TMI Blog2011 (1) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on 10.8.05. Consequent to the said action, proceedings u/s 153-A were initiated by the A.O. for the years under consideration i.e. A.Y. 2001-02 to 2006-07. In the returns originally filed, the assessee had declared income from business centre in the form of rent as its business income against which various expenses were claimed. In the returns filed in response to notices issued by the A.O. u/s 153-A, the assessee, however, offered the said income under the head income from house property and after claiming deduction u/s 24(a) for repairs and maintenance on fixed percentage basis, the balance amount was offered to tax. In A.Y. 2001-02, the gross rental income received by the assessee was declared at ₹ 14,25,000/-. According to the A.O., the assessee should have declared gross rental income of ₹ 14,70,000/- for a period of six months from October to March 2001 calculated @ ₹ 2,45,000/- per month as per the lease agreements with three tenants. He, therefore, adopted the said amount of ₹ 14,70,000/- as gross rental income received by the assessee for the purpose of computing its total income. In A.Y. 2002-03, the assessee had declared gross rental income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion might reasonably be expected to let out which represented annual letting value of the said property in the case of the assessee. As regards the claim of the assessee that the annual letting value of the said property should be taken at ₹ 79,898/- being the annual ratable value as determined by the Municipal Corporation, the ld. CIT(A) held that the said value claimed by the assessee was wholly unsubstantiated and it was not supported by any certificate issued by the Bombay Municipal Corporation and was also bereft of any clarification as to how the annual value was determined. The ld. CIT(A) thus confirmed the additions made by the A.O. on this issue. 6. The learned counsel for the assessee submitted that in so far as A.Y. 2001-02 is concerned, the property was let out by the assessee only w.e.f. 7.10.2000 and not w.e.f. 1.10.2000 as taken by the A.O. He invited our attention to the copy of the relevant agreement to substantiate this submission and pointed out that the rental income receivable to the assessee for the period 7.10.2000 to 31.3.2001 was actually ₹ 14,25,000/- and not ₹ 14,70,000/- as calculated by the A.O. by taking the rental period as 1.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts three sister concerns during the years under consideration. In terms of the said lease agreement, monthly rental @ ₹ 10,000/- per month each was received by the assessee from M/s Medical Engineers Khurana Gases Pvt. Ltd. and the rental income of the third property was received by the assessee from its sister concern M/s Everest Kanto Cylinders Ltd. The said third property was let out by the assessee w.e.f. 7.10.2000 on monthly rent which was initially fixed at ₹ 2,25,000/- with interest free security deposit @ ₹ 1.25 crores received from the tenant. The rent actually received by the assessee for the period 7.10.2000 to 31.3.2001 amounting to ₹ 14,25,000/- was shown by the assessee while computing its income under the head income from house property . The A.O., however, took the same at ₹ 14,70,000/- calculated for a period of six months i.e. from October 2000 to March 2001 @ ₹ 2,25,000/- per month under the wrong impression that the property was let out by the assessee w.e.f. 1.10.2000. As pointed out by the learned counsel for the assessee from the relevant agreement, the said property was actually let out by the assessee w.e.f. 7.10.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2004-05, 2005-06 and 2006-07 respectively. On appeal, the ld. CIT(A) upheld this action of the A.O. in increasing the annual letting value of the assessee s property by relying on the provisions of section 23(1)(a) and while supporting the case of the Revenue on this issue, the ld. D.R. has placed strong reliance on the Third Member decision of the Tribunal in the case of ITO vs. Baker Technical Services (P) Ltd. (supra) wherein it was held that relying on the decision of Hon ble Patna High Court in the case of Kashi Prasad Katarvka vs. CIT 101 ITR 810 that the ratable value determined under the Municipal Law is not binding on the A.O. if the A.O. can show that the said value does not represent the correct fair rent. 10. The learned counsel for the assessee, on the other hand, has relied on the decision of co-ordinate Bench of Division Bench of this Tribunal in the case of Reclamation Realty India (P) Ltd. (supra) in support of the assessee s case on this issue. He has also filed a copy of the said order passed by the Tribunal in the said case and a perusal of the same shows that the Third Member decision in the case of Baker Technical Services (P) Ltd. (supra) has been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndlord and that actual rent is only an indicator what the landlord might reasonably expect to get from a hypothetical tenant. The Hon ble Supreme Court further held that where tenancy is subject to rent control legislation, standard rent would be a proper measure and in any event, annual value cannot exceed such standard rent. 13. The Tribunal in its order passed in the case of Reclamation Realty India P. Ltd. also took note of the decision of the Hon ble Supreme Court in the case of Mrs. Sheila Kaushish vs. CIT 131 ITR 435 (SC), wherein the question arose in the context of provisions of section 23 of the Income Tax Act and it was held by the Hon ble Supreme Court that the ratio of its decision in the case of Dewan Daulat Rai Kapoor (supra) would be equally applicable in interpreting the definition of Annual Value given in section 23(1) of the Income Tax Act. It was held that these definitions are given in identical terms and it was impossible to distinguish the definition of annual value given in section 23(1) of the Income Tax Act from the definition of that term given in the Delhi Municipal Corporation Act 1957 and the Punjab Municipal Act, 1911. It was therefore held ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) the said decision of the Hon ble Calcutta High Court in the case of Prabhabati Bansali (supra) has been subsequently followed by the Hon ble Bombay High Court in the case of M.V. Sonavala vs. CIT 177 ITR 246 (Bom) wherein the question posed to Their Lordships was whether the actual compensation received could be taken as annual value of the property as against the Municipal Ratable Value and the same was answered by the Hon ble Bombay High Court in the negative that is against the Department and in favour of the assessee. 15. In our opinion, the issue involved in the present case thus is squarely covered by the decision of co-ordinate Bench of this Tribunal in the case of Reclamation Realty India P. Ltd. (supra) which in turn has relied on and followed the judgments of Hon ble Apex Court and jurisdictional High Court on a similar issue and respectfully following the said judicial pronouncements, we reverse the impugned order of the ld. CIT(A) on this issue and direct the A.O. to adopt the rent actually received by the assessee during A.Y. 2003- 04 to 2006-07 as annual value of the property being more than the Municipal Ratable Value. The additions made by the A.O. and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the various heads. As rightly observed by the ld. CIT(A), the nature of most of the said expenses is such that they can be said to have been incurred to maintain the entity of the assessee company and its overall operations. The possibility of the said expenses having been partly incurred by the assessee in relation to earning of house property income thus cannot be ruled out and in the absence of any details prepared and furnished by the assessee giving exact break-up of the said expenses, the apportionment thereof is required to be made on some reasonable basis. In this regard, the learned counsel for the assessee has submitted that the electricity charges paid by the assessee in respect of portion of the premises let out were recovered from the tenants to the extent of 90% as per the terms of the agreement. Keeping in view this submission of the assessee and having regard to all the facts of the case, we are of the view that it would be fair and reasonable to estimate the expenses attributable to the earning of house property income at 20% of the total expenses. Accordingly, we modify the impugned order of the ld. CIT(A) on this issue and direct the A.O. to recompute the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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