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2015 (10) TMI 2026 - ITAT MUMBAI

2015 (10) TMI 2026 - ITAT MUMBAI - TMI - Addition of income from House Property u/s. 23(1 )(a) - CIT(A) confirming the addition by rejecting the submissions of the assessee that no interest on interest free advance was assessable as income from House Property - Held that:- In the present case it is seen that the AO has not made any enquiry, nor any material has been brought on record to show that rent received by the assessee was lesser then the fair market rent nor any inquiry or investigation .....

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rected to be deleted. - Decided in favour of assessee.

Addition on account of disallowance of Bank Interest and Bank Charges on the ground that the Bank Loan is utilized for other than business purpose - Held that:- As it has been argued that part of the loan raised during the year has been utilized for repayment of the old loan. This fact has not been controverted by the Ld. DR.

Also stated before us that no disallowance has been made out to the amount of interest paid on .....

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are directed to be allowed. - Decided in favour of assessee in part. - ITA NO.6878/Mum/2013 - Dated:- 11-9-2015 - Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Assessee : Shri Vishwas Mehendole (AR) For The Revenue : Shri Satyajit Mandal (DR) ORDER Per Ashwani Taneja (Accountant Member): The present appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-20, Mumbai dated 02.09.2013 for the assessment year 2010 .....

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nterest free advance of ₹ 25,15,000/- was assessable as income from House Property u/s. 23(1 )(a) of the income tax Act, 1961. Without prejudice to the aforesaid Ground of appeal. (iii) On the facts and in the circumstances of the case and in law, learned CITA erred in taking the security deposit amount at the ₹ 25,15,000/- instead of correct amount of ₹ 25,00,000/-. (iv) On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in holding that .....

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tilized for other than business purpose. (vi) The appellants crave leave to add, alter, amend or delete any ground(s) of appeal either before or during the course of hearing of the appeal. 2. Ground No.1 and 6 are general and do not need any specific adjudication. 3. Ground no.2: The assessee has challenged the action of Ld. CIT(A) in confirming the addition of ₹ 4,80,754/- under the head income from House Property by rejecting the submissions of the assessee that no interest on interest f .....

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received by the assessee from the tenant of the aforesaid property. According to the AO, as per section 23(1)(a), house property income was taxed on annual value which was deemed to be sum for which the property might reasonably be extracted let from year to year. The assessee claimed that municipal valuation of the aforesaid party was only of ₹ 35,595/- But, claim of the assessee was not accepted by the AO. It was observed by the AO that the fair rent of the property would be determined, .....

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increased monthly rent from a sum of ₹ 60,000/- per month to ₹ 85,150/- per month. 3.2. Before the Ld. CIT(A), the assessee submitted that in view of judgment of Hon ble Delhi High Court in the case of CIT vs. Moni Kumar Subba 333 ITR 38 (Delhi) and judgment of Hon ble Bombay Bench of ITAT dated 05.11.2012 in the case of Gagan Trading Co. Ltd. vs. ACIT, in view of Circular No.204 dated 24.07.1976 issued by the CBDT, the expression the Annual Letting Value has to be decided on either .....

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luation, Fair Rent or in Maharashtra Rent Control Act. The Ld. CIT(A) did not accept the submissions of the assessee on the ground that element of interest income could not have been ignored while considering the genuineness of fair rent of the property. 3.3. Before us, Ld. Counsel has submitted that the addition made was illegal and contrary to the provisions of Income Tax Act, 1961. It has been submitted by the Ld. Counsel that AO has not ascertained the fair market rent of the impugned proper .....

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vs. Mrs. Bharati Anirudh Kilachand 53 taxmann.com 403 and judgment of Hon ble Bombay High Court in the case of CIT vs. Tip Top Typography 368 ITR 330 (Bom). On the other hand, Ld. DR has argued that the AO has rightly made the addition and therefore same should be upheld. 3.4. We have heard both the parties and have gone through the judgments relied upon the Ld. Counsel which are directly on this issue. We have also gone through the relevant material placed on record for the purpose of computat .....

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cedure is stipulated u/s 23(1) of the Income Tax Act. As per the prescribed procedure, the Assessing Officer has to first determine the sum for which the property might reasonably be expected to fetch the rent from year to year as per clause (a) of sub-section 1 and then if the property is let out, compare the same with the annual/actual rent received or receivable. Therefore, the reasonable rent expected to be fetched by the property by letting out year to year has to be determined as per secti .....

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ine the reasonable rent to be fetched by the property, the Assessing Officer has to conduct the proper enquiry and take the necessary steps to find out the prevailing fair market rent. In the case in hand, the Assessing Officer has not carried out any enquiry or made any attempt to determine the fair market rent u/s 23(1)(a). The Assessing Officer has made the addition by adopting 12% interest rate on the interest free deposits and determined the annual value of the property by adding the said n .....

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Jurisdictional High Court in the case of CIT Vs. Tip Top Typography (Supra) in para 47 as under:- 47. We are of the view that where Rent Control Legislation is applicable and as is now urged the trend in the real estate market so also in the commercial field is that considering the difficulties faced in either retrieving back immovable properties in metro cities and towns, so also the time spent in litigation, it is expedient to execute a leave and license agreements. These are usually for fixed .....

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carrying out the necessary investigation and enquiry. He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make would be for ascertaining the going rate. He can make a comparative study .....

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transactions and documents in relation thereto can be applied or whether a departure there from can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advantages and benefits an office or a block on the upper floor may fetch higher returns or vice versa. Therefore, there is no magic formula and everything depe .....

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ons makes it unreasonable must precede the undertaking of the above exercise. After the above ascertainment is done by the Officer he must, then, comply with the principles of fairness and justice and make the disclosure to the Assessee so as to obtain his view. 7. Since in the case in hand, the Assessing Officer had not conducted any enquiry or investigation to find out the effect of interest free deposits and to determine the fair market rent expected to be fetched by the property in question .....

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licensor or a willing licensee uninfluenced by any extraneous circumstances would afford reliable evidence of what the landlord might reasonably be expect to get from a hypothetical tenant. She has in making this submission, answered the issue and summed up the conclusion as well. Then, it is but natural and logical that in the event, the transaction is influenced by any extraneous circumstances or vitiated by fraud, or the like that the Assessing Officer can adopt a fair rent based on the opini .....

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Bank rate is the income of the assessee till the determination or conclusion of the transaction. The Assessing Officer ought to be aware of several aspects and matters involved in such transactions. It is not necessary that if the license is for three years that it will operative and continuing till the end. There are terms and conditions on which the leave and license agreement is executed by parties. These terms and conditions are willingly accepted. They enable the license to be determined e .....

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be commercially unviable to enter into a lease and, therefore, this mode of inducting a third party in the premises is adopted. This may not be the trend tomorrow, therefore, we do not wish to conclude the matter by evolving any rigid test. 52. We have also noted the submissions of Shri Ahuja. We are of the opinion that even in the cases and matters brought by him to our notice, it is evident that the Assessing Officer cannot brush aside the rent control legislation, in the event, it is applicab .....

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t Control Act, 1999 if the same is applicable or leave the parties to have it determined by the Court or Tribunal under that Act. Until, then, he may not be justified in applying any other formula or method and determine the fair rent by abiding with the same. If he desires to undertake the determination himself, he will have to go by the Maharashtra Rent Control Act, 1999. Merely because the rent has not been fixed under that Act does not mean that any other determination and contrary thereto c .....

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ses and to which our attention is not invited the principles laid down in the decisions of the Hon ble Supreme Court and referred to by the Full Bench of the Delhi High Court would govern the enquiry. 54.As a result of the above discussion, we are of the opinion that wherever the Assessing Officer has not adhered to the above principles, and his finding and conclusion has been interfered with, by the higher Appellate Authorities, the revenue cannot bring the matter to this Court as no substantia .....

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s and circumstances of the case, where the Assessing Officer has not conducted any enquiry or investigation and by following the Judgment of Hon ble Jurisdictional High Court in the case of CIT Vs. Tip Top Typography (supra), we do not find any reason to interfere with the order of CIT(A) qua this issue. 3.5. Thus, in nutshell, in para 7 of aforesaid judgment, Hon ble Mumbai Bench of ITAT has held that since the Assessing Officer had not conducted any enquiry or investigation to find out the eff .....

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done to find out the effect of interest free deposits and to determine the fair market rent expected to be fetched by the property in question, as per clause (a) of section 23(1). Under these circumstances, AO cannot be allowed to make addition on account of notional interest. Since this issue stands squarely covered with the aforesaid judgments, it is held that the addition made by the AO of ₹ 2,20,316/- is contrary to law and facts and the same is directed to be deleted. 4. Ground No.3: .....

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nk Loan is utilized for other than business purpose. 5.1. The brief facts are that during the year assessee was in the business of resorts. During the year assessee had taken loan from Bajaj Finance. This loan was utilized for land purchased and rest has been used in regular course of business. The assessee officer made following disallowances on the ground that loan was not utilized for the purpose of business: Sr. No. Head Amount (Rs.) 1. Interest on loan Rs.8,26,301 2. Loan Processing Charges .....

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