2001 (6) TMI 811 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of Rs. 3,32,500 in the Annual Letting Value (ALV) for computing income from House Property.
2. Determination of ALV for the extended additional property.
3. Estimation of ALV by CIT(A) and its accordance with section 23 of the IT Act and the Bombay Rent Control Act.

Summary:

Issue 1: Inclusion of Rs. 3,32,500 in ALV
The Department contended that the CIT(A) erred in not including Rs. 3,32,500 while arriving at the ALV for computing income from House Property. The Tribunal upheld the CIT(A)'s decision, noting that the rent collected was not fair compared to the actual outgoings and the investment made in the property. The CIT(A) had observed that the rent collected was significantly lower than the expenses incurred, thus not reflecting a fair ALV.

Issue 2: Determination of ALV for Extended Property
The Department argued that the ALV of the extended additional property should be Rs. 27,02,458 instead of Rs. 23,69,958. The Tribunal found that the CIT(A) had correctly determined the ALV by considering 12% of the investment in the property. The CIT(A) had also considered the interest-free deposit from M/s. FPL and the relationship between the tenants and the assessee-company, concluding that the rent collected was not fair and needed adjustment to reflect the fair market value.

Issue 3: Estimation of ALV by CIT(A)
The assessee contended that the CIT(A) erred in estimating the ALV at Rs. 2,84,394, arguing that it was not in accordance with section 23 of the IT Act and the Bombay Rent Control Act. The Tribunal agreed with the assessee that the ALV should not exceed the standard rent under the Bombay Rent Control Act. The Tribunal referred to various court cases, including Mrs. Shiela Kaushish v. CIT and Dewan Daulat Rai Kapoor v. NDMC, which established that the ALV should be based on the standard rent or municipal valuation. The Tribunal directed the Assessing Officer to adopt the fair rental value of Rs. 4,90,875 for the assessment year 1989-90 and Rs. 2,80,500 for the assessment year 1993-94, based on the highest of the standard rent, municipal valuation, and actual rent receivable.

Conclusion:
The appeals of the Department were dismissed, and the appeals of the assessee were partly allowed. The Tribunal directed the Assessing Officer to adopt the fair rental values as determined.