2014 (12) TMI 1111 - HC - Income Tax

Determination of Rent - AO enhanced the rent on the presumption that actual rent is low - taxable in the hands of deceased assessee as well as the Trust - double taxation Held that - Where the premises, are leased to the Government or its organisations, the scope for an assessee to show the rent at a lower figure, does not arise - there does not exist any particular standard, to fix the rent of any premises - much would depend upon the location and condition of the building and the demand in the locality - where the lessee is a Government, the transaction is regulated by the fixed parameters - even if the building has potential to fetch a higher rent, the Government departments are not expected to pay such rent - in case the owner of the premises is willing to lease them to the Government or its agencies, for reasons of safety and security or assured payment of rent, the discretion of the AO to determine the reasonable rent of his choice, gets virtually restricted - He cannot ignore the actual payments and fix an imaginary figure, based upon the alleged information or potential of the building - once the penalty proceedings were dropped, the suggested figure virtually loses its significance - the rent for the premises must be taken at ₹ 13,500/-, unless there was any enhancement by the lessee itself, for any subsequent period. Period regarding which the assessee is under obligation to pay the tax Held that - The original assessee died on 16.09.1994 and her legal representative filed returns for the period from 01.04.1994 to 16.09.1994 - Tax was also paid on the income derived from house property - For the subsequent period, the Trust, which became the legatee, filed returns and paid the tax - once that is so, there was absolutely no basis for the AO to levy tax for the same period on the testator also - The Commissioner did not address this issue and the Tribunal refused to take that into account, on the ground that it was not raised earlier - being a last authority on facts, the Tribunal was supposed to deal with every aspect, that arises for consideration, uninhibited by any such restrictions thus, the matter is remitted back to the AO for the limited purpose of verification of the Will Deed and the factum of the bequest of the property on the Trust Decided in favour of assessee.

Summary

Issues involved:
1. Quantum of rent determination
2. Levy of tax on two assessees for the same period

Quantum of rent determination:
The appellant contested the Assessing Officer's decision to fix the rent at a lower rate without proper basis, arguing that the rent was actually higher. The Commissioner and Tribunal upheld the decision, leading to the appeal. The court noted that while the Assessing Officer can verify facts, in the case of government leases, the rent is regulated differently. The court found the Assessing Officer's method flawed, as the rent figure was derived incorrectly. It was held that the rent should be considered as claimed by the appellant unless there was a subsequent enhancement by the lessee.

Levy of tax on two assessees for the same period:
The original assessee passed away, and her legal representative filed returns and paid taxes for the period until her death. Subsequently, the Trust, as per the Will, became the legatee and paid taxes for the following period. The court found no justification for the Assessing Officer to levy tax on both for the same period. The Commissioner and Tribunal did not address this issue, citing lack of prior mention. The court deemed this a matter for remand to the Assessing Officer for verification of the Will Deed and the Trust's status as legatee. The appeal was allowed, setting aside previous orders and remanding the matter for further examination.

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