TMI Blog2017 (9) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for taxation, then there was no justification for taxing it again. We agree with the FAA that AO had not properly understood the entries in the books of account. Confirming the his order, we decide second ground of appeal against the AO. Addition under the head income from house property - computation to taxable rent - Held that:- As gone through the registered leave and license agreement. We find that assessee owned several properties, residential as well as commercial in Kalyan, that the AO had estimated the ALV of all the properties by adopting the highest rent(Rs. 238/-per sq. ft. ), that no comparable instance of property located in same building /area and having higher rent than the rent received by the assessee was brought on record. It is also a fact that the actual rent received by the assessee is substantially higher than the rateable value as per the local authority i. e. Kalyan-Dombivili Municipal Corporation (KDMC). The AO had not alleged that the assessee had received any amount over and above the rent received in pursuance of the leave and license agreement. - The AO has estimated the house property income without any basis and ignoring the principles enumerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, the Departmental Representative(DR)stated that the matter could be decided on merits. The Authorised Representative(AR) supported the order of the FAA and relied upon the case of Matru Ashish Co-op Hsg. Soc. Ltd. (ITA/316/Mum/2010, dt. 27. 8. 2008). We find that the FAA has allowed the appeal of the assessee considering the judgment of Hon'ble Bombay High Court. Respectfully following the judgment of the Hon'ble High Court we decide the first Ground of appeal against the AO. 3. Second Ground of appeal is about deleting the addition of ₹ 1. 29 lakhs. During the assessment proceedings, the AO found that a sum of ₹ 1. 85 lakhs was credited as rent to the capital account of the assessee in his proprietary concern M/s. Sab Reality. Not finding the specific amount of rent, being part of computation of income, he held that the amount in question was over and above the rental income offered to tax. Accordingly, he made an addition of ₹ 1, 29, 630/- to the total income of the assessee, after granting deduction of 30% u/s. 24(a) of the Act. 3. 1. The assessee filed detailed submission before the FAA who held that the assessee was maintaining financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the available material, including the leave and license agreements entered into by the assessee, the FAA held that the assessee was holding several immovable properties in Kalyan, that each of the property was located at a different location, that it was leased out to third parties. Referring to the provisions of section23(i)(a) of the Act, he held that the properties owned by the assessee were located at different places and had different specific characteristics, that they had their individual advantages and disadvantages, that the AO was not justified in putting all the properties in one basket and multiplying total area of the properties with the highest rent , that while calculating the rental income the AO had clubbed together old and new properties, ground floor and basement premises, that the maximum area of any property was the basement premises (2600 sq. ft. ) that was acquired in the month of October 2008 for a consideration of ₹ 10. 50 lakhs, that the said property was rented out for a monthly rent of ₹ 50, 700/-, that the AO had substituted the rent of this property at ₹ 74. 25 lakhs, that as against the actual rent of ₹ 50, 700/- per month th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property which consists of any buildings or lands appurtenant thereto, if the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), it is that amount so received or receivable which shall be deemed to be the annual value for the purposes of computing the tax under the head Income from house property . The principles applicable in determining the annual letting value are : (i) the annual letting value would be the sum at which the property may be reasonably let out by a willing lessor to a willing lessee uninfluenced by any extraneous circumstances ; (ii) an inflated or deflated rent based on extraneous considerations may take it out of the bounds of reasonableness ; (iii) the actual rent received, in normal circumstances, would be a reliable evidence unless the rent is inflated or deflated by reason of extraneous considerations ; (iv) such annual letting value, however, cannot exceed the standard rent as per the rent control legislation applicable to the property ; (v) if the standard rent has not been fixed by the Rent Controller, then it is the duty of the Assessing Officer to determine the standard rent as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him from the deals and transactions and documents in relation thereto can be applied or whether a departure therefrom can be made. Before the Assessing Officer determines the rate by the above exercise or similar permissible process he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other considerations makes it unreasonable must precede the undertaking of the above exercise. In the case of Akshey Textiles(supra), the Hon ble High Court has held as follows: Section 23(1)(a) of the Income-tax Act, 1961, uses the expression the sum for which the property might reasonably be expected to be let from year to year . This has to be considered in the context of the applicable rent laws. The courts have construed the rent receivable in such circumstances to be either the standard rent or the rateable value as fixed by the local authority. Before the amendment brought about to section 23 by the Finance Act, 2001, with effect fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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