2016 (11) TMI 455 - HC - Income Tax

Reference of matter to the Valuation Officer to ascertain the rent of the building after applying the provisions of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 - Held that - The formula contained for fixation of fair rent under the Rent Control Act is, what is now directed to be adopted for the purpose of arriving at a reasonable rental value the property leased out by the assessee would fetch. Instead of leaving any discretion in the hands of the Assessing Officer in working out, all that the Tribunal did was to direct the Assessing Officer to get guided by the principles contained in the Rent Control Act in the matter of fixation of fair rent. No legal infirmity in the order passed by the Tribunal warranting our interference - Decided against the assessee.

Summary

Issues:
Challenging common order passed by Income Tax Appellate Tribunal for multiple assessment years.

Analysis:
The appellant challenged a common order passed by the Income Tax Appellate Tribunal for different assessment years. The case involved the rental income from a property leased to a subsidiary company. Initially, the Assessing Officer estimated the annual rental value, which was later revised based on a report by the Inspector of Income Tax. The Commissioner of Income Tax (Appeals) partially allowed the appeal, leading to further appeals. The Tribunal directed the Assessing Officer to consider the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, for determining the rental income, allowing for a 15% increase every three years. The appellant contended that the Rent Control Act provisions should not apply in this case.

The High Court noted that the property in question was located in an area with high rental values. The Tribunal directed the Assessing Officer to use the Rent Control Act's principles to determine a reasonable rental value, which the appellant objected to. The Court clarified that the Rent Control Act's formula for fixing fair rent should guide the assessment, rather than leaving discretion solely to the Assessing Officer. The Court found no legal flaw in the Tribunal's order and allowed the Assessing Officer to seek guidance from the State Government or local Municipal Corporation for similar rental values in the area. The Court also affirmed the Tribunal's direction to involve the Valuation Officer appointed under the Income Tax Act.

In conclusion, the High Court dismissed the Tax Case Appeals, along with related applications, finding no merit in the appellant's contentions. The judgment upheld the Tribunal's decision to consider the Rent Control Act's provisions for determining the rental income, emphasizing the need for guidance from relevant authorities in assessing the property's value.