2017 (9) TMI 841 - AT - Income Tax

Income from house property - property given to sister concern without charging any Interest - inclusion of Interest of investments (deemed income) - Estimation of Annual Value - determination of rate of interest for addition - Held that - tribunal has already dealt with all these arguments in arriving at interest rate of 8.5% to form reasonable basis - We therefore direct the Assessing Officer to pass consequential order accordingly adopting 8.5% as the rate of return. Rest all other substantive grounds stand rejected in both these cross appeals.

Summary

Issues:
- Computation of income from house property for properties let out to sister concern without rent
- Discrepancy in interest rate adopted for assessing notional income
- Consideration of property cost in assessment

Analysis:

Issue 1: Computation of income from house property
The case involved cross-appeals by the assessee and the Revenue against the CIT(A)'s order for the assessment year 2010-11 regarding the computation of income from house property for properties let out to a sister concern without charging rent. The Assessing Officer calculated a net addition under the head income from house property, leading to a dispute. The CIT(A) considered the rate of return on the properties and made adjustments based on previous assessment years. The Tribunal referred to earlier cases to establish a reasonable basis for determining the annual letting value of the property.

Issue 2: Discrepancy in interest rate for assessing notional income
The assessee argued against the interest rate adopted by the CIT(A) for determining the annual letting value, contending that it was excessive. The Tribunal analyzed the rate of return on investments in fixed deposits and emphasized the need to consider long-term investments for assessing income from property. The Tribunal upheld the CIT(A)'s decision to apply an interest rate of 8.5% for determining the income, rejecting both parties' appeals on this point.

Issue 3: Consideration of property cost in assessment
The assessee raised concerns regarding the CIT(A)'s failure to consider the property cost in the assessment. The Tribunal examined the relevant legal precedents and concluded that the rate of interest on the cost of the building and land provided a reasonable basis for determining the annual letting value of the property. The Tribunal rejected the argument to consider the market value of the property each year, affirming the CIT(A)'s decision to estimate the income based on the interest earned on the investment of a similar amount.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, directing the Assessing Officer to adjust the assessment based on the established rate of return. The judgment provided detailed reasoning and analysis to resolve the issues raised by both parties, ensuring a fair and legally sound decision.