9911796707
TMI Blog1987 (5) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased sometime in 1949. This property was let out to as many as 36 tenants. Shri Tirath Ram Sahni HUF held 271/2 per cent share inNajafgarh Roadproperty and Shri Acharaj Lal HUF owned the balance of 271/2 per cent share. For the purpose of wealth-tax asst. yr. 1978-79 this property was valued at Rs. 11,86,200 by capitalising rental income of Rs. 94,898 at 12-1/2 per cent and the share of the assessee Shri Tirath Ram Sahani individual, at 45 per cent was returned at Rs. 5,33,990. The Share of Shri Tirath Ram Sahni, HUF and Shri Acharaj Lal HUF of 271/2 per cent each was returned at Rs. 3.26,105 each. For the asst. yr. 1979-80 the property was valued again by capitalising the net rental income, which amounted this year to Rs. 1,05,281. Capitalising at 12-1/2 per cent the share of Shri Tirath Ram Sahni, Individual, of 45 per cent was returned at Rs. 5,92,200 and the share of Shri Tirath Ram Sahni, Individual, of 45 per cent was returned at Rs. 5,92,200 and the share of Shri Tirath Ram Sahnil HUF and Shri Acharaj Lal HUF was returned at Rs. 3,61,900 each vide papers 1 and 2 of the paper book filed before us. 3. The WTO did not accept the value of this property as returned. He refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nants and since those tenants were in the occupation of these properties for several years, the provisions of Delhi Rent Control Act became applicable, under which it was not possible to evict them and therefore the question of collusion never tenants was accepted by the ITO as proper and correct and assessment was framed on that basis, there was no room to further hold that there was collusion and estimating the rents at imaginary figures. The CIT(A) accepted the assessee's contention in part. He held that in regard to the termination of annual letting value so far as the tenants the than co-owners ware concerned, the could not be any presumption of collusion in regard to rent. He held that there was no evidence to prove collusion. It was not possible for the owner to enhance the rents, when the property was subject to the Rent Control Act. He also did not approve of the assumption made by the Valuation Officer of further increase in the rent on the basis of potentiality for further construction. In regard to portions under the occupation of the co-owners in the names of Sahni Industries and American Machine Tools, he found that the area under occupation was 3,809 sq. ft. and 6,18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y let out for that rent and there are also other properties let out at lower rents. The CIT(A) having come to the conclusion that there was no collusion in respect of other properties, where there was lower rent, committed an error in coming to the conclusion that there was collusion in respect of these two properties merely on the ground that the properties were let out to cowers ignoring the fact that even her the rent charged was lower. It is further submitted that the Valuation Officer had not basis to estimate the rent of these properties at such a high rent of 66 paise per sq. ft. as if the was the only standard rent available or applicable in respect of these properties at the time when they were let out. Several arguments were addressed to show how the method adopted by the Valuation Officer to ignore the rent charged and to estimate it at a higher figure was uncalled for backed and was baseless too. The rents which were accepted for the purpose of income-tax should have been accepted for the purposes of wealth-tax and should not have been disturbed. The only basis for disturbing the rent is suspicion and not any fact. Further it was contended that for the purpose of estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for industrial purposes in the same locality, normally one would expect the rent charged to be common and uniform. The rent charged here varied from as low as 9 paise per sq.ft. to 88 paise per sq.ft. between 1962 and 1974, This wide variation for almost identical nature of the properties in the same locality showed that there was possibility for negotiations and showing certain favours. Were this true, then the conclusion drawn by the Valuation Officer that there was a possibility of collusion cannot be ruled out and therefore the CIT(A) was wrong in assuming that there was no collusion and he was further wrong in assuming that the Valuation Officer could not prove the collusion by bringing evidence which he is not possibly to expect upon relying certain evidence to draw certain inferences, which is permissible in this case. Thus he stoutly defended the assessments made by the WTO on the basis of the valuation report. 7. We have also heard the Valuation Officer Shri S.C. Mittal. He submitted that except the difference in rents no other evidence was available with him to step up the rents in respect of properties. These are the properties where the rent charged was very much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent or concessional rent was charged and those rents did not represent the correct market rent and therefore there existed a case to revise the rents for the purpose of capitalisation to arrive at the market value. This is only an assumption made on the basis of the rents collected from other tenants. That by itself, in our opinion, would not provide a ground to assume that there was collusion although it may provide a strong case for suspicion. Nothing was shown to us by which we can say that the Valuation Officer had tried to establish the collusion between the assessee and the tenants. Mere difference in rents cannot therefore be taken as an evidence of collusion in order to give a right to the Valuation Officer to estimate the rents nor we find any evidence in support of his estimate of 66 paise per sq.ft. in respect of all the properties where the rents charged were low. At page 41 of the paper book the names of the tenants, description of the building let out to them, amount of rent and the rate per sq.ft. was given The statement shows 36 tenants. There are different kinds of tenants using the property for various purposes. The letting out began as early as 1962. The rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paise per sq., ft., for a covered area of 3039 sq., ft. Similarly in the case of American Machine Tools the covered area is 2100 sq., ft., and the open area is 4080 sq. ft. and it was let out at 4 paise per sq., ft. There are also other properties let out 9 paise per sq., ft., in 1966 and 22 paise per sq., ft., in 1975. We are therefore of the opinion that the mere variation in the rent as we have observed earlier cannot be conclusive of the decision reached by the Valuation Officer that there was collusion and in order to establish collusion there ought to be some evidence otherwise we will be permitting an assessment to be made on the basis of suspicion, which we think is not permissible in law. The fact that Shri Acharaj Lal became owner in 1971 bad therefore the rent obtaining at that point of time should be taken is also not relevant because the property was let out to Shri Acharaj Lal in 1968. The rent obtaining at that point should only be considered i.e., in 1968. Once the rents are fixed up under the Rent Control Act, they cannot be varied except by due process of law. That is also a very great inhibiting factor for increasing the rent. The impact of that legislation on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol must be given. If under law delivery of vacant possession is not permissible or improvements are again impermissible like the properties situate in Military Cantonment Area, it is not possible to assume that the properties would be offered for sale with vacant possession or after improvements. Since there is no evidence to show that the properties let out to Sahni Industries or American Machine Tools were at all offered on lower rents, it cannot be said that in those two cases also the rent has to be estimated. Even if it is assumed that the rent could be estimated, there is no evidence shown to us that it could be let out for 66 paise per sq., ft., when the property in the same year was let out for must much lower rent. The assumption that these properties should be let out at 66 paise per sq., ft., alone is patently incorrect. The rental income having been accepted for income-tax purposes should not have been disturbed for wealth-tax purposes without there being any evidence to suggest that these rents were manipulated with a view to reduce the market value. Further the values given for these properties on the basis of the actual rental income realised was accepted by the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been included in the method of rent capitalisation, then the question of location of land however important it be, would be of no consequence. In all these cases what is to be seen is the rent and the control on the tenancy and rent. These two will have a great diminishing aspect on the value of the land. To show that inspite of these controls, the land has still higher value, the onus would then shift very heavily to the person asserting it and the person asserting it in this case is the WTO and he has no evidence to show except an assertion that it has got reversionary value. The conclusion of the CIT(A) is therefore correct and we uphold it. 11. The only other point raised in the Departmental appeals is whether the CIT(A) is justified in allowing two months' rent as deduction towards repairs and maintenance. We find that this is a normal deduction to be granted even under the IT Act for the purpose of arriving at the net income. Further the properties being very old, highly tenanted being only sheds, they require higher rate of maintenance which means higher expenditure and in that context we are of the view that the CIT(A) is justified in permitting two months rent as st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
