2012 (4) TMI 727 - AT - Income Tax

Annual Letting Value of the properties u/s.23 - Held that - A.O. was not justified in estimating the ALV of those flats in both the assessment orders on arbitrary basis. Accordingly, direct the A.O. to adopt standard rent as determined as per the Maharashtra Rent Control Act, 1999 if available or latest valuation made by the local authority Brahanmumbai Municipal Corporation (BMC) for the payment of the property tax whichever is higher, as ALV to be determined u/s.23(1)(a) of the Act in both the financial years relevant to A.Y s. 2005-06 and 2006-07. Ground no.2 in the A.Y. 2006-07 is allowed for the statistical purposes. Determination of ALV u/s.23(1)(a) - Held that - A.O. should determine the ALV of the said flat as per our directions in respect of ground no.2 and if the actual rent received by the assessee is higher as u/s.23(1)(b) then the same should be adopted. In our opinion, law is clear if the actual rent received by the assessee is more than the ALV determined u/s.23(1)(a) and in view of clause (b) to sec.23(1) actual rent received is to be adopted. In the present case, actual rent received by the assessee is more than the municipal rateable value and in view of clause (b) to sec.23(1) the A.O. has rightly adopted the said value. Accordingly, confirm the order of the Ld. CIT (A) on one flat at EL-DORDO Mumbai and dismiss ground no.3 for A.Y. 2005-06.

Summary

Issues:
1. Determination of Annual Letting Value of properties u/s.23 of the Act for A.Ys. 2005-06 & 2006-07.

Analysis:
1. The Assessing Officer (A.O.) estimated the Annual Letting Value (ALV) of two residential flats in Grant Field Jogeshwari for A.Y. 2005-06 at &8377; 60,000 per annum, rejecting the declared value of &8377; 882 per flat. The A.O. considered rent at &8377; 2,500 per month, allowing a 30% deduction u/s.24, resulting in a net value of &8377; 48,000 for the two flats on Vikroli Link Road, Mumbai.

2. For the same year, the A.O. assessed the ALV of a flat at EL-DORDO at &8377; 46,000 for four months based on actual rent received, allowing a 30% deduction u/s.24. In A.Y. 2006-07, the A.O. estimated the ALV of two flats in Green Field at &8377; 48,000, with a net ALV of &8377; 33,600 after deductions.

3. The Judicial Member found the A.O.'s estimation of ALV without basis and referred to the case of Shiela Kaushik 131 ITR 435 (SC), emphasizing the consideration of standard rent under the Rent Control Act or local authority valuation for ALV determination. The Member directed the A.O. to adopt the standard rent or latest BMC valuation as ALV for the relevant years.

4. Regarding EL-DORDO flat, the A.O. did not determine ALV u/s.23(1)(a) for A.Y. 2006-07. The Member instructed the A.O. to determine ALV based on standard rent or BMC valuation and adopt actual rent received if higher, as per sec.23(1)(b).

5. Ground no.4 for A.Y. 2005-06 was not pressed by the assessee due to the small quantum involved, leading to its dismissal. Other grounds in both appeals were of a general nature and did not require specific adjudication.

6. The appeal for A.Y. 2005-06 was partly allowed for statistical purposes, while the appeal for A.Y. 2006-07 was allowed for the same reason, as per the order pronounced on 25th April 2012.