TMI Blog2003 (6) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... to use and occupy the said premises for a period of 10 years on leave and licence basis. Clauses 04 and 05 of the said agreement read as under : 04. During the entire period of the Licence, the Licensee shall pay to the Licensors a Licence Fee or Compensation of ₹ 9,825 (Rupees Nine Thousand Eight Hundred Twenty Five Only) per month. The said Licence Fee or Compensation shall be paid inclusive of all present taxes and outgoings to the extent of ₹ 9,825 per month and shall be paid in advance for the month/quarter for which it is due, the first of such payment to be made against the Licensee being put in occupation of the Licensed Premises and subsequent monthly/quarterly payments on or before the 7th day of each succeeding month/quarter. 0.5 During the period of the Licence, the Licensor shall regularly (whether payable monthly or quarterly, as the case may be) bear and pay all present taxes and outgoings (including all municipal taxes, grounds rent, cesses, duties and other outgoings due in respect of the Licensed Premises and payable to the Municipal Corporation or the State Government or to Builders or any Society or Limited Company o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not reimbursement. This is the licence fees. Apart from this licence fees, the assessee got the deposits. The benefit emanating out of those deposits is not exigible to tax. It was also argued that under section 23(1)(a) of the Income-tax Act, 1961 (hereinafter called the Act), the Assessing Officer is bound to take only the ratable value as determined by the Municipal Corporation. 8. According to Shri Dastur, the ratable value of the premises, which comprised area of 255 sq. mts. was only ₹ 10,200. So, as per section 23(1)(a) of the Act, its value is to be adopted at ₹ 10,200. This was on the basis of a letter given by Aesthetic Builders Private Limited, appended at page 60 of the paper book. In the paper book at page 59, one certificate from Sakhar Bhavan Premises Co-operative Society Limited (Proposed) dated 28-11-1995 was appended, wherein the valuation of premises No. 702 at Sakhar Bhavan was stated to be ₹ 67,331 per year. In the certificate given along with the paper book, it was stated that this evidence was available before the CIT(A). The CIT(A) did pass the order on 29-3-1993. The learned Departmental Representative submitted that the certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to take into consideration the amount for which the property might reasonably be let from year to year or the Assessing Officer may also consider the annual Municipal rateable value. The word ';or'; is disjunctive as such it is possible to take the sum for which property might reasonably let from year to year or the Municipal rateable value. It is pertinent to note that while deciding this issue the Hon'ble jurisdictional High Court took into consideration the decisions of the Apex Court rendered in the case of Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee (1980) 122 ITR 700and in the case of Sheila Kaushish v. CIT (1981) 131 ITR 435. 13. No cogent material was placed before us to indicate that what is the rateable value of the property. The piece of evidence which was placed before the revenue authorities is only certificate from Aesthetic Builders Private Limited, who said that the rateable value of the property was ₹ 10,200. In our opinion, no credence can be given to this certificate as the valuation from the Assessment Department of the Municipal Corporation was not appended to. Besides, this value is ridiculously low. For determining th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescription of law. There is no double taxation. Assuming that there was no security, rent from the let out premises was to be computed. Admittedly the property was exploited. Rental income was not offered for taxation. As such, the rental income was determined with reference to the modus prescribed under the law. As such, in our opinion, there is no double taxation. 17. We now come to the question that if in lieu of rent some benefit is given to the owner, whether the value of such benefit could be assessed as rent. 18. There was lot of discussion on this aspect. Various precedents were relied upon. It is true that no addition is possible with reference to notional interest on interest free deposits. When the ALV is determined under clause (a) of section 23(1) of the Act, with reference to the fair rent and then to such value no further addition can be made. The fair rent takes into consideration everything. The notional interest on such deposit is not any actual rent received or receivable. Under clause (b) of section 23(1) of the Act, only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruly speaking, no licence fee. No amount of compensation or licence fee is separately stipulated in the agreement. What is the consideration for the user of the property ? Shri S. Vaidyanathan, Assistant Vice President and Head Services Administration, was examined on 27-8-1992 under section 131 of the Act. Several questions were put to him. We reproduce here the question and reply of Question No. 8. Q. 8 In answer to question No. 2 you have stated that you have given interest free deposit of ₹ 1 crore 54 lakhs to M/s. Tivoli Investment and Trading Co. Can you tell me whether the interest is not charged in lieu of leave and licence premise occupied by the Bank ? Ans. The interest free security deposit of ₹ 1 crore 54 lakhs has been given to the company as a part of compensation towards our occupying the premises at Sakhar Bhavan. 21. It transpires from the reply of Shri S. Vaidyanathan that the usufructus of the deposit amount was the consideration for the user of the property. As such, the usufructus can be considered as the licence fee. Now the question arises what is that usufructus ? The assessee availed the over- draft facility on an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the agreement. This amount cannot be construed to be licence fee or rent. As such, the facts of the present case are different. Hon'ble High Court has further observed in this case that the fair rent is fixed even under the Bombay Municipal Corporation Act and Rent Act by taking into account various principles of valuation, viz., the contractors'; method, the rent method, etc. In the present case we find that there is no cogent evidence in regard to the determination of the fair rent under the Bombay Municipal Corporation Act. The certificate from Aesthetic Builders Private Limited, which is bereft of any supporting documents, cannot be relied upon. The rateable annual value for the area 255 sq. mts. at Nariman Point is given at ₹ 10,200 which is ridiculously low. The other papers filed, to increase that valuation in the Paper Book, are not to be relied upon. The learned counsel stated that these are to be ignored. 23. Hon ble jurisdictional High Court in the case of Saipansaheb WD. Dawoodsaheb v. Laxman Venkateshi Naik LVII BLR 413 (Bom.) has held that in fixing the standard rent the correct approach should be, what is the net return which a landlord should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle significant detail may alter the entire aspect. The facts of the present case are totally different from the facts of the cases referred. We have made it clear in the preceding Paras that no addition is possible with reference to the notional interest on interest free deposits. But if there is no rent paid and in lieu of that rent excessive deposit is being made, the usufructus of the said deposit may be considered as rent. Normally the deposit is made as security of the payment of rent and the vacation of premises on the expiry of lease. Here the deposit is accepted in lieu of rent. As such, in our opinion, the revenue, authorities were correct in considering the usufructus from the security as rent. We find no infirmity in the impugned orders. Accordingly we confirm the same on this count. 26. Once it is accepted that the income in question is to be computed as ';income from house property'; and not as ';Business income';, then all the deductions permissible under the house property income should be given to the assessee while computing the income. We direct the Assessing Officer to compute the house property income in accordance with law, after allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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