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2017 (2) TMI 805 - AT - Income TaxEnhancement of rental income receivable - Held that:- We notice that the tax authorities have interpreted the agreement entered between the assessee and M/s Visage studios in their own way and accordingly came to the conclusion that the assessee was entitled to a sum of ₹ 1.11 crores. However, the fact remains that the recipient of the share, being the assessee and the payer of the share, being M/s Visage Studios have understood the transactions in a particular way and accordingly shared the lease income. When there is no misunderstanding between the parties on the terms and conditions of the agreement, in our view, the tax authorities may not be justified in interpreting the agreement in a different manner. As contended by Ld A.R, the assessing officer has not brought any material on record to show that there was suppression of share of income. It is also not the case of the AO that the rent received from M/s Visage studio was less than the fair market value. In view of the above, we are unable to agree with the view taken by Ld CIT(A) as well as the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the enhancement made by him. Disallowance of expenses claimed under the head Security charges, Depreciation and Interest - Held that:- There is no dispute with regard to the fact that the assessee is a private limited company and it did not discontinue the business. It is stated that similar expenses claimed in the past have been allowed. The AO has not shown that the assessee has discontinued the business activities permanently. Hence we are of the view that the expenses claimed by the assessee should be allowed fully, since they have been incurred for the purposes of business only. With regard to the depreciation, the assessee has submitted it has been claimed in respect of entire building, plant and machinery etc. With regard to the depreciation claimed on the building, we direct the AO to disallow depreciation pertaining to the let out portion on proportionate basis from the WDV of the building, since the building let out cannot be considered to be used for the purposes of business. Accordingly we modify the order passed by Ld CIT(A) on the lines discussed above. Determining ALV of the property let out by taking the share of income of the assessee in lease rent as the basis - Held that:- M/s Rem Nord Lab P Ltd have been occupying the premises of the assessee since 1995 and the agreement is being renewed periodically. The AO has not shown that the fair rental value of the property was more than the rent received by the assessee. The agreement with M/s Visage studios was entered only in the preceding year and the assessee could fix the rental value on some other methodology depending upon market conditions. The same, in our view, would not render the agreements entered by the assessee with M/s Rem Nord Lab P Ltd since 1995 void. Hence we are of the view that the AO was not justified in determining the Annual Letting value of the property let out to M/s Rem Nord Lab P Ltd by taking the share of income of the assessee in lease rent as the basis. We notice that the Ld CIT(A) has analysed the facts in a proper perspective in accordance with the law and hence we do not find any reason to interfere with his decision rendered on this issue.
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