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TMI Blog1990 (12) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... s.3,825 on the basis of rent received from the let out portion and the income from the self occupied portion. The ITO found that a portion of the property was let out by the assessee to his brother Shri Banwari Lal on a monthly rent of Rs.300 per month for a period of 3 years in terms of the agreement dt. 1st. April, 1972. This agreement was subsequently extended on29th July, 1975for a period of 5 years commencing from1st March, 1973on the same terms and conditions which were embodied in the earlier agreement. Therefore, considering the floor space let out and the locality where the property is situated, the rent received from the tenant who happened to be the assessee's brother, was considered to be very low. He estimated the value taking the rent receivable at Rs.1,000 per month. 4. Before the CIT(A), it was pointed out that the property has been let out since1st April, 1972. The annual value should be determined on the basis of rent actually received and not on hypothetical calculation/estimation of the annual value. Alternatively, it was also contended that the estimate of fair rent at Rs.1,000 per month is excessive in view of the situation of the house. However, the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Rent Control Act, the standard rent as defined by or fixed by the relevant Rent Control Legislation, will have to be taken for determining the bona fide annual value and it was further observed that in normal circumstances, the actual rent payable by the tenant to the landlord would afford reliable evidence of what the landlord may reasonably expect to get from the hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous considerations such as relationship, exception of some other benefit, etc. Thus it is clear that the standard rent determined bona fidely shall be taken as annual value of the building. The Municipal valuation is one of the mode of determining, the standard rent. For determining the Municipal taxes, payable, the local authorities make a periodical survey of all buildings within its area. The surveyor first determines the gross rent receivable from the property. If the property is equipped with facilities like water-pump, lift, electricity etc., this is also taken into considerations. Therefore, it must be presumed that such annual value was assessed after taking into consideration all relevant factors such as the locality, the prevai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The next grievance in the assessee's appeal related to the disallowance of interest of Rs.28,281 on borrowed sum invested in the firm M/s Sain Industries. The facts of the case are that the assessee had taken a loan of Rs.1,30,000 from M/s Finance and Agencies for making investment in the firm M/s Sain Industries in which he became a partner. The assessee had claimed deduction of interest of Rs.28,281 against share income from firm M/s Sain Industries. The ITO found that the firm M/s Sain Industries commenced manufacturing activity only in September, 1979, i.e., after the close of the accounting year of the assessee ended on31st March, 1979. He has also mentioned that a loss figure of Rs. 21 has been shown as the assessee's share from the firm M/s Sain Industries, it has not been explained as to how the sum has been arrived at. Therefore, the ITO was of the view that the firm in which the assessee had become partner, has not commenced business and the assessee did not derive any share income from the firm. Therefore, he disallowed the interest under s. 67(3) of the IT Act. 8. On appeal, the CIT(A) confirmed the order of the ITO. 9. The learned counsel for the assessee Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yr. 1978-79 or under asst. yr. 1979-80 and the expenditure was incurred for the purpose of business or profession of the assessee. From the facts narrated above, it is clear that the interest can be allowed if it is established that the expenditure was incurred in respect of business which was carried on by the assessee and the profit of which are to be computed and assessed and to be incurred after the business is set up. We have gone through the finding given by the Revenue authorities. We do not find finding of the Revenue authorities on this point whether the business of the assessee was set up in the asst. yr. 1978-79 or not. In case the business of the assessee was set up in either of these two assessment years which can only be determined vis-a-vis the books of account maintained by the firm, the expenditure incurred would be allowable as expenditure for businesses or profession of the assessee under s. 37(1). Therefore, we think that the matter should go back to the file of the ITO to re-examine the claim of the assessee in the light of our above observations. He shall decide this point afresh after giving a due opportunity to the assessee of being heard. 10A. As far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the accounting year, i.e.,1st April, 1978and which were representative withdrawals of the previous assessment year, this amount stand explained. The only matter remains of Rs.600 which is not explained and which is a meagre sum. As against this, the ld. Deptl. Representative Smt. Kumar supported the action of the Revenue authorities. 14. We have considered the rival submissions, In view of the fact that Rs. 1,900 has shown by the assessee in his wealth-tax return and this was a cash balance as on the beginning of the accounting year1st April, 1978, therefore, the amount of Rs. 1,900 stood explained. At the most it could be said that Rs. 600 had not been explained. So addition of Rs. 2,000 is uncalled for. Out of Rs. 2,500, Rs. 1,900 is properly explained, only a sum of Rs. 600 can be said to be income from undisclosed sources. We, therefore, modify the order of the CIT(A) to this extent and direct the ITO to give relief accordingly, 15. The next grievance in the assessee's appeal relates to the charging of interest under ss. 139(8) and 217(1)(a) of the IT Act. This is a consequential relief. Therefore, no discussion is required. 16. In the result, the appeal is partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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