TMI Blog2011 (1) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee is definitely a part of the compensation towards the buying of the premises. As such, the notional interest has to be included to find out the correct annual value. The interest free deposit form part and parcel of the license agreement and as such, the said deposit has an element of annual value. The reliance placed by the assessee in the cases of J.K. Investors, Satya Co. and the CIT(A) s order for A.Y. 2001-02 could not be accepted as the decisions in those cases have not reached the finality. Accordingly, the AO calculated 12% of the interest free deposit amounting to ₹ 1,48,33,200/- i.e. ₹ 17,79,984/- and added the same to the rent shown by the assessee in determining the ALV. 3. Aggrieved by the order of the AO, assesseepreferred an appeal before the Learned CIT(A) and submitted as follows: It was submitted that the addition of notional interest was done without verifying the facts. The AO has wrongly applied the decisions in the case of Trivoli Investment Trdg. Co. Ltd as in the said case the landlord was not in receipt of any rent and the only compensation received by the landlord was the interest free deposit. The rent received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. We are reproducing the relevant portion hereunder: The learned D.R. submitted that the CIT(A) was not correct in following the decision of the Hon ble Bombay High Court in the case of J.K.Investors (Bombay) Ltd. (supra) because that decision related to determination of annual value u/s.23(1)(b) of the Act. He drew our attention to the penultimate paragraph of the said decision and submitted that the Hon ble Court has observed therein as follows: We once again repeat that whether such notional interest could form part of the fair rent under S.23(1)(a), is expressly left open. He further drew our attention to a third member decision of the ITAT Mumbai in the case of ITO Vs. Baker Technical Services (P) Ltd. 126 TTJ (Mumbai)(T M) 455 wherein it was held that annual value determined by the Municipal authorities is not binding on the AO while determining the annual value under Sec.23(1)(a), if it can be shown that the rateable value under the municipal laws does not represent the correct fair rent. It was submitted by him that the Rent Control laws are not applicable in the case of the Assessee because the tenant was a Bank with a share capital exceeding a particular limit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon ble Bombay High Court in the case of Smitaben N. Ambani Vs. CWT 323 ITR 104 (Bom) wherein the Hon ble Bombay High Court in the context of Rule 1BB to the Wealth Tax Rules, which uses the same expression the sum for which the property might be reasonably expected to let from year to year as is found in Sec.23(1)(a) of the Act, held that rateable value as determined by the Municipal authorities shall be the yardstick. In coming to the above conclusion, the Hon ble Court followed its own decision in the case of M.V.Sonavala (supra) a decision rendered in the context of Sec.23 of the Act. A reference was made to the CBDT circular No.204 dated 24/7/1976 wherein it was explained that the sum for which the property might be reasonably expected to let from year to year as is found in Sec.23(1) of the Act refers to the rateable value as determined by the Municipal authorities. The learned Counsel for the Assessee also distinguished the case laws relied upon by the learned D.R. It was submitted that the decision in the case of Baker Technical Services (P) Ltd., was a case where the facts were that in the first four months of the previous year, the month rent was &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue. We are not making reference to those decisions, since, in our opinion the aforesaid pronouncement of Hon'ble Bombay High Court considers the decisions of Hon ble Calcutta High Court which in turn has considered the law laid down by the Hon'ble Apex Court on the issue. It is clear from the aforesaid exposition of law that charge u/s. 22 is not on the market rent; but is on the annual value and in the case of property which is not let out, municipal value would be a proper yardstick for determining the annual value. If the property is subject to rent control laws and the fair rent determined in accordance with such law is less than the municipal valuation then only that can be substituted by the municipal value. The decision in the case of Mrs. Sheila Kaushish (supra) mentions standard rent under the Rent Control Act as one of the yardsticks. We also find from the decision of Hon'ble Calcutta High Court in the case of Smt. Prabhabati Bansali (supra) that standard rent, if it does not exceed the municipal valuation alone can be adopted in place of municipal valuation. As far as decisions relied upon by the learned D.R. in the case of Baker Technical Services (P) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `For the reasons given above, we hold that the annual value (also referred to as municipal valuation/ rateable value) adopted by the municipal authorities in respect of the property at ₹ 27,50,835 should be the determining factor for applying the provisions of Sec.23(1)(a) of the Act. Since the rent received by the Assessee was more than the sum for which the property might reasonably be expected to let from year to year, the actual rent received should be the annual value of the property u/s.23(1)(b) of the Act. Notional interest on interest free security deposit/rent received in advance should not be added to the same in view of the decision of the Hon ble Bombay High Court in the case of J.K.Investors (Bombay) Ltd. (supra). We hold accordingly. The appeal of the revenue is dismissed. Respectfully following the decision of the co-ordinate Bench of the Mumbai Tribunal, we dismiss this ground raised by the Revenue. 8. Ground No. 2 raised by the revenue reads as follows: On the facts and in circumstances of the case and in law, the Learned CIT(A) has erred in deleting the addition of ₹ 4,58,096/- on account of the maintenance expenses thus ignoring the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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