2015 (6) TMI 145 - HC - Income Tax

Capitalisation of rent - Held that - In respect of the first property Tribunal noted that no comparable sale instance had been given and that there was no incriminating material which could justify the addition made. The Assessing Officer had added an amount of only ₹ 46,916/-. The Tribunal rightly deleted the addition. Second property, Tribunal rightly observed that the DVO had valued the property on 18.11.2008 ignoring the vital fact that the property was acquired in the year 2003 and registered on 03.03.2004 with the constructed house thereon. There was no evidence to support the addition. The same was, therefore, rightly set aside. Third property Tribunal found merit in the argument that the PWD rates should have been adopted instead of the CPWD rates and that no rebate had been given for self-supervision and adopted a rebate of 15% on account of difference between the CPWD rates and the PWD rates and 5% on account of self-supervision. The Tribunal, therefore, after balancing the factors reduced the addition to ₹ 1,61,542/-. There is no warrant for interfering with the discretion. Last property the rent was taken as prevalent in the year 2007-2008. It was noted that by then the locality had become more prominent and had started fetching commercial value. The rent was fixed in respect of a lease granted in favour of a Multi National Company (MNC). The Tribunal rightly noted that the estimated cost of the acquisition ought to have been considered with respect to the relevant assessment year, namely, 2003-2004. At that time, the rent was about 1/10th of the rent in the year 2007-2008. The addition was, therefore, rightly deleted. - Decided against revenue.

Summary

Issues:
- Appeal against Tribunal's order allowing respondent's appeal against CIT (Appeals) order confirming additions made by Assessing Officer for assessment years 2004-2005 and 2006-2007.
- Valuation discrepancies by Departmental Valuation Officer (DVO) and subsequent Tribunal decisions.
- Difference in valuation of properties leading to additions made by Assessing Officer.
- Stamp duty payment discrepancy and valuation of property by DVO.
- Assessment of cost of construction and discrepancies in rates used.
- Valuation of property based on rent and relevant assessment year.
- Capitalization of rent for property valuation and errors in calculation.

Analysis:
1. The appeals were filed against the Tribunal's order that favored the respondent by setting aside additions made by the Assessing Officer for the assessment years 2004-2005 and 2006-2007. The Tribunal upheld the matter referred to the Departmental Valuation Officer (DVO) but overturned the additions on merits.

2. In the first property valuation issue, the Tribunal noted a significant difference in valuation between the assessee and the DVO, with no comparable sale instances provided. The Tribunal found no incriminating material justifying the additions made by the Assessing Officer, leading to the deletion of the addition.

3. Regarding the second property, the Tribunal observed that the DVO valued the property based on the current circle rate, ignoring the property's acquisition year and registration details. Lack of evidence to support the addition resulted in the Tribunal rightly setting it aside.

4. The third property's cost of construction assessment discrepancy was addressed by the Tribunal, which favored the respondent's argument on adopting Public Works Department (PWD) rates over Central Public Works Department (CPWD) rates. After considering factors like rebate for self-supervision, the Tribunal reduced the addition, balancing the rates and supervision percentages.

5. The valuation of the last property based on rent capitalization raised issues about the relevant assessment year and rent calculation errors. The Tribunal correctly noted the need to consider the property's acquisition cost in the appropriate assessment year, leading to the deletion of the addition.

6. The findings in all property valuation matters were deemed factual issues by the Court, with no legal questions arising. Hence, the appeals were dismissed based on the Tribunal's decisions and the lack of legal grounds for interference.