping Complexes Offices Banks ATMs Super Specialty Hospitals Nursing Homes Other Hospitals, Clinics, Dispensaries Diagnostic centres IVA IVB IVC IVA IVB IVC IVA IVB IVC IVA IVB IVC IVA IVB IVC IVA IVB IVC IVA IVB IVC 1 2 3 4 5 6 7 RCC Posh Building 1. Independent 12.00 6.00 4.00 15.00 7.50 5.00 12.00 5.40 3.60 15.00 11.50 7.50 50.00 45.00 40.00 10.00 7.50 - 8.00 6.00 4.00 Multi- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 4.80 1.50 1.50 6.00 3.00 2.00 4.80 1.50 1.50 7.50 5.50 4.00 25.00 22.50 25.00 4.00 - - 3.50 2.50 1.50 Mangalore tiled buildings or asbestos roofed or GI roofed buildings 3.00 1.50 1.00 3.50 2.00 1.50 3.00 1.50 1.00 6.00 4.50 3.00 - - - 3.25 - - 2.50 2.00 1.00 Country tiled building 2.50 1.00 0.50 - - - 2.50 1.00 0.50 - - - - - - - - - - - - 16. According to the DR the rent fixed at Rs. 9 per sq. ft. is on very higher side and it is to be lowered. He submitted that the CIT(A) ignored the fact that property tax in respect of the said building and depreciation thereon was claimed by the assessee society making it the de facto owner of the said society. 17. We have heard both the parties and perused the material on record. It is an admitted fact that the building owned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order dated 31st December, 2010. It is also brought to our notice that in the building situated adjacent to this building, PCH-E Zone in the ground floor is paying Rs. 66 per sq. ft. from the year 2007. In the same building the top floor was rented at Rs. 25 per sq. ft. On the other side to the assessee, Indian Overseas Bank is functioning in the ground floor which is paying Rs. 35 per sq. ft. since 1995. In the same building the other tenants at 6th floor are paying Rs. 50 per sq. ft. since 1988. Considering the above facts, in our opinion, the property being situated at the heart of the city, charging of rent at Rs. 10 per sq. ft. is very reasonable and there is no basis for the lower authorities to reduce the rent claimed by the assessee. In our opinion, the claim of the assessee is justified and the same has to be allowed. However, the property tax cannot be borne by the assessee and it is the liability of the land owner to pay the same to the Government authorities. Accordingly, we direct the Assessing Officer to allow the claim of the rent by assessee and to disallow the municipal tax if it is paid by the assessee as the assessee is receiving prevailing market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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