2004 (2) TMI 649 - AT - Income Tax

Summary

Issues:
1. Determination of annual letting value (ALV) of property for assessment years 1992-93 and 1993-94.

Analysis:
The appeals were filed against the composite order dated 27th June, 1996, by the ld. CIT(A)-XXII, New Delhi for assessment years 1992-93 and 1993-94. The property in question, owned by the appellants, was let out to a company at an annual rent of Rs. 60,000. The Assessing Officer determined the ALV by adding the interest on the interest-free deposit to the actual rent received, resulting in an aggregate value of Rs. 2,75,250. The ld. CIT(A) upheld this decision, considering the property's ratable value assessed by the Municipal Corporation at Rs. 1,87,240 and concluding that the declared rent did not reflect the fair rental value. The appellant contended that the interest amount was not justifiable to be added to the income, citing previous assessments and legal principles. The DR supported the lower authorities' orders.

Upon review, the Tribunal found that the property was under bona fide tenancy, generating an annual rent of Rs. 60,000, which was accepted by the revenue in previous assessments. The Assessing Officer lacked evidence to suggest deliberate underreporting of rent. Section 23 of the Act deems ALV as actual or expected rent. As the property was already let out at the beginning of the assessment year, the actual rent received was deemed appropriate for determining ALV. The Tribunal relied on the Calcutta High Court decision and concluded that the actual rent received should be the yardstick for ALV, especially when no contrary evidence was presented by the revenue. Therefore, the appeals of the assessee were allowed, overturning the lower authorities' decision.

This judgment clarifies the principles governing the determination of ALV for properties under tenancy and emphasizes the significance of actual rent received as a key factor in assessing ALV. The decision underscores the importance of evidence and legal precedents in establishing fair rental values, providing guidance for future assessments involving similar circumstances.