2012 (12) TMI 1155 - AT - Income Tax

Determination of annual letting value (ALV) of the property u/s 23(1) - whether it can be determined as per municipal valuation or not? - Held that - Annual letting value of the property in question should be determined as per the municipal valuation/rateable value adopted by the municipal authorities. Accordingly, the Assessing Officer is directed to adopt the municipal valuation/rateable value adopted by the municipal authorities.

Summary

Issues:
Determination of annual letting value (ALV) based on municipal valuation for property not let out.

Analysis:
The appeal concerned the Order of the CIT(A)-32, Mumbai related to the assessment year 2009-2010. The assessee challenged the determination of the annual letting value (ALV) of a property not let out, arguing that it should be based on municipal valuation as adopted by the municipal authorities. The key issue was whether the ALV can be determined as per municipal valuation or not.

The Tribunal examined the provisions of section 23(1) regarding the annual value of any property. It was noted that the section deems the annual value to be the sum for which the property might reasonably be expected to let from year to year. The Tribunal referred to various case laws, including M.V.Sonavala Vs. CIT and Parkpaper Industries P. Ltd., which emphasized that municipal valuation should be the basis for determining the annual value of properties not let out. The Tribunal highlighted that the charge under section 22 is not on market rent but on the annual value, and in cases of unlet properties, municipal valuation is a proper yardstick for assessment.

Furthermore, the Tribunal cited the decision in Smitaben Amabani and DCIT Vs. Reclamation Realty India Pvt. Ltd. to support the position that municipal valuation/rateable value should be considered for determining the ALV. Based on these precedents, the Tribunal held that the ALV of the property in question should be determined as per municipal valuation/rateable value adopted by the municipal authorities. The Assessing Officer was directed to adopt the municipal valuation/rateable value for assessment purposes.

In conclusion, the Tribunal allowed the appeal of the assessee, following the decisions in similar cases and directing the Assessing Officer to determine the ALV based on municipal valuation. The judgment reiterated that in cases of properties not let out, municipal valuation should be the basis for assessing the annual value, in accordance with relevant legal precedents and provisions.