TMI Blog2001 (6) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... of the extended additional property is ₹ 27,02,458 and not ₹ 23,69,958. The common grounds of appeal taken up by the assessee for both the assessment years are as follows : (i )On the facts and in the circumstances of the case, the learned CIT(A) erred in estimating Annual Letting Value at ₹ 2,84,394 (12 per cent of ₹ 23,69,958). Such determination is not in accordance with the provisions of section 23 of the IT Act and the Bombay Rent Control Act and is unreasonable and excessive. (ii)In estimating the Annual Letting Value, in relation to addition to the existing residential house owned by your Appellant, the learned CIT(A) should have taken into consideration, (a )the principles laid down in Mrs. Shiela Kaushish v. CIT [1981] 131 ITR 435 (SC), Dewan Daulat Rai v. NDMC [1980] 122 ITR 700 (SC) and Dr. Balbir Singh v. MCD [1985] 153 ITR 388 (SC), and (b)having regard to the provisions of fixing the standard rent under the relevant provisions and decisions under the Bombay Rent Control Act, and (c )the annual letting value revised and enhanced from ₹ 28,485 to ₹ 74,860 by the Municipal Corporation of Greater Bombay an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, the bungalow was rented to the above persons for ₹ 34,092 during the assessment year 1993-94. The total expenses incurred by the assessee for this bungalow were ₹ 67,354 and ₹ 34,092 for the assessment years 1989-90 and 1993-94 respectively. The Assessing Officer thus observed that the expenses incurred by the company for the maintenance of the bungalow are much more than the actual rent received. Therefore, the Assessing Officer has stated that taking into consideration the investment made by the assessee in the bungalow, the rent charged by the company from the tenants was far below the rental value. The Assessing Officer also observed that the tenants of the property are related to each other and their relation is father and a son and they are both directors of the assessee-company and Mr. Mahabir Prasad Jatia is a Chairman. The Assessing Officer stated that during the course of assessment proceedings, the assessee has filed resolution by the assessee company and M/s. FPL. As per this resolution, Mr. Chem Mech Pvt. Ltd., has to offer the company s property at 38, Little Gibbs Road, Mumbai to Mr. S.M. Jatia, Managing Director of M/s. FPL at a monthly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the same needs to be worked out to arrive at the fair market value in terms of section 23 of the Act. The learned CIT(A) has further pointed out that ₹ 23,69,958 was spent on the higher floors and the ground floor was purchased as constructed and in that portion at the time of purchase, a tenant was having possession. Therefore, for the ground floor being old, the learned CIT(A) has considered ALV at ₹ 9,165 as fair. However, for the remaining portion, he has confirmed the findings of the Assessing Officer that 12 per cent of the investment of ₹ 23,69,958 should be the ALV. Thus according to him, the ALV should be worked out at ₹ 9,165 plus 12 per cent of ₹ 23,69,958 for the assessment year 1993-94 and for the assessment year 1989-90 being of 21 months should accordingly be calculated. Aggrieved by the order of the learned CIT(A), both the Department and the assessee filed the present appeals before the Tribunal. 4. At the time of hearing, the learned counsel for the assessee contended that the property is subject to the provisions of the Bombay Rent Control Act and the ALV in terms of section 23 cannot exceed the standard rent. He further arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty might reasonably be expected to let from year to year. It is this artificial or statutory income which is the annual value of the property and is different from the mandatory benefits derived from the property or the profit arising to the owner of the house property therefrom. The owner of the property is liable to tax on the annual value and not on the actual income arising therefrom whether it has been let out or not. As per the provisions of section 23 of the Act, the annual value is the reasonable amount which is expected when let out from year to year irrespective of the method of accounting followed by the owner. It has been held by the Supreme Court in the case of Amolak Ram Khosla v. CIT [1981] 131 ITR 5892 and Mrs. Shiela Kaushish (supra) that When the building is covered under the Rent Control Act and the standard rent is fixed, the assessing authority can fix up the annual value based on standard rent. Generally, the annual value cannot exceed standard rent which is based on the cost of the property from time to time. In Bombay, it is the Annual Ratable Value as fixed by the Municipal Corporation Act which is taken as annual value as the same is based on the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual rent received by the assessee as per the provisions of section 23(1)(b) of the Act. For the assessment year 1989-90, the assessee received the rent of ₹ 59,661 along with that the assessee has also received ₹ 20 lakhs interest free from M/s. FPL, in which Shri S.M. Jatia one of the tenants is a Director. Shri S.M. Jatia is also a Director in the assessee-company. Shri Mahabir Prasad Jatia, father of Shri S.M. Jatia, another tenant is also a Director in both the companies. Another Director, Mr. Vijaykumar Jatia is also a brother of Shri S.M. Jatia, and also a Director in the above company. The third tenant is HUF of Shri M.P. Jatia. Shri S.M. Jatia is also a coparcener of the HUF. Thus, both the companies are closely related. Therefore, interest-free deposit of ₹ 20 lakhs with the assessee-company has definitely contributed to bring down the rental value to a nominal amount. We fully agree with the Assessing Officer that the resolution passed by both the companies for letting out the property to Shri S.M. Jatia against interest-free deposit of ₹ 20 lakhs was infact to accommodate each other by applying dubious method of tax planning. Therefore, to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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