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2015 (5) TMI 475 - AT - Income TaxIncome from house property - Annual Value - Estimated the “ALV” - CIT(A) reducing the addition made by the A.O. on account of estimation of ALV and reworking of the ALV at ₹ 17,04,420/- as against that of ₹ 34,58,969/- being the ALV worked out by the A.O.Held that:- This issue is squarely covered by the decision of the Hon’ble Jurisdictional of Sakarlal Balabhai vs Income-Tax Officer [1974 (11) TMI 33 - GUJARAT High Court] to come to the conclusion that rate of interest on cost of the building and land would provide a reasonable basis for determining the Annual Letting Value of property. Therefore, the contention of the ld. DR that instead of cost, market value of the property in each year should be adopted cannot be accepted. - Decided against revenue. Rate of interest to be adopted for determining the ALV - whether interest which would have been payable by the assessee had the assessee borrowed the money for investment in the property or it should be interest receivable by the assessee had the similar money is invested somewhere else? - Held that:- for determining the income from the property, it should be rate of return on the investment of similar amount in another asset. Therefore, in our opinion, the CIT(A) was fully justified in estimating the ALV on the basis of interest which assessee would have earned on the investment of the similar amount. The ld. Counsel for the assessee had argued that the rate of interest applied by the CIT(A) at 8.5% is excessive. In support of which, he gave various examples of investment in FDRs which faced the interest ranging from 5.52% to 7.5%. Copies of those certificates from the bank are placed at page No. 29 onwards of the assessee’s paper-book. However, we find that those investments were for a very short period. In first case where interest rate was 5.5%, the investment was only for 46 days. In another case where the interest was 5.6%, it was only for 31 days. In another case, where the rate of interest was 6%, it was for 91 days and in another case where the period of deposit was 366 days, the rate of interest was 7.75%. The ld. DR was fully justified that if the rate of return on the investment is considered, then it should be a long term investment because in any property nobody would make investment just for few days. Considering all these facts, in our opinion, the CIT(A) has rightly applied the rate of interest of 8.5%. We, therefore, do not find any justification to interfere with the order of the CIT(A). - Decided against revenue and assessee. Calculation of ALV in respect of one property for whole year while the property has let out only for the period of 6 months and 21 days - Held that:- If the property is let out for the part period, the rent received or receivable by the owner is to be considered. Therefore, it is evident that if the property is let out for the part period, the ALV is to be computed for the part period and not for the whole year. We, therefore, direct the Assessing Officer to assess the ALV of the property for 6 months and 21 days i.e. actual period for which the property let out.
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