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2015 (4) TMI 407 - BOMBAY HIGH COURT

2015 (4) TMI 407 - BOMBAY HIGH COURT - [2015] 375 ITR 66 (Bom) - Annual Letting Value of the selfoccupied property at Ahmedabad - Standard Rent under the Bombay Rent Control Act v/s Municipal Rateable value in computing the property income u/s. 23 of the I. T. Act, 1961 - Tribunal confirming that the orders of the C.I.T. u/s. 263 holding that the original assessment computing property income on the basis of the Municipal Rateable value was erroneous and prejudicial to the interest of revenue - H .....

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s where property is let out. While carrying out exercise under section 23(1) of the Act, the departmental authorities shall follow these guidelines reproduced above provided in the Full Bench decision of the Delhi High Court and followed by a Division Bench of this Court in the case of Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT).

Reference will also have to be made to a decision of this Court in the case of Smt. Kokilaben D. Ambani vs. The Commissioner of Income Tax [201 .....

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istri, Sr. Adv. Mr P C Tripathi & Mr Raj Darak For the Respondents : Mr Vimal Gupta, Sr. Adv. & Mr Sham V Walve JUDGMENT (Per A. K. Menon, J.) By this common order, we dispose of the above Income Tax Reference and the Income Tax Appeal. 2. The Assessee, along with two others had purchased premises for a consideration of ₹ 17,75,000/-. The Assessee claims to have 1/3rd share in the property. On 29th September, 1986, the Assessee filed return of income at ₹ 979/- in respect of .....

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spect of the same Assessee to the effect that the annual value should be determined on the basis of the standard rent and not on the basis of the rateable value as determined by the Municipal Corporation. He further took the view that in determining the standard rent, the return on the investment should be calculated at 12% and computed the income from house property at ₹ 57,760/- instead of ₹ 979/- as per the return filed by the Appellant/Assessee. 3. Being aggrieved by the order, t .....

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in computing the property income under section 23 of the Income Tax Act, 1961, the Annual Letting Value of 1/3rd share in the selfoccupied property at Vimal House, Ahmedabad has to be the sum equivalent to the standard rent under the Rent Control Act and not the municipal rateable value." 4. In the meantime, the Tribunal, on the application of the Assessee/Appellant referred the following questions of law, arising out the order of the Tribunal dated 23rd December, 1991 in respect of assessm .....

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t in law in confirming that the orders of the C.I.T. u/s. 263 of the I. T. Act holding that the original assessment computing property income on the basis of the Municipal Rateable value was erroneous and prejudicial to the interest of revenue?" 5. The Tribunal had proceeded on the basis of decisions in respect of the same Assessee in the previous years. 6. Before us, Mr. Mistrilearned Senior Counsel appearing for the Assessee/Appellant has taken us through the decision of this Court in the .....

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erties requires to be taken at the amounts actually received by the Assessee as compensation in respect of different properties and not at their municipal rateable value. The Tribunal relied upon a Judgment of the Hon'ble Supreme Court in the case of Motichand Hirachand vs. Bombay Municipal Corporation reported in 1968 SC 441. On behalf of the Assessee, it was contended that a more recent decision of the Hon'ble Supreme Court in the case of Dewan Daulat Ravi Kapoor vs. New Delhi Municipa .....

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the property is required to be determined with reference to standard rent and not the actual rent received. While deciding the said Appeal in M. V. Sonavala's case (supra), the Division Bench of this Court followed a decision of the Calcutta High Court in the case of Commissioner of Income Tax vs. Prabhabati Bansali reported in (1983) 141 ITR 419 and held that for the purpose of computing the annual letting value, sum for which the property might reasonably be let from year to year or the a .....

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hile applying the provisions of rule 1BB for valuing the selfoccupied property, municipal rateable value has to be adopted instead of standard rent?" This Court held, in respect of the said question, that while applying the provisions of rule 1BB for valuing the selfoccupied property, municipal rateable value with addition of statutory deductions, if any, may be adopted instead of standard rent, for arriving at the gross maintainable rent. 9. Mr. Mistri was at pains to submit that although .....

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o which, one of us, (S.C.Dharmadhikari, J.) is a party, in which decision, this Court has followed the decision of the Full Bench of Delhi High Court and the conclusions in the said Full Bench decision are relevant to the facts of the case at hand, which read as under: "(i) ALV would be the sum at which the property may be reasonably let out by a willing lessor to a willing lessee uninfluenced by any extraneous circumstances. (ii) An inflated or deflated rent based on extraneous considerati .....

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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. We would like to remark that still the question remains as to how to determine the reasonable / fair rent. It has been indicated by the Supreme Court that extraneous circumstances may inflate / deflate the "fair rent". The question would, therefore, be as to what would be circumstances which can be .....

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