2014 (6) TMI 104 - AT - Income Tax

Addition of notional annual value Deemed let out u/s 23(4) r.w.s. 23(1) of the Act Held that - House nos.3 & 4 were alternatively opted for deemed to be let out - CIT(A) had taken fair market value of the both immovable property for determining ALV Relying upon Shailesh I Shah vs. ITO 2011 (2) TMI 1310 - ITAT MUMBAI - in case of self-occupied property, municipal retable value has to be adopted for the purpose of ALV - the municipal reteable value as ALV of the property as against Rs.3 lacs estimated by him - The AO himself has accepted that husband of the assessee, namely, Shri Gautambhai K. Desai who has 50% share in the said properties ALV on the basis of Municipal ratable value- the AO should assess ALV on the basis of Municipal ratable Value Decided in favour of Assessee.

Summary

Issues Involved:
1. Determination of annual value for residential properties deemed to be let out.
2. Application of Municipal Ratable Value vs. notional annual value.
3. Disallowance on motor car expenses and depreciation.

Issue 1: Determination of Annual Value:
The appeal concerned the assessment year 2007-08, where the assessee disputed the notional annual value of two flats in Mumbai. The Assessing Officer (A.O.) assessed the notional income based on factors like location, market rates, and the assessee's financial status. The assessee argued that the properties were subject to the Maharashtra Rent Control Act, limiting the notional rent to the standard rent. The CIT(A) partially allowed the appeal, considering the entire rental value assessed on a protective basis due to co-ownership. The appellant contended that the Municipal Ratable Value consistently shown in past assessments should be accepted. The ITAT held in favor of the assessee, citing case laws where municipal ratable value was adopted for determining the annual letting value (ALV) of self-occupied properties. The appeal was allowed based on this principle.

Issue 2: Application of Municipal Ratable Value:
The A.O. had determined the annual rental value of the properties using a multiplication formula based on the market value of a property purchased in 2006. However, the appellant argued for the adoption of Municipal Ratable Value as shown consistently in previous assessments. The ITAT referred to previous judgments where the municipal ratable value was accepted for ALV calculation in self-occupied properties. The ITAT directed the A.O. to consider the municipal ratable value for assessing the ALV, as done in the husband's case for the same properties. The appeal was allowed based on this principle, emphasizing the acceptance of municipal ratable value for self-occupied properties.

Issue 3: Disallowance on Motor Car Expenses:
Additionally, the appeal contested an ad hoc disallowance on motor car expenses and depreciation. The specific details and arguments related to this disallowance were not extensively discussed in the judgment, as the focus was primarily on the determination of the annual value for the residential properties.

In conclusion, the ITAT ruled in favor of the assessee, allowing the appeal and directing the A.O. to assess the annual letting value based on the Municipal Ratable Value for the properties deemed to be let out. The judgment emphasized the consistent application of municipal ratable value for self-occupied properties in determining the annual value, as supported by relevant case laws and previous assessments.