TMI Blog2017 (2) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees and even the assessing officer has not doubted the fact of incurring of expenses. In the circumstances, we do not see any valid reason to disallow the said expenses. We agree with the view of the ld. CIT (Appeals).- Decided against revenue Assessability of rental income - income from letting out of the properties - income from house property OR income from other sources - Held that:- The issue has been considered by the tribunal in the assessment year 2008-09 and it was held that lease rent in respect of the property situated in Village Kolkhe, Taluk Panvel, District Raigad (within the limits of gram panchayat Kolkhe) should be assessed under the head Income from House Property. Thus we direct the assessing officer to assess the rental income in respect of the said properties under the head Income from House Property. The grounds raised by the revenue on this issue are rejected. Restricting the notional income from house properties on the unoccupied house properties - Held that:- From the perusal of the assessment order, we find that the assessing officer said to have estimated the rental values for the vacant properties looking at the location and area of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent of ₹ 1,16,10,000/- received by the assessee from M/s Sanyo Resorts Pvt. Ltd was to be taxed as income from house property and not as income from other sources as held by the AO. 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in granting the relief to the assessee as per the decision of the ITAT Mumbai in the assessee s own case for A.Y.s 2008-09 2009-10 in which the perverse and bad in law findings of the CIT(A) have been relied upon. Hence the decision of the ITAT was not factually correct and had no force in law. 4. On the facts and circumstances the Id. CIT(A) erred in restricting the notional income from house properties in respect of unoccupied house properties to ₹ 5,45,760/- as against assessed by the AO at ₹ 20,65,000/- without appreciating the fact that rent estimated by the AO was reasonable having regards to the location of premises and investment made therein. 5. On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the amount of ₹ 7,20,000/- added as ALV being the notional interest from security deposit of ₹ 72 lacs in respect of let out property and assessed to tax by the AO as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment of salary and that there was no allegation that these employees are relatives of assessee or they are covered under 40A(2)(b) of the Act, the assessing officer has only disallowed these expenses observing that there was no commensurate increase in turnover. Before the ld. CIT (Appeals), the assessee relied on the decision of Supreme Court in the case of CIT Vs. Walchand and Co.(P) Ltd. [65 ITR 381] and submitted that the Hon ble Supreme Court held that the rule that increased remuneration can only be justified if there is corresponding increase in the profits of the employer was erroneous. It is the finding of the ld. CIT (Appeals) that the assessee has demonstrated that these expenses were actually incurred which are evidenced from the bank statement and the confirmations from the employees and even the assessing officer has not doubted the fact of incurring of expenses. In the circumstances, we do not see any valid reason to disallow the said expenses. We agree with the view of the ld. CIT (Appeals). This ground of revenue is rejected. 6. Coming to the ground nos. 2 and 3 relating to the assessability of rental income, the ld. Counsel at the outset submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NORTH National Highway (N.H.48) THE ELEVENTH SCHEDULE HEREINABOVE REFERRED TO PVL3-4600-2006 1) ALL that piece or parcel of Non-agricultural land or grounds and hereditaments bearing Gut / Survey No 95, Hissa No 1, totally admeasuring 20000 Sq.mts (out of area admeasuring 38960 Sq.mts.), Assessment ₹ 604.80 Paise, situated lying and being village-Kolkhe, Tal. Panvel, Dist. Raigad within the limits of Grampanchayat Kolkhe, Panchayat Samiti Panvel. 2) Four R.C.C. frame structures with cement sheet roof and one residential Premises having five rooms which are recorded in the record of Grampanchayat Kolkhe Assessment as under Milkat No. Area (Sq.mts.) 237 Godown 464.68 238 Godown 464.68 239 Godown 464.68 240 Godown 278.81 In the 11th Schedule of agreement there are four RCC old structures and one existing residential structure with 5 bedrooms with total area of 1858.72 sq.mtr. shown. Total area of the big plo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2015-16 from such properties. He arrived at the rental value from such properties for the current assessment year at ₹ 7,79,658/- before allowing deduction u/s 24(1) and rental value at ₹ 5,45,760/- after allowing the deduction. 9. The ld. DR supported the orders of the assessing officer and the ld. counsel for the assessee strongly placed reliance on the ld. CIT (Appeals) order. The counsel for the assessee further submitted that the assessing officer has estimated the rental value without any basis. He submits that no comparable cases were also brought on record by the assessing officer and therefore the estimation of the assessing officer is not scientific. 10. We have heard the rival submissions, perused the orders of the authorities below. From the perusal of the assessment order, we find that the assessing officer said to have estimated the rental values for the vacant properties looking at the location and area of the property. However, assessing officer did not cite any instances of similar properties deriving rent where the rental income is similar to the estimated value in respect of the properties of the assessee. We find that the ld. CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bay) Ltd (2000) 248 ITR 723 (Bom.) 9.2 I have considered the submission of the Authorised Representative and the order of the Assessing Officer as well as the case laws cited by the Authorised Representative. It is seen that the total rental income received by the assessee in respect of the impugned properties is ₹ 1,16,10,000/- per annum and the assessee has received interest free security deposit of ₹ 72,00,000/-. From these figures, it is clear that the amount of security deposit is not disproportionately higher compared to the rent received by the assessee. It is equivalent of approx 7.5 months rent, which is not abnormal considering the general market practice of taking 6-9 months rent as security deposit. It is settled law that the notional interest on the interest free deposit cannot be added to the rental income unless it is demonstrated that the security deposit was taken as a colourable device to reduce the rent and the incidence of tax hands of the assessee. In cases where the security deposit is abnormally high i.e. many times the rental income, because of which the rental fixed is abnormally low, such a decision could be justified. However, in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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