2016 (1) TMI 1365 - AT - Income Tax

Basis of calculation of deemed income from self occupied house property - Held that - the annual letting value of the property which was not given on rent should be determined as per Municipal Valuation - restored the case before AO to adopt the Municipal Value

Summary

Issues:
1. Upholding of Assessing Officer's order by CIT(A) against principles of natural justice.
2. Calculation of deemed income from self-occupied house property based on fair market value instead of Municipal Rateable Value.
3. Consideration of Rent Control Act in determining deemed income.
4. Property being self-occupied with no actual rent received by the assessee.

Issue 1 - Principles of Natural Justice:
The appeal was against the order passed by the CIT(A) dated 02.07.2013 for the A.Y. 2009-10. The assessee declared a total income of &8377;6,70,080, which was processed under section 143(1) of the Income Tax Act, 1961. The assessment was completed under section 143(3), adding &8377;57,926 under "Income from House Property." The CIT(A) dismissed the appeal filed by the assessee, leading to the current appeal.

Issue 2 - Calculation of Deemed Income:
The main issue raised by the appellant was the calculation of deemed income from a self-occupied house property based on fair market value instead of Municipal Rateable Value. The assessee argued that since the property was vacant, the annual value could not be valued as actually let out. The Assessing Officer assessed the rent at &8377;77,900 per month based on prevailing rates in the area. The CIT(A) upheld this assessment. However, the Tribunal referred to a similar case and held that in the absence of the property being let out, the Municipal Valuation should be used to determine the deemed income. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to adopt the Municipal Value/Ratable Value to assess the income.

Issue 3 - Rent Control Act Consideration:
The appellant also argued that the property was subject to the Rent Control Act, and hence fair market value could not be considered as notional rent. However, the Tribunal's decision focused on the absence of the property being let out, leading to the application of Municipal Valuation for determining the deemed income.

Issue 4 - Self-Occupied Property:
Given that the property was self-occupied and no actual rent was received by the assessee, the Tribunal emphasized the need to determine the income based on Municipal Valuation in line with previous decisions. The Tribunal allowed the assessee's appeal, setting aside the CIT(A)'s order and directing a reassessment based on Municipal Value/Ratable Value.

In conclusion, the Tribunal allowed the appeal, emphasizing the use of Municipal Valuation for determining deemed income from a self-occupied property in the absence of actual rent being received.