TMI Blog2013 (10) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... ld agree for higher taxable income till the evidences, going against him, are collected and confronted to him by the AO - in the present case also same thing happened - Therefore, considering the peculiar facts of the case under consideration and keeping in mind the ratio laid down by the Hon'ble Apex Court in the case of Commissioner of Income-Tax, West Bengal II Versus Durga Prasad More [1971 (8) TMI 17 - SUPREME Court] and Sumati Dayal Versus Commissioner of Income-Tax [1995 (3) TMI 3 - SUPREME Court] the order of the FAA does not suffer from any legal infirmity – order of FAA upheld – Decided against Assessee. Disallowance of Electricity Expenditure and Society Maintenance Charges – Held that:- Disallowance of professional fees, electricity expenses, society charges, miscellaneous expenses and salary, the AO was directed to allow statutory deduction u/s. 24(a) of the Act under the head "Income from House Property "@ 30% of the ALV - once the standard deduction @30% was allowed no further deduction could be allowed unless same was covered by the provisions of section 24(b) of the Act - the disallowance of electricity expenses and society charges confirmed. No 'commercial' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10. 05. 2005, revealed that the assessee had leased its property bearing Flat No. 154/A, Navshakti Nagar Co-op. Hsg. Soc. Ltd. (NNCHS) 98, Nepean Sea Road for a monthly rent of Rs. 6, 000/-, that the area of the said property was 650 sq. ft. , that the property had been given on lease to Mr. Dinesh Rasiklat Shah and Mrs. Aruna Dinesh Shah. He directed the assessee to explain as to whether Mr. Dinesh Rasikial Shah and Mrs. Aruna D. Shah were related to the assessee company or its Directors or share-holders. He further directed the assessee to explain as to why it had leased its property at Nepean Sea Road to Mr. Dinesh Rasiklal Shah and Mrs. Aruna D. Shah at a nominal rent of Rs. 6, 000/- p. m when the market rent of the property would be much higher. After considering the reply of the assessee, AO found that it had not offered any explanation with regard to the smallness of rent, that Shri Sudhir K Shah was also one of the Director of the assessee-company, that Shri Dinesh Shah was given power of attorney by the company for entering into lease agreements of other property owned by it. AO was of the opinion that property in question was leased to a person who was not only a ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (152 ITR 388), Mrs. Shiela Kaushish (131 ITR 435) and Kashi Prasad Kataruka (101 ITR 810). He concluded that: i). ALV would be the sum at which the property may be reasonably let out by a willing lesser to a willing lessee uninfluenced by any extraneous circumstances ii). an inflated or deflated rent based on extraneous consideration may take it out of the bounds of reasonableness iii). actual rent received, in normal circumstances, would be a reliable evidence unless the rent is inflated /deflated by reason of extraneous consideration, iv). such ALV, however, cannot exceed the standard rent as per the Rent Control Legislation applicable to the property v). if standard rent has not been fixed by the Rent Controller, then it is the duty of the Assessing Officer to determine the standard rent as per the provisions of rent control enactment, vi). the standard rent is the upper limit, if the fair rent is less than the standard rent, then it is the fair rent which shall be taken as ALV and not the standard rent. He also relied upon the judgment of J. K. Investors Ltd. decided by the Hon'ble jurisdiction High Court (168 CTR 189) and held that u/s. 23(1)(a) of the Act, AO co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from year to year. Courts are of the view that if rent is inflated /deflated by reason of extraneous consideration, then AO can take a reasonable base for calculating House property income. In the case of N. Nataraj (266 ITR 277), Hon'ble Madras High Court has held as under : "What is required to be ascertained for the purpose of determining the annual value as provided in section 23(1)(a) of the Income-tax Act, 1961, is the sum for which the property might "reasonably be expected to be let" from year to year. " In that matter assessee owned a building that was constructed in 1981 and after its completion, a lease deed was entered into between the assessee and the firm, L, consisting of the wife, daughter of the karta of the assessee-Hindu undivided family and a trusted employee of the karta. As per the agreement entire building was leased out to the firm on a monthly rent of Rs. 6, 250/- and the firm, in turn, entered into several agreements of lease with different tenants in respect of several portions of the building. AO found that a lease deed dated December 9, 1982, was entered into between the firm and Indian Bank showed that the rental received by that firm from its te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial available on record is considered, but in certain situations other factors can also be considered. Hon'ble Apex court has, in the cases of Durga Prasad More (82 ITR 540) and of Sumati Dayal (214 ITR 801), held that one of the factors to be considered in special circumstances is human probability. Here, we would like to re-produce the relevant portion of the judgment delivered in the case of Druga Prasad More(Supra): "Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus on a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it. . . Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece or evidence. " Similarly, in the case of Sumati Dayal(supra)Hon'ble Court had reiterated the necessity of test of 'human probability'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest received on advance-rent/security-deposit is not to be decided for arriving at ALV. In our opinion, cases relied upon by the asseesee are of no help to decide the appeal before us. 2. 3. c. We have already discussed the decision of Durga Prasad More and Sumati Dayal (supra), delivered by the Hon'ble Supreme Court. No assessee would agree for higher taxable income till the evidences, going against him, are collected and confronted to him by the AO. We find that in the present case also same thing happened. Therefore, considering the peculiar facts of the case under consideration and keeping in mind the ratio laid down by the Hon'ble Apex Court in the case of Durga Prasad More More and Sumati Dayal(supra)we are of the opinion that order of the FAA does not suffer from any legal infirmity. Therefore, upholding the order of the FAA, we decide Ground no. 1 against the assessee. 3. Next ground of appeal is about disallowance of Electricity Expenditure and Society Maintenance Charges. During the assessment proceedings, AO found that the assessee-company had offered income amounting to Rs. 2. 94 lacs under the head Income from Business and Profession from premises at 312, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at of the above expenses, electricity charges and society charges were directly related to the property, that it was common business practice that such expenses were borne by the parties who would uses the premises, that electricity bills showed that the bill amount was allocated to various cabins that were rented out in that month. Accordingly the expenses claimed under the heads electri -city and society charges, totalling to Rs. 2, 61, 977/-(1, 50, 024 +1, 11, 953), were disallowed. 3. 1. Assessee preferred an appeal before the First Appellate Authority(FAA). After considering the submissions of the assessee and the assessment order FAA held that even if the property was held as business asset the rental or the user charges from the ownership of the said house property had to be assessed under the head IFHP, that specific head of charge was provided u/s. 22 of the Act to assess the income from the ownership of house properties, that assessment of rental income u/s. 22 of the Act was not only proper but obligatory, the rent received by the assessee could not be taxed u/s. 28 of the Act as business income even if the assessee was in the business of letting out the rooms. He reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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