2019 (8) TMI 844 - AT - Income Tax

Income from house property - notional rent - Additions towards deemed ALV of three house properties - taxability of property assessee use for its profession but not claimed any depreciation - AO estimated ALV at 8%, the books value of the property - CIT(A) reduced @4% - HELD THAT - No doubt, when a property used for his own business or profession necessary depreciation on said property has to be claimed under the Act, but merely for the reason that no depreciation has been claimed on the property, the claim of the assessee cannot be disregarded, when the assessee has demonstrated with evidences that said property has been used in his profession. Therefore, we are of the considered view that there is no error in the findings recorded by the CIT(A), in so far as residential bungalow at Lonawala and accordingly, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue. Residential flat at MHADA, S.V.P.Nagar and residential Flat at Millat Nagar, the Ld. CIT(A) recorded categorical findings, while estimating 4% on book value of assets to determine deemed ALV, that those two properties are situated in slum area and also not in a posh area to estimate higher rental value. We further noted that the flat at MHADA, S.V.P.Nagar was not having necessary occupation certificate, because of this it cannot be let out for normal rental value. Likewise, the flat at Millat Nagar is surrounded by slum area and which was purchased at a cost of very nominal amount of ₹ 1,50,000/-. Therefore, he came to the conclusion that adopting 8% on book value of the property is higher rate and accordingly, reduced to 4% of books value. Facts remains unchanged, the revenue fails to bring on record any contrary evidences to counter the findings of facts recorded by the CIT(A). Hence, we are inclined to uphold findings of CIT(A) and reject ground taken by the revenue. Capital gain from sale of office premises - period of holding - date of allotment OR date of registration - HELD THAT - When the property has been allotted and also, the assessee has made initial payment, the subsequent payment and registration of property is a follow up action and for the purpose of determination of period of holding, the date of allotment of the property by the developer should be considered. If date of allotment has been considered for the purpose of period of holding, then the property is held for more than 36 months and accordingly, the surplus from sale of property is assessable under the head long term capital gain. This legal proposition is supported by the decision of CIT vs Hilla J.B.Wadia 1993 (3) TMI 7 - BOMBAY HIGH COURT and also the circular issued by the CBDT 672 of 16/12/1993, where it was clarified that for the purpose of date of acquisition of property, the date of allotment of property needs to be considered. CIT(A) after considering relevant facts has rightly held that property in question was a long term capital asset and surplus from sale of such property is assessable under the head long term capital gain. Adoption of full value of consideration as per ready reckoner value - We find that the Ld. CIT(A) has recorded categorical finding in light of valuation report filed by the assessee and also contention of the assessee that the property in question was not having proper electrical installation and water supply and also the municipal authorities have not issued valuation certificate and accordingly, ready reckoner value cannot be considered as full value of consideration. CIT(A) has held that the AO has adopted ready reckoner value without appreciating various facts about the property and therefore, by following the decision of Hon ble High Court of Karnataka in the case of Jyoti Prakash vs Addl.CIT 2016 (6) TMI 649 - KARNATAKA HIGH COURT , came to the conclusion that there is no reason to adopt ready reckoner value, as against sale consideration received by the assessee, for the purpose of computation long term capital gain. CIT(A) had further held that AO has mechanically applied ready reckoner value without any corroborative material in his position to suggest that the value determined by the stamp duty authority is in fact correct market value of the property in the given facts and circumstances. On the other hand, the assessee has filed necessary evidences to prove that the correct market value of the property is at ₹ 1,60,00,000/-, which was further supported by valuation report issued by the registered valuer . Although, there is a difference in sale consideration received by the assessee and value determined by the registered valuer, but search difference is less than 5% of the property and hence, the Ld. CIT(A) held that no reason to replace ready reckoner value in place of sale consideration actually received for sale of property. Fact remains unchanged. The revenue fails to bring on record any evidences to counter findings of facts recorded by the CIT(A). Hence, we are inclined to uphold the findings of Ld. CIT(A) and reject ground taken by the revenue.

Summary

Issues:
1. Deemed Annual Let out Value (ALV) of house properties.
2. Addition of deemed rental income for house properties.
3. Admission of additional evidence during appellate proceedings.
4. Computation of Long Term Capital Gain from sale of office premises.

Issue 1: Deemed Annual Let out Value (ALV) of house properties
The Revenue challenged the CIT(A)'s decision regarding the ALV of three house properties used by the assessee for professional activities. The AO estimated ALV at 8% of the property value, rejecting the assessee's claim of professional use. The CIT(A) found the properties were indeed used professionally, reducing the ALV to 4% for two properties in slum areas. The ITAT upheld the CIT(A)'s findings due to lack of contrary evidence by the Revenue.

Issue 2: Addition of deemed rental income for house properties
The Revenue disputed the CIT(A)'s decision to reduce the deemed rental income for house properties. The ITAT upheld the CIT(A)'s findings, noting the properties' location and lack of necessary facilities, supporting the reduction to 4% of the property value. The Revenue failed to provide evidence against the CIT(A)'s findings, leading to the dismissal of their appeal.

Issue 3: Admission of additional evidence during appellate proceedings
The Revenue objected to the CIT(A) admitting additional evidence, including a valuation report, during the appeal. The ITAT supported the CIT(A)'s decision, citing the relevance of the evidence in determining the long term capital gain from the sale of office premises. The ITAT upheld the CIT(A)'s findings, emphasizing the importance of considering actual sale consideration over ready reckoner value.

Issue 4: Computation of Long Term Capital Gain from sale of office premises
The dispute centered on the period of holding and the full value of consideration for the sale of office premises. The ITAT agreed with the CIT(A)'s assessment that the property was a long term capital asset and that the actual sale consideration should be considered over the ready reckoner value. The Revenue's failure to provide contrary evidence led to the dismissal of their appeal.