2011 (6) TMI 927 - AT - Income Tax

Summary

Issues involved: Appeal against the order of CIT(A) regarding taxation of notional value of second flat and annual market value determination.

Issue 1 - Taxation of notional value of second flat:
The assessee owned two adjacent flats used as one house, both self-occupied. The Assessing Officer estimated the annual valuation of the second flat without considering the combined use of both flats. The CIT(A) upheld the AO's decision, distinguishing a similar case of combined flats. The Tribunal held that since both flats were used as one unit, they should be considered self-occupied, rejecting the CIT(A)'s reasoning based on the location of the flats. Consequently, the annual value of the second flat was deemed Nil, and the appeal was allowed.

Issue 2 - Determination of annual market value:
The Assessing Officer determined the annual value of the second flat based on market rent information received from the society, resulting in a higher valuation than the municipal rateable value offered by the assessee. The assessee argued for a lower valuation based on municipal rateable value. However, the Tribunal's decision on the first issue rendered this point moot, as the second flat was considered self-occupied with a Nil annual value.

This judgment highlights the importance of considering the actual use of property in determining tax liability and the relevance of treating combined units as a single entity for taxation purposes.