2015 (9) TMI 740 - AT - Income Tax

Determination of the Annual Value of the property for the purposes of assessment under the head income from house property - CIT(A) deleted the addition made by the Assessing Officer observing that the Annual Ratable Value of the property determined by the Municipal Corporation was lower than the actual rent received and; therefore the income declared by the assessee under the head Income from house was quite justified - Held that - The precedents which have been referred by CIT(A) and also the decision of the Tribunal in the case of Shri Manish Ranbir Maker (2013 (8) TMI 895 - ITAT MUMBAI) clearly support the Annual Value of the property as determined by the assessee in his return of income. Factually speaking it is quite clear that the Municipal Ratable Value of the property is lower than the actual rent received by the assessee and in fact the actual rent received is almost seven times the Municipal Ratable Value. This aspect of the matter in our view signifies that the actual rent derived by the assessee is quite reasonable. It is also evident that in case of Shri. Manishi Ranbir Maker (supra) the issue before the Tribunal related to the determination of Annual Value of the property located in the same building as that of the assessee before us. In the case of Shri. Manishi Ranbir Maker (supra) the property was admeasuring an area of 1800 sq. Fts. and the rent derived was 90, 000/- per annum which compares quite favorably with the rental of 1, 80, 000/- per annum being earned in the case of the instant property. The case of the Assessing Officer is based on a rent of 3.00 lacs per month purported to be earned by Mr. Puneet R. Gupta from a flat located in the same building as that of the assessee. This very comparable relied upon by the Assessing Officer has considered by the Tribunal in the case of Shri Manish Ranbir Maker (supra) for the assessment year 2008-09 which is also the year under consideration before us. CIT(A) has justifiably ignored the action of the Assessing Officer in relying on the rent earned by Mr. Puneet R. Gupta. - Decided against revenue.

Issues involved:
Determining Annual Value of property for assessment under 'income from house property'.

Analysis:

Issue 1: Determination of Annual Value
The case involved co-owners of a property disputing the Annual Value for income assessment. The Assessing Officer calculated the Annual Value based on a comparison with another property in the same building rented at a higher rate. The co-owners argued that the actual rent received should be considered, as per Section 23(1) of the Income Tax Act. The CIT(A) supported the co-owners' position, citing precedents and the lower Municipal Ratable Value compared to actual rent. The Tribunal found the co-owners' rent reasonable, considering the size and rental income of comparable properties. The Tribunal rejected the Assessing Officer's reliance on the higher rent of another property in the same building, emphasizing the unique circumstances of that rental agreement.

Issue 2: Appeal by Revenue
The Revenue challenged the CIT(A)'s decision based on the higher rent of the neighboring property. However, the Tribunal upheld the CIT(A)'s decision, emphasizing the reasonableness of the co-owners' actual rent received compared to the Municipal Ratable Value. The Tribunal found no merit in the Revenue's argument, affirming the CIT(A)'s decision to delete the addition made by the Assessing Officer.

Final Decision
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision in favor of the co-owners. The Tribunal applied the same reasoning to a similar case, resulting in the dismissal of all appeals by the Revenue. The judgment was pronounced on 19th August 2015 by the Appellate Tribunal ITAT Mumbai.

This detailed analysis covers the key issues involved in the legal judgment regarding the determination of the Annual Value of the property for income assessment under the head 'income from house property.'

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