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TMI Blog2012 (8) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 and 6-2- 980 adneasuring 3037 sq yds sutyated at Raj Bhavan Rd, Khairtabad, Hyd Rs. 18.50 Lajkhs per month @ Rs. 10/- per sq.feet 2 Page 33 to 36 of annexure A/SES/KHAI/02 22-04- 2006 Smt. Shadan Tahniath w/o Dr. Md Vizarath Rasool Khan -do- 12 floor building bearing MCH NO. 6-2-978, "Azmath Nishan'. Raj Bhavan Rd, Khairtaba3d, Hyd Rs. 18.50 Lajkhs per month @ Rs. 10/- per sq.feet 3 Page 38 to 41 of annexure A/SES/KHAI/02 22-04- 2006 Sh. Md. Saqib Rasool Khan, S/o Dr Md Vizarath Rasool Khan -do- 9 floor building bearing MCH NO. 6-2-977, admeasuring 1200 sq yards, at Raj Bhavan Rd, Khairtabad, Hyderabad Rs. 5.40 Lakhs per month @ Rs. 10/- per sq.feet 4. The above property had been given to the assessee society in the year 1984 wherein the assessee constructed buildings and has been running an educational institution for the minority students. The land offered by Dr. Mohd. V. Rasool Khan and his family members is not as a donation and the said land is not transferred to the society. The land was only offered for construction of the buildings to start educational institution for the minority students. The assessee society, however, had not paid any consideration to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d plots by Dr. Mohd. Vizarath Rasool Khan and his family members, with its own funds. It is pertinent to mention here that the building owned by Smt. Shadan Tahniath and the plots owned by Dr. Vizarath Rasool Khan, Mohd Sarib Rasool Khan and Mohd Saquib Rasool Khan were never transferred to the Society in any manner. The Society was allowed to enjoy the property from 1984/1991 to 31.03.2006 without any payment of any rent or other benefit to the owners of the properties. The society enjoyed the properties of the owners, free of cost, up to 31.03.2006. It is further submitted that the Society, had an oral understanding with the owners of the land that the society will enjoy the properties for a reasonable period free of cost, by developing its own infrastructure with its own funds, according to its needs and after expiry of a reasonable period the society will have to vacate the properties. In case it is not vacating the properties, the society will be charged with a reasonable rent prevailing in the market. The Society enjoyed the properties of the owners for a period more than 22 long years without paying any rent or benefit to the owners. Therefore, during 2006 it was decided and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not eligible for rent. 8. On these properties, the society over a period of time invested the amounts towards construction as under: S. No. Assessment year Amounts spent by the society (Rs.) 1. 1989-90 24,28,069 2. 1990-91 - 3. 1991-92 12,70,292 4. 1992-93 32,12,502 5. 1993-94 49,42,731 6. 1994-95 48,27,658 7. 1995-96 45,98,747 8. 1996-97 - 9. 1997-98 69,00,520 10. 1998-99 57,73,569 11. 1999-00 1,29,15,906 12. 2000-01 24,71,588 13. 2001-02 58,15,892 14. 2002-03 1,01,58,948 15. 2003-04 1,11,11,469 16. 2004-05 32,18,555 17. 2005-06 7,67,500 18. 2006-07 31,00,000 19. 2007-08 - Total 8,35,13,949 9. As per the above statement, the society spent about Rs. 8.35 Crores and odd and enjoyed the properties perpetually over a period of 22 years without paying any rent. This amount was claimed as application of funds by claiming the deductions as available in the I.T. Act. According to the assessee if the society had paid the rents to the third parties it would have been much more than what it has spent on development work. The savings made in this manner were utilized for the development of the infrastructure required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby." A copy of the judgment is placed on record. Accordingly it was requested to allow the expenditure of Rs. 5,02,80,000/- paid to the owners of the properties towards rents. 11. According to the assessee, the Assessing Officer rejected the claim of expenditure only on the basis that the investment for the construction is made by the society, therefore, assumed that the claim of payment of rent is not allowable. The fact of ownership of the land and also the fact of non- payment of rent for over a period of 1989 to 31.03.2006 and from 1.4.1997 to 31.3.2006 was brought to his notice, but, the issue was not examined. It was also submitted that the value of the property on which rent is paid is about Rs. 80 Crores. The reasonability of the rent can also be decided taking into consideration of the rent being paid by the tenants in the adjacent buildings. The following are the facts with regard to value of the property, whether a reasonable rent/charge con be collected from the society by the member of the society, when he has hired his assets to the society, the issue is decided in favour of assessee by the Hon'ble AP. High Court in the under mentioned case. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zarath Rasool Khan, Mohd. Mohd Sarib Rasool Khan. 2262 Rs. 70,00,000 02.11.1993 Cellar + ground + 10 floors, + Malgies, built up area 185000 sft. 18,50,000 Property (8 Malgies) at Rajbhavan Road, bearing MCH Nos. 6-2- 979/1,2,3,4,5,6,& 7, Khairatabad, Hyderabad purchased from Smt. Kabeerunnisa, Mtullah Airaj and Smt. M. Padmavathi by Mohd. Sarib Rasool Khan 377 Rs.17,00,000 1.1.1994 21.7.1995 21.11.1996 13. He submitted that the society had enjoyed the free lands for constructing the educational institution and also in position to cater the needs of many students since 1984. The society grew by leaps and bounds and the society which was started as a small educational institution; now it is a big institution to cater education in various fields like engineering, medicine, bachelor of education and various other subjects. Since 1984 the society did not make any payment to the owners of the land even though the land was utilized by the society for more than 22 years and for 15 years in case of the other portion of lands. The land owners also did not pressurize the society for taking any payments either in the form of rent for only reason that they wante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sides Lakidikapool x Roads Both sides Jalavihar Both sides (BPPA) Dr. Car (HUDA). 6. Nirankari Bhavan Junction both sides. 7. Road facing Lunmibi Park Both sides. 8. NTR Park Back side CIRCLE NO. X Zone No. IV Sub-Zone No. IV-B Localities/Areas included in zone/sub-zone S. No. Number & Name of the Locality Door Nos./Land Marks From To Sub-Zone-IV-B 2. 050-Khairatabad 1. Khairatabad Post Office (H. Nos. 6- 1-1067) (both roads) Railway Gate, Khairatabad. 2. Dwaraka Hotel (H.No. 6-1-1061) (Both side road) Khairatabad Library; H. No. 6-1-360 3. Big Bass Hotel, Opp. Shadan College (either side) Chintal Basthi, Khairatabad and any other buildings internal roads excluding main roads of Zone IV-A. CIRCLE NO. X Zone No. IV Sub-Zone No. IV-C Localities/Areas included in zone/sub-zone S. No. Number & Name of the Locality Door Nos./Land Marks From To Sub-Zone-IV-C 3. 050-Khairatabad 1. Maruthi Nagar,CIB Quarters, BJR Nagar, Gandhi Nagar, Budda Jagam Basthi MCH Quarters, Indira Nagar and EWS Quarters Entire area 2. Marutinagar Entire area 3. Buildings located at the Sub-zone IC Area, Bisthi Wada, Chinthal Basthi, Tummala Basthri Area. Entire Area 4. MS Maqt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 society and plot of land owned by Dr. Vizarath Rasool Khan and family members. This property has been enjoyed by the assessee since 1984/1991 for which the assessee has not paid any rent up to 31.3.2006. The property was allowed to be used by the assessee on oral agreement and it has been used by the assessee for a reasonable time at free of rent by developing its own infrastructure with its own funds and after expiry of a reasonable time the assessee will have to vacate the property and in case the assessee not vacating the property the assessee has to pay reasonable rent in accordance with market conditions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 rent. Since, we have allowed the payment of rent as claimed by the assessee, in our opinion it is appropriate to bear the payment of municipal tax by the land lord themselves instead of assessee bearing the same. 19. Coming to the Revenue appeal, the issue is relating to the rent which requires no adjudication as we have already held that payment of Rs. 10 per sq. ft. is reasonable instead of Rs. 9 per sq. ft. determined by the CIT(A). 20. Coming to the other ground in the Revenue appeal that the CIT(A) erred in allowing "P-money" as petrol expenditure without proper evidence. 21. Brief facts relating to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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