2011 (11) TMI 512 - AT - Income Tax

Notional rent charged on property deemed to be let out - Revenue contended it to be separate flats and deemed one flat to be let out - Held that Assessee, who is the owner of flat No. 601 and 602 at Gaurav Plaza has occupied both the flats as a single unit for the purpose of residence of his family members and both the flats are self occupied having only one common entrance and common kitchen. Even the Ward inspector in his report had also submitted that the assessee had made alteration after obtaining the flats and there is only one entrance for both the flats therefore no notional rent can be brought to tax - Decided in favor of the assessee Dis-allowance of 30% of rent received for table space provided in office - assessee showed it under head income from other sources - Held that - Rent agreement in the instant case appears to have not been examined by the lower authorities which is vital before coming to any conclusion - matter restored to file of AO - Appeal of assessee allowed for statistical purpose Interest paid to bank for the loan taken for flat No. 601/602 towards construction - disallowance on non furnishing of evidence to show that the interest on loan has been utilized for the purpose of said premises - Held that - The assessee is not consistent in her stand. At one point she says the interest has to be deducted from the rental income and at another claims the loan has been utilized for the residential accommodation. Therefor the matter is restored back to the file of the A.O. - Decided in favor of the assessee by way of remand.

Summary

Issues:
1. Treatment of flat as two separate flats for notional income calculation.
2. Ownership of flats and computation of deemed income from house property.
3. Disallowance of 30% of rent received for office space.
4. Addition of interest paid to the bank for the housing loan.

Issue 1: Treatment of flat as two separate flats for notional income calculation
The appeal was against the order of the CIT(A) regarding the treatment of two flats as separate flats for calculating notional income. The Assessing Officer (A.O.) considered the two flats in Gaurav Plaza for deemed income from house property. The A.O. calculated the income from house property based on the rent receivable for the flats and made an addition to the income. The CIT(A) directed the A.O. to calculate the income from house property in accordance with the Income-tax Act. The Tribunal held that both flats were used as a single unit for residential purposes, as evidenced by alterations made by the assessee and the report of the Ward Inspector. The Tribunal set aside the CIT(A)'s order and allowed the appeal.

Issue 2: Ownership of flats and computation of deemed income from house property
The assessee claimed ownership of two flats in Gaurav Plaza and argued that both flats were self-occupied as a single unit. The CIT(A) was not convinced with the explanation given by the assessee and directed the A.O. to calculate the income from house property. The Tribunal found that the assessee indeed owned two flats and had used them as a single unit for residential purposes. Therefore, no notional rent could be brought to tax. The Tribunal allowed the appeal on this issue.

Issue 3: Disallowance of 30% of rent received for office space
The assessee received rental income for providing table space in an office building. The A.O. disallowed 30% of the rent for repairs and maintenance charges. The CIT(A) upheld the disallowance stating that income from renting out amenity in a property falls under "income from house property." The Tribunal found that the matter needed fresh adjudication at the A.O. level, directing a re-examination of the rent agreement in line with relevant legal decisions. The Tribunal allowed the appeal on this issue for statistical purposes.

Issue 4: Addition of interest paid to the bank for the housing loan
The assessee claimed interest on a housing loan, but the A.O. disallowed the deduction due to lack of evidence linking the loan to the rented property. The CIT(A) confirmed the disallowance, noting inconsistencies in the assessee's statements. The Tribunal found the assessee's stand inconsistent and directed the A.O. to provide another opportunity to explain the case. The Tribunal allowed the appeal on this issue for statistical purposes.

In conclusion, the Tribunal allowed the appeal for statistical purposes, addressing issues related to the treatment of flats for notional income calculation, ownership of flats, disallowance of rent, and addition of interest paid for the housing loan. The Tribunal provided detailed reasoning for each issue, emphasizing compliance with the Income-tax Act and the need for proper documentation and evidence in tax matters.