TMI Blog2017 (9) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... -5/12-13, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short the Act . Heard both sides. Case file(s) perused. 2. A combined perusal of both the parties respective pleadings indicate that their identical grievance in nut shell revolves around computing income from house property in respect of assessee s properties A B comprising of industrial shed at plot no.37-B and 5/1/B situated in phase-1, GIDC, Industrial Estate, Vatva, Ahmedabad. The assessee had given it to its sister concern M/s. Patel Alloy Steel Pvt. Ltd. (PASPL) without charging any rent in earlier assessment years. The Assessing Officer framed a regular assessment on 12.03.2013 computing net addition of ₹ 34,59,456/- under the head income from house property at ₹ 49,42,080/-. It emerges that the very issue had arisen for the first time in assessment year 2005-06. The Assessing Officer referred to the said proceedings in arriving at the impugned addition amount after a detailed discussion after taking into account this tribunal s directions in assessment year 2005-06 involving interest rate addition @17.25%. 3. The assessee preferred appeal. We notice that the CIT(A) takes into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Sakarlal Balabhai (supra), the Hon'ble jurisdictional High Court held as under:- ... In the absence of better way of estimating rent, the rate of interest on cost of building and land may provide a reasonable basis for determining the annual letting value of property more particularly when the property is occupied by the owner. The capital value of the property has relevance in determining its annual letting value. In this case, the AO estimated the ALV on the basis of some information said to have been collected by him behind back of the assessee. Admittedly, those details were not confronted to the assessee. Neither the same is produced before us. Therefore, the same cannot be relied on for estimating the ALV . In the above circumstances, we deem it proper to set aside the order of the authorities below on this point and restore the matter back to the file of the AO. We direct him to determine the ALV as per the observations of the Hon'ble jurisdictional High Court i.e. by applying the reasonable rate of interest on the cost of immovable property. Needless to mention, he will allow adequate opportunity of being heard to the assessee while ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from house property is worked out at ₹ 11,93,094/- the appellant will get a relief of ₹ 12,28,185/-. This ground of appeal is partly allowed. 6. Both the parties, aggrieved with the order of the ld. CIT(A), are in appeal before us. 7. We have heard both the sides and perused the material placed before us. At the time of hearing before us, the ld. Counsel for the assessee stated that the Assessing Officer has estimated the interest which the assessee would have been required to pay had he borrowed the money for the purpose of investment in the property. He submitted that in the case of the assessee, income from the property is to be estimated and not interest expenditure on acquisition of such property had borrowed money been utilized. Therefore, proper yardstick is to estimate the proper rate of return on the investment of similar amount in any other secured investment. He gave before us various bank certificates for investment in FDRs and pointed out that interest on the FDRs was varying from 5.5% to 7.5%. He, therefore, submitted that the average rate of interest on the FDRs was around 6.5% and therefore, income should be estimated at the rate of 6.5% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the above, it is evident that their Lordships of Hon'ble Jurisdictional High Court have come to the conclusion that rate of interest on cost of the building and land would provide a reasonable basis for determining the Annual Letting Value of property. Therefore, the contention of the ld. DR that instead of cost, market value of the property in each year should be adopted cannot be accepted. 10. Now, we come to the question whether rate of interest to be adopted for determining the ALV should be interest which would have been payable by the assessee had the assessee borrowed the money for investment in the property or it should be interest receivable by the assessee had the similar money is invested somewhere else. In our opinion, for determining the income from the property, it should be rate of return on the investment of similar amount in another asset. Therefore, in our opinion, the CIT(A) was fully justified in estimating the ALV on the basis of interest which assessee would have earned on the investment of the similar amount. The ld. Counsel for the assessee had argued that the rate of interest applied by the CIT(A) at 8.5% is excessive. In support of which, he g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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