TMI Blog1996 (4) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the total investments made in the property stood at Rs. 12,47,160. Besides the assessee-company also provided air-conditioning costing Rs. 3,00,000 and furniture and furnishing at a cost of Rs. 1,08,147. The total investment thus comes to Rs. 16,61,307. Immediately after the purchase, the assessee-company gave this property on rent to Elecon Engg. Co. Ltd. at the rate of Rs. 1,250 per month in July, 1978 and further Rs. 1,500 in January, 1980. A portion was also let out to Power Build Ltd.—another limited company belonging to this Patel group at a monthly rent of Rs. 750 per month. Shri P.B. Patel along with his family continued to reside in the building. It was claimed that Elecon Engg. Co. Ltd. got the property on rent for the residence of the Managing Director Shri B.I. Patel, father of the original owner Shri P.B. Patel. A portion was separately taken on rent by Power Build Ltd. from the assessee-company for the residence of Smt. Madhuben B. Patel, mother of the original owner Shri P.B. Patel. 3. The first grievance of the assessee is that the learned CIT(A) ought to have held that income from 'Honest House' is taxable as business income of the assessee-company and not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol Act fixing the standard rent at Rs. 1,250 per month for Elecon Engg. Co. Ltd. and Rs. 750 per month for Power Build Ltd. The AO rejected the civil Court's order mainly because it was applicable from 1986 onwards and not for prior period and also because civil Court's order was amongst interested parties. The learned AO further noted that the prior owners of the property were the occupants who sold it to the assessee-company who in turn let it out to two companies, viz., Elecon Engg. Co. Power Build Ltd. of which they were the Chairman and Managing Director and thus the same persons continued to enjoy the occupation of the property. He further noted that though the property was let out to two separate entities there was no separate demarcation of the areas let out to each of them. Since the parties for whom the property was taken on rent, e.g., Managing Director and Chairman of the two companies respectively were the husband and wife, the AO held that recourse to the civil Court for fixation of standard rent was not independent or an objective action. The AO, therefore, taking note of the Supreme Court decisions relied on by in the cases of Dewan Daulatrai Kapoor vs. New Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent as estimated by the AO is fairly reasonable, keeping in view the commission earned from the tenant company. On facts and in law, therefore, I see no justification in interfering with the decision of the AO for all these years." 6. Shri K.C. Patel, the learned counsel for the assessee submitted that the ALV shown by the assessee was fair and reasonable and ought to have been accepted by the authorities below. He submitted that Vallabh Vidyanagar is extremely small village managed by Gram Panchayat where majority of the residents are students who again stay in the hostels. There are only three major industries in Vallabh Vidyanagar, namely, M/s Elecon Engg. Co. Ltd., Shree Vallabh Glass Works Ltd. and M/s Gujarat Machinery Manufacturers Ltd. Shree Vallabh Glass Works Ltd. have their own housing colony whereas Gujarat Machinery Manufacturers have less number of employees and they are having their own housing arrangements. Consequent to this, there are no tenants available who would like to pay high rent and to occupy the premises. The present Managing Directors of Vallabh Glass Works Ltd. and Gujarat Machinery Manufacturers Ltd., are residing at Bombay. The learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the report of the Inspector who visited the building and got plans of the building from the assessee. He further submitted that the assessee-company who owns building and the two lessee companies, viz., Elecon Engg. Co. Ltd. and Power Build Ltd. belonged to the same group, i.e., B.I. Patel. The building is occupied by Shri B.I. Patel, his wife Smt. Madhuben B. Patel and their son Shri P.B. Patel who was the original owner of the building and who later on sold it to the assessee-company. Under the circumstances the AO rightly rejected the assessee's contention that the ALV shown by the assessee on the basis of actual rent received was fair and reasonable. In support of his contentions he relied upon the following authorities: (1) Smt. Pratima Roy vs. CIT (1989) 175 ITR 107 (Cal); (2) Smt. Pratima Roy vs. CIT (1982) 27 CTR (Cal) 275 : (1982) 138 ITR 586 (Cal); (3) Sakarlal Balabhai vs. ITO (1975) 100 ITR 97 (Guj); (4) ITO vs. Sudhakar Somabhai (1984) 18 TTJ (Ahd) 285; (5) CIT vs. Smt. Vimlaben B. Patel (1979) 13 CTR (Guj) 27 : (1979) 118 ITR 134 (Guj). 8. We have considered the rival submissions and perused the facts on record. No doubt, Vallabh Vidyanagar where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Gram Panchayat fixing the annual rateable value at a nominal figure of Rs. 5,020. Similarly, the assessee's reliance on the order of the civil Judge, Anand fixing the standard rent at Rs. 1,250 and Rs. 750 for Elecon Engg. Co. Ltd. and Power Build Ltd. respectively is of no assistance to the assessee because the same was based on the conduct and reasoning given by the parties in question who were closely related. Under the circumstances as held by the Gujarat High Court in the case of Sakarlal Balabhai, in the absence of any better way of estimating the 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 owners themselves or by their close relatives. In the case of Smt. Pratima Roy the Hon'ble Calcutta High Court has held that in determining the real annual value under s. 22 r/w s. 23 of the IT Act, 1961, the rent receivable should be taken into consideration and not the amount actually/supposed to have been received by the assessee. Therefore, where an assessee leased out his house property and the Tribunal found that the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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