TMI Blog2015 (5) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that:- for determining the income from the property, it should be rate of return on the investment of similar amount in another asset. Therefore, in our opinion, the CIT(A) was fully justified in estimating the ALV on the basis of interest which assessee would have earned on the investment of the similar amount. The ld. Counsel for the assessee had argued that the rate of interest applied by the CIT(A) at 8.5% is excessive. In support of which, he gave various examples of investment in FDRs which faced the interest ranging from 5.52% to 7.5%. Copies of those certificates from the bank are placed at page No. 29 onwards of the assessee’s paper-book. However, we find that those investments were for a very short period. In first case where interest rate was 5.5%, the investment was only for 46 days. In another case where the interest was 5.6%, it was only for 31 days. In another case, where the rate of interest was 6%, it was for 91 days and in another case where the period of deposit was 366 days, the rate of interest was 7.75%. The ld. DR was fully justified that if the rate of return on the investment is considered, then it should be a long term investment because in any property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any logical basis and in replacing the rate of 17.25% adopted by the A.O. being the rate of interest on borrowings from the Bank at the relevant time forming the basis for determining of ALV of the rented properties. iii. On the facts and circumstances of the case, the Ld. Commissioner of Income-tax (A) ought to have upheld the order of the Assessing Officer. iv. It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set aside and that of the Assessing Officer be restored. ITA No.2639/Ahd/2013 - Assessee s appeal : AY 2005-06 3. In this appeal by the assessee, following grounds are raised:- i. Ld. CIT(A) gravely erred in law and on facts in adopting rate @ 8.5% as return of investment confirming addition of ₹ 11,93,094/- from total addition of ₹ 24,21,279/- made by AO towards house property income. Ld. CIT(A) erred in ignoring the submissions that reasonable rate of return would be 5.5 to 7.5% on long term Fixed deposit as confirmed by the Bankers of the appellant. Ld. CIT(A) ought to have accepted rate of interest as confirmed by the Bankers. It be so held now. ii. Ld. CIT(A) further erred in law and on facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble rate of interest on the cost of immovable property. Needless to mention, he will allow adequate opportunity of being heard to the assessee while adjudicating the matter. 5. The Assessing Officer gave effect to the order of ITAT vide his order dated 03.12.2012 passed u/s 143(3) r.w.s. 254 of the Act, wherein the Assessing Officer estimated income at the rate of 17.25% of the investment in the property by the assessee. On appeal, the CIT(A) vide his order dated 11.09.2013 computed the income at 8.5% of the cost of the property and allowed part relief to the assessee. The relevant portion in the order of the CIT(A) reads as under:- 2.2 I have carefully considered the rival contentions. I am of the opinion that the stand of A.O. in adopting the interest as if the appellant is borrowing funds equivalent to the investment is not reasonable. The appellant had already invested in the property and what is to be worked out is a reasonable rate of return from such investment, in accordance with the directions given by Hon ble ITAT. In such a scenario the reasonable rate of return can be equated with the prevailing interest rate on the long term fixed deposit kept with the banks/NBF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5% to 7.5%. He, therefore, submitted that the average rate of interest on the FDRs was around 6.5% and therefore, income should be estimated at the rate of 6.5% on the cost of the property let out by assessee to sister concern. 8. The ld. Departmental Representative, on the other hand, relied upon the order of the Assessing Officer and he stated that the Assessing Officer was fully justified in estimating the interest at the rate of 17.25% on the basis of interest which would have been required to be paid by the assessee had borrowed money being utilized. He alternatively submitted that if the assessee s contention with regard to rate of return on investment is accepted, then the examples in the investment in FDRs by the assessee should not be accepted because those investments are for a short period; while the investment in the property is for the long period. He also submitted that the rate of return should be considered on the basis of market value of the property in each year and not simply on the basis of cost of the property. 9. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that this issue is squarely co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee had argued that the rate of interest applied by the CIT(A) at 8.5% is excessive. In support of which, he gave various examples of investment in FDRs which faced the interest ranging from 5.52% to 7.5%. Copies of those certificates from the bank are placed at page No. 29 onwards of the assessee s paper-book. However, we find that those investments were for a very short period. In first case where interest rate was 5.5%, the investment was only for 46 days. In another case where the interest was 5.6%, it was only for 31 days. In another case, where the rate of interest was 6%, it was for 91 days and in another case where the period of deposit was 366 days, the rate of interest was 7.75%. The ld. DR was fully justified that if the rate of return on the investment is considered, then it should be a long term investment because in any property nobody would make investment just for few days. Considering all these facts, in our opinion, the CIT(A) has rightly applied the rate of interest of 8.5%. We, therefore, do not find any justification to interfere with the order of the CIT(A), the same is sustained; and on this point, the ground appeal of Revenue as well as asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in respect of improper computation of the so called notional rental income by AO. Ld. CIT(A) despite having noted the submissions of the appellant instead of adjudicating upon the same confirmed the addition on the basis of order of the previous year. Ld. CIT(A) alternatively ought to have directed AO to compute the income on the basis of documentary evidence and submissions of the appellant. iii) Ld. CIT(A) has erred in law and on facts in confirming disallowance of ₹ 9,11,602/- made by AO treating revenue expenditure incurred as capital in nature. Both the lower authorities erred in not appreciating the fact that the expenses were incurred for conduct of the business more profitably and no new asset was acquired by the appellant. Ld. CIT(A) ought to have allowed the expenses incurred and quashed the order of AO. iv) Levy of interest u/s 234B/234C and 234D of the Act is not justified. v) Initiation of penalty u/s 271(1)(c) of the Act is not justified. vi) Withdrawal of interest u/s 244A is not justified. 15. The issue raised by the assessee in Ground Nos. 1 2 is similar to the issue raised by the assessee as well as Revenue in their respective appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty u/s 271(1)(c) of the Act is not justified. 20. The issue raised by the assessee in Ground Nos. 1, 2 3 is similar to the issue raised by the assessee as well as Revenue in their respective appeal for Assessment Year 2005-06. For the detailed discussion in paragraph 10 above, we direct the Assessing Officer to compute the income at the rate of 8.5% on the cost of the building let out by the assessee and treat the same as ALV and accordingly determine the income from house property. 21. Ground No.4 of the assessee s appeal was not pressed at the time of hearing; accordingly the same is rejected. 22. Ground No. 5 is with respect to charging of interest u/s 234B of the Act, which is admitted to be consequential. Accordingly, the Assessing Officer is directed to work out interest, if any, in accordance with law, after re-determining the income as per our order. 23. No arguments were advanced with regard to ground No.6; accordingly, the same is treated as not pressed and rejected as such. ITA No.661/Ahd/2013 - Assessee s appeal : AY 2009-10 24. In this appeal, the assessee has raised following grounds:- i) Ld CIT (A) erred in law and on facts in enh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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