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TMI Blog2011 (4) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... nnual letting value at a figure higher than the standard rent whilst computing the income of the appellant under section 23(1)(a) of the IT Act, 1961; (4) On the facts and in the circumstances of the case, and in law, the learned CIT(A) ought to have made an estimation of the appellant's income from house property; (5) On the facts and in the circumstances of the case, and in law, the learned CIT(A) erred in not taking into consideration the fact that there was no benefit received by the appellant at the time of receiving the interest-free deposits; (6) On the facts and in the circumstances of the case, and in law, the learned CIT(A) ought to have held that the benefit accrued to the appellant only when the funds were deployed and income accrued as a result of such deployment; (7) On the facts and in the circumstances of the case, and in law, the learned CIT(A) erred in not allowing deductions allowable under section 24 of the Income-tax Act, 1961 such as ground rent, maintenance charges, municipal taxes etc.". 3. The brief facts emerging from the record are that the assessee entered into an agreement dated 26-6-1982 with Aesthetic Builders ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of CITI Bank and Head Service Administrator of CITI Bank was recorded. In the said statement, Shri Vaidyanathan stated that the CITI Bank has entered into an agreement with the assessee for the premises in question on total area of 3275 sq. ft. He has further stated that the bank has entered into three agreement viz. (i) Leave and license Agreement, (ii) Agreement for interest free advances and Overdraft agreement for overdraft facilities. On a specific question about interest not charged on the deposits of Rs.1,54,00,000 Shri Vaidyanathan has stated that interest free security deposit has been given by the bank to the Company as part of compensation towards our occupancy of the premises in question. The AO observed that the statement of Shri Vaidyanathan reveals that the interest free advances of Rs.1,54,00,000 has been given by the bank to the assessee in lieu of compensation/rent towards occupancy of the premises in question. The AO after considering the contentions and submissions of the assessee has determined Annual Rateable Value of the property in question by adding 15% interest on free deposits of Rs.1,54,00,000 and made an addition of Rs.23,10,000. The assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Builders Private Limited who said that the rateable value of the property was Rs.10,200. In our opinion, no credence can be given to this certificate as the valuation from the Assessment Department of the Municipal Corporation was not appended to. Beside, this value is ridiculously low. For determining the Municipal taxes payable, the local authority makes a periodical survey of all buildings within its area. The surveyor first determines the gross rent receivable from the property. The annual value is determined after considering the prevailing rate of rent in the area and what a similar building of the same nature would fetch in the locality, etc.It was noted by the AO that Aesthetic Builders Private Limited, who has issued certificate for rateable value and which is appended at page 60, has given first and ground floor of the said building on rent/leave and licence to Citibank as per agreement dated 20-10-1983. The licence fees charged was Rs.43 per sq.ft. per month. On the basis, for the assessment year 1990-91, the AO took the licence fees at Rs.50 per month and calculated the compensation receivable at Rs.19,65,000. This indicates that the rateable value as shown by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notional interest on such deposit is not any actual rent received or receivable. Under sub-clause (b) of section 23(1) of the Act, only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of money which is payable by the tenant for use of the premises to the landlord. Any advantage and/or perquisite cannot be treated as rent. Wherever any such perquisite or benefit is sought to be treated as income, specific provisions in that behalf have been made in the Act by including such benefit etc. in the definition of income under section 2(24) of the Act. Specific provisions have also been made under different heads for adding such benefits or perquisites as income while computing the income under those heads, e.g. salary, business. The computation of the income under the head "Income from house property" is on a deemed basis. The tax has to be paid by reason of the ownership of the property. Even if one does not incur any sum on account of repairs, a statutory deduction therefor is allowed and where on repairs the expenses are incurred in excess of such statutory limit, no deduction for such expenses is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us of the deposit amount was the consideration for the user of the property. As such, the usufructus can be considered as the licence fee. Now the question arises what is that usufructus? The assessee availed the overdraft facility on an interest of 15% per annum. As such to find out the usufructus of the deposit amount, if we apply the rate of 15%, the usufructus will come to Rs.23,10,000. This usufructus is not additional advantage to the assessee. It is the sum of money for which the property was let out. It was the consideration for the user of the house property. The Hon'ble Apex Court in the case of Bhagwan Dass Jain v. Union of India (2002-TAXINDIAONLINE-165-SC-IT) [1981] 128 ITR 315 has held that even in its ordinary economic sense, the expression "income" includes not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it on self. Here we are concerned with the question that what the assessee received by exploiting the user of the property? Obviously a deposit is not the receipt because it is refundable. Deposit is not obtained to secure the payment of rent because there is no stipulation for any rent. What the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dawoodsaheb v. Laxman Venkateshi Naik LVII BLR 413 (Bom.) has held that in fixing the standard rent the correct approach should be, what is the net return which a landlord should be reasonably allowed on his investment. In our opinion, the amount of Rs.10,200 cannot be said to be the correct net return. For that purpose, the AO found that the same builder given the ground floor of the building to the Citibank as per agreement dated 20-10-1983 on leave and licence basis. For that rent was charged at Rs.43 per sq. ft. per month. In 1983 the return was Rs.43 per sq. ft. In 1988 the AO took the rent at Rs.50 per sq. ft. and accordingly calculated the rent receivable at Rs.19,65,000. (24) Adverting to the rateable valuation, it is pertinent to note that the assessee did not file any documentary evidence from the Municipality. It is well known principal of law canonized in the dictum:- "DE NON APPARENTIBUS ET NON EXISTENTIBUS EADEM EST RATIO", meaning thereby the which does not appeal will not be presumed to exist. The letter from the Builder is the self-serving document. As such, no conclusion can be drawn on the basis of that letter. The conduct of the assessee in furnishing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the issue was referred vide recommendation dated 21-10-2005 for consideration of Special Bench consisting of three or more Members to decide the question whether the notional interest on interest free deposits received by the assessee be take into consideration in determining the Annual Letting Value of the property under section 23(1)(b) of the Act. 7. The Hon'ble President of this Tribunal constituted the Special Bench of three Members for deciding the issue referred to the Special Bench vide order dated 21-11-2006. Subsequently, the revenue vide its letter dated 20-2-2007 and again vide letter dated 20-4-2009 objected to the Constitution of the Special Bench on the issue involved in the assessee's case on the basis that the assessee has already filed the appeal before the Hon,ble Jurisdictional High Court against the order of this Tribunal for the assessment years 1990-91 and 1991-92 on identical issue. The Hon'ble High Court has admitted the appeal vide order dated 29-12-2004. Thus, the revenue has pleaded that the order of Constitution of Special Bench be withdrawn. The revenue also referred the precedent in the case of M/s. Star Ltd. Hong Kong, where in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such taxes and outgoings in excess of Rs.9825 per month the licensee has to pay the same. Thus, the learned Sr. Counsel has submitted that Rs.9,825 is the amount of license fee or compensation and not for reimbursement of taxes, maintenance and outgoings etc. The condition in the agreement is only regarding the increase in the license fee whenever there is a increase in taxes and outgoings. He has further submitted that for determining the income from house property under section 23(1) the starting point under clause (a) is the sum for which the property might reasonably be expected to let from year to year. He has submitted that it has been held in the various decision of this Tribunal as well as in the decisions of the High Courts that such value is the municipal rateable value. In the present case, the Municipal Corporation has determined the rateable value of the property at Rs.78,750. He has then referred the provisions of section 154 of the Mumbai Municipal Corporation Act, 1888 as well as section 23(1)(a) of the Act and submitted that the language used in both the provisions is similar. He has then referred the decision of the Hon'ble Supreme Court in the case of Mrs. She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided such a value is not above the standard rent receivable and that would be the safest guide for this purpose and the rent actually received would not be of any relevant" (c) in case of M.V. Sonavala v. CIT 177 ITR 246 where the Bombay High Court has followed the decision of the Calcutta High Court in CIT v. Prabhabati Bansali 141 ITR 419 and concluded that the municipal value is to be regarded as the sum for which the property might reasonably be expected to let from year to year that it was municipal rateable value which was unequivocally regarded as the sum for which the property might reasonably be expected to let from year to year insofar as section 23(1)(a) is concerned, i.e. the municipal rateable value is in no way to be adjusted upward or downward. (d) in case of Smt. Smitaben N. Ambani v. CWT 323 ITR 104 (Bom.) where Municipal rateable value has been held to be the gross maintainable rent for the purposes of rule 1BB of the Wealth-tax Rules. (e) in case of CIT v. Shapoorji and Co. (Rajkot) (P.) Ltd. (unreported) wherein for the assessment years 1994-95 and 1995-96 the AO had assessed the annual value at Rs.4,62,000 based on two criteria viz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a wide disparity between the municipal rateable value and the actual rent fetched by a property is not unusual. (4) No addition of notional interest can be made for arriving at the annual value under section 23(1)(b) of the Act as held by the High Court at Bombay in CIT v. J.K Investors (Bom.) Ltd. 248 ITR 723. The Supreme Court has dismissed the SLP filed by the revenue. Indeed the decision in paragraphs 3(a)(b) and (c) above also consider the question of addition under section 23(1)(b) for interest free deposits. Thus, neither under section 23(1)(a) nor under section 23(1)(b) can be an addition be made for interest free deposits. Indeed in paragraphs 18 and 19 of its order dated 30th June, 2003 for assessment years 1990-91 and 1991-92 the Tribunal itself has accepted this position" 10. It is submitted that the assessee invested the said amount of Rs.1,54,00,000 in purchasing of the properties and acquired shares and also advancement of the loans, therefore, the income from the investment of the said amount is taxable and the addition of notional interest in the annual value for computation of income from house property amount to double taxation of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch fact is borne out by the license agreement. Whether a license fee is received or not is to be determined by considering the position and relationship prevailing between the assessee and Citibank and has nothing to do with what the licensor has to pay out ; (ii) In this regard the Tribunal has referred to the statement of Mr. S.Vaidyanathan from Citibank. The assessee submits that firstly, this was a leading question put by the revenue to Mr. S.Vaidyanathan. Further, the earlier Bench of the Tribunal has overlooked his reply to Q.No.2 where he has accepted the license fee to be Rs.9825 pm. In any event, what is the license fee/rent of the premises is to be judged on the basis of the agreement and not the understanding of Mr. Vaidyanathan; (iii) Assuming without admitting that there is no rent received by the assessee the annual value under section 23(1)(b) would be nil and, therefore the annual value will have to be determined only under section 23(1)(a) which as mentioned above is equivalent to the municipal rateable value. (d) Tribunal's conclusion that usufructus of the amount of deposit is to be regarded as consideration for user of property would appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question is Rs.64845 for the year under consideration and the ground rent payable by the assessee is Rs.17665. Therefore, the total outgoing even as per the AO is less than Rs.1,17,900 which is license fee received by the assessee. The learned senior counsel has submitted that when the assessee is receiving more than outgoing then it cannot be treated or said that the license fee received by the assessee is only reimbursement of the outgoings which comprises municipal taxes, ground rent etc. Even if it is presumed that the same is as reimbursement it would not be treated as other than license fee because even if it is going towards taxes and other charges it has nothing to do with the license fee. The learned Sr. Counsel has further contended that even if no license fee received by he assessee the assessee is under statutory obligation to pay municipal taxes, therefore, there is no nexus between payment of the taxes and the license fee. The provisions in the agreement is only for enhancement of the license fee whenever there is an increase in the municipal taxes payable. The learned Senior counsel has pointed out the word "actual rent" was not in the section 23(1) at the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived by this Tribunal by different Bench. If the first Tribunal took a particular view as to construction of documents, the Hon'ble Jurisdictional High Court has observed that it would not be open to the second Tribunal to disturb the decision given by the first Tribunal, in case of construction of documents is not a matter of computation or matter of reckoning which may alter from year to year or from assessment year to assessment year. The learned DR has further submitted that even though the principle of res judicata may not apply even thought the there may be estoppels. It is very desirable that there should be finality and certainly in all litigation including the litigation arising out of the Act as observed by the Hon'ble Jurisdictional Hugh Court in the said case. 14. The learned DR has, therefore, referred the third member decision of this Delhi Bench of this Tribunal in the case of Napar Drugs (P.) Ltd. v. Dy. CIT [2006] 100 TTJ 38/98 ITD 285 and submitted that the decision of the co-ordinate bench of this Tribunal should be followed and the subsequent Bench should not proceed on its own taking contrary decision. The learned DR has then referred the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y might reasonably be let out from year to year as per the provisions of section 23(1)(a) of the Act. Even the decision in the case of Smt. Smitaben N. Ambani (supra) is on the point of gross maintainable rent in the case of self occupied property and valuation of house for the purpose of wealth tax. She has relied upon the decision of the Hon'ble Patna High Court in the case of Kashi Prasad Kataruka v. CIT [1975] 101 ITR 810 as well in case of ITO v. Baker Technical Services (P.) Ltd. [2010] 125 ITD 1 (Mum.) (TM) and submitted that the municipal value is only an indication as to be reasonable annual letting value of the property subject to the reduction or enhancement on the basis of other material on records. The standard rent is the more proper and reliable method and it is only guidance on the basis of which the annual letting value can be determined. The ld. DR has then relied upon the decision of this Tribunal in the case of ITO v. Makrupa Chemicals (P.) Ltd. [2007] 108 ITD 95/12 SOT 68/110 TTJ (Mum.)489 and submitted that this Tribunal after considering the decision in the case of J.K. Investor's (Bom.) (supra), CIT v. Smt. Prabhabati Bansali [1983] 141 ITR 419/[1982] 9 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. Sr. counsel has pointed out that in view of the various decisions of the Hon'ble Jurisdictional High Court and the decision of the Calcutta High Court and the decision of the Hon'ble Supreme Court, apart from the decision of the Tribunal, this Bench needs not to adhere with the earlier decision of this Tribunal in assessee own case. The learned Sr. Counsel has stressed that when the issue is settled by the decision of the Hon'ble. Supreme Court and High Courts in subsequent decisions then the Tribunal has to follow the same instead of following the earlier decision of this Tribunal. He has specifically pointed out that in the case of CIT v. Shapoorji and Co. (Rajkot) (P.) Ltd. [IT Appeal No. 7051 (Mum.) of 1998, dated 29-7-2003] and in the case of Smt. Smitaben N. Ambani (supra) and Bansali International Private Limited the Hon'ble Jurisdictional High Court has taken the view which is in favour of the assessee and therefore this Tribunal has to take an independent view by following the decisions of the Hon'ble Jurisdictional High Court. He has further pointed out that it is not clear from the record that under what provision, the additions was made by the AO whether by de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out the property from year to year as determined under section 23(1)(a) the amount so received or receivable would be annual value for the purpose of section 22 of the Act. 19. The Income-tax Act does not define the term reasonable expected rent to be fetched by the property from letting out from year to year. No method for determination of such reasonable rent under section 23(1)(a) has been provided either in the Act or in the Rules framed thereunder. Only the judicial pronouncements on the issue have thrown some light as how to determine the sum for which the property may reasonably be expected to let out from year to year under section 23(1)(a). In the case of Mrs. Sheila Kaushish (supra), the issue involved was whether the actual rent received by the assessee or standard rent under the Delhi Rent Control Act should be taken to be the annual value of the property within the meaning of section 23 of the Act. The said case pertains to the assessment year 1969-70 and assessment year 1970-71 therefore, the unamended provisions of section 23 were applicable. In the said case, the Hon'ble Supreme Court has observed that this question stands concluded by the decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the standard rent by reason of expiration of the period of limitation prescribed by section 12 of the Rent Act or the building is self-occupied by the owner. Thus, it was held that in either case, according to the definition of the annual value the standard rent determined under the provisions of Rent Control Act and not actual rent received by the landlord from the tenant would constitute the correct measure of annual value of the building. The Hon'ble Apex Court pointed out that in each case the assessing authority would have arrived at its own figure of standard rent by applying the principle laid down under Rent Control Act for determination of the standard rent and determination of annual value of the building on the basis of such figure of standard rent. In the case of Smt. Prabhabati Bansali (supra) the Hon'ble Calcutta High Court has observed at pages 433 -435 as under: "17. Therefore, in a case where the actual rent received is higher than that for which the property might reasonably be expected to let from year to year in respect of an income accruing subsequent to the amendment different considerations might arise. But we are not concerned with such a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) jurisdictional High Court has held as under: "(17) The Advocate for the assessee relied upon the judgment of the Calcutta High Court in the case of CIT v. Smt. Prabhabati Bansali [1982] 29 CTR (Cal.) 15: [1983] 141 ITR 419 (Cal.). In that case the Tribunal had directed the ITO to determine the annual value of the property afresh with reference to its rateable value as determined by the municipal corporation. In a reference, the Calcutta High Court held that the Tribunal had (was) justified in giving these directions. (18) Advocate for the assessee then relied upon a judgment of this Court in the case of M.V. Sonavala v. CIT [1989] 75 CTR (Bom.) 74: [1989] 177 ITR 246 (Bom.), where this Court following the view taken by the Calcutta High Court in the case of CIT v. Smt. Prabhabati (supra), held that the annual value of different properties should be calculated on the basis of which the property might reasonably be let from year to year or the annual municipal value. The aforesaid decision was given for calculating the annual value within the meaning of section 23(1)(a) of the IT Act and the reference was one under the IT Act. The question in the case was also fram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l tenant; i.e., the amount so arrived at should not be more than the standard rent which can be calculated in terms of the provisions contained in section 11 r/w section 5(10) of the Rent Act". [Emphasis, supplied] (20) In our view, the basis on which a self-occupied property is valued under rule 1BB of the WT Rules and municipal rateable value is arrived at under municipal law is the same i.e. "a reasonable amount of rent that can be expected by the owner from a hypothetical tenant". That while arriving at such reasonable amount of rent that can be expected by the owner from a hypothetical tenant, the amount of statutory deduction, if any, permissible under the local municipal law must be added to the rateable value. We thus answer question No. 3 as follows: 'That while applying provisions of r. 1BB for valuing the self-occupied property, municipal rateable value with addition of statutory deductions, if any, may be adopted instead of standard rent, for arriving at the gross maintainable rent." (21) In view of the questions as answered, the wealth-tax reference is disposed of with no order as to costs." 22. Thus, it is settled proposition that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y applies to cases where the actual rent received is more than the reasonable rent under section 23(1)(a) of the Act and it is for this reason that section 23(1)(b) contemplates that in such cases the annual value should be decided on the basis of the actual rent received. As stated hereinabove, in this case, the Department has invoked section 23(1)(b) which, as stated hereinabove, proceeds on the basis that the actual rent received by the assessee is more than the reasonable rent under section 23(1)(a). The Tribunal has also found that the actual rent received by the assessee, even without taking into account the notional interest, was more than the annual value determinable under section 23(1)(a) of the Act. This finding of fact has not been challenged by the Department in this appeal. On the contrary, the Department has contended that in this case, section 23(1)(b) was applicable. They have not relied on the provisions of section 23(1)(a). The question as to whether notional interest could have been taken into account under section 23(1)(a) does not arise in this appeal and we do not wish to go into that question in this appeal. However, the moot point which needs to be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent would be the annual value of the property. In the circumstances, the value of the notional advantage, like notional interest in this case, will not form part of the actual rent received as contemplated by section 23(1)(b) of the Act. At the cost of repetition it may be mentioned that under section 23(1)(a), the Assessing Officer has to decide the fair rent of the property. While deciding the fair rent, various factors could be taken into account. In such cases various methods like the contractors method could be taken into account. If on comparison of the fair rent with the actual rent received, the Assessing Officer finds that the actual rent received is more than the fair rent determinable as above, then the actual rent shall constitute the annual value under section 23(1)(b) of the Act. Now, applying the above test to the facts of this Commissioner of Income-tax v. J.K. Investors (Bom.) Ltd. on 5 June, 2000 we find a categorical finding of fact recorded by the Tribunal that the actual rent received by the assessee was more than the fair rent. Under the above circumstances, in view of the said finding of fact, we do not see any reason to interfere". 23. Thus the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of section 23 could be fixed. (11) Thus, taking into consideration the question in all its ramifications, I am constrained to hold that, on the facts and in the circumstances of the case, for determination of the annual value under section 23, the rent fixed by the Rent Control Act [Bihar Buildings (Lease, Rent and Eviction) Control Act, 1947], could be taken into consideration. I, accordingly, answer the question in the affirmative, in favour of the assessee and against the department. But, in the circumstances of the case, there shall be no order as to costs." 24. Therefore, it is clear from the various judicial pronouncements that the standard rent or the municipal value, as case may be, is the one of the various factors to be taken into account by the AO while determining the fair rent expected to be fetched for letting out the property from year to year under section 23(1)(a). 25. In the case of Makrupa Chemicals (P.) Ltd. (supra), the co-ordinate Bench has taken a similar view after considering all the decisions relied upon by the either parties including, J.K. Investors, (Bom.) Ltd's. case (supra), Smt. Prabhabati Bansali's case (supra), Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent. So, the question arises as to what may the circumstances which may be taken into consideration while determining the fair rent. In our opinion, no particular test can be laid down since it would depend on the facts of each case. However, we find that Hon'ble Supreme Court had to consider this question in the case of Motichand Hirachand v. Bombay Municipal Corpn. AIR 1968 SC 441 wherein it was observed as under: It is well recognized principle in rating that both gross value and net annual value are estimated by reference to the rent at which the property might reasonably be expected to let from year to year. Various methods of valuation are applied in order to arrive at such hypothetical rent, for instance, by reference to the actual rent paid for the property or for others comparable to it or where there are no rents by reference to the assessments of comparable properties or to the profits carried from the property or to the cost of construction." Even the Hon'ble Bombay High Court in the case of J.K. Investors (Bombay) Ltd. (supra) has held that under section 23(1)(a) of the Act, the AO can take into consideration various factors like contractor's method as is appa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee deposit could be taken into consideration for determination of fair rental value under section 23(1)(a) of the Act. In my considered view, the benefit derived by the assessee from the interest-free deposit could not be more than the lending rate at which the deposits were available in the market at the particular point of time. Even if that is taken into account, the fair rental value of the property does not work out to the amount determined by the AO and confirmed by the learned AM. I, therefore, partly agree with the learned AM that the ALV in this case cannot be limited to standard rent but I do not agree with him that the fair rent adopted by the AO is justified. I partly agree with the learned JM that the matter has got to go back to the AO instead of adopting the value determined by the AO. I hold accordingly. (18) Since this case is peculiar insofar as I have partly agreed with learned AM and partly with learned JM, I would like to give the following opinion: That in this case the ALV cannot be limited to the standard rent as workable under the Rent Control Act but the fair rental value shall have to be determined. The fair rental value determined by the AO howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue cannot be considered as - (i) CIT(A) has in earlier years accepted value calculated by AO which was other than standard rent; (ii) Hon'ble ITAT Bombay in case of Asstt. CIT v. Meca Properties vide ITA No. 9288(Bom.)/1990(E) Bench) has upheld that value under section 23 is to be determined independent of standard rent or valuation done by Municipal authorities. In fact this judgment has upheld that value of notional interest on interest free deposits has to be taken into account while deciding annual let- able value vide nothing on note-sheet dated 20-1-1995" 28. From the order of the AO is clear that the AO has not even made an attempt to determine the fair rent under section 23(1)(a). It is also not clear as under what provision, the additions on account of interest on interest free deposits is made. It is pertinent to note that the alleged certificate given by the society for rateable value was not available before the authorities below as it was given much later on 20-10-2003. Thus, in our view, the AO has not followed the proper procedure as provided under the provisions of section 23(1). As we have discussed in the forgoing paragraphs that the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity can be taken as determinative factor to arrive at a "fair rent". Provisions of section 23(1)(a) do not mandate this. The Division Bench in Asian Hotels Ltd. (supra), thus, rightly observed that in a taxing statute it would be unsafe for the Court to go beyond the letter of the law and try to read into the provision more than what is already provided for. We may also record that even the Bombay High Court in the case of Commissioner of Income-tax v. J.K. Investors (Bom.) Ltd. (2001) 248 ITR 723 categorically rejected the formula of addition of notional interest while determining the "fair rent" in the following manner: "......... Before concluding we may point out that under section 23(1)(b), the word "receivable" denotes payment of actual annual rent to the assessee. However, if in a given year a portion of the actual annual rent is in arrears, it would still come within section 23(1)(b) and it is for this reason that the word "receivable" must be read in the context of the word "received" in section 23(1)(b). In the light of the above interpretation, notional interest cannot form part of the actual rent as contemplated by section 23(1)(b) of the Act. We once again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(24) of the Act. Specific provisions have also been made under different heads for adding such benefits or perquisites as income while computing income under those heads, e.g., salary, business. The computation of the income under the head House property is on a deemed basis. The tax has to be paid by reason of the ownership of the property. Even if one does not incur any sum on account of repairs, a statutory deduction therefore is allowed and where on repairs expenses are incurred in excess of such statutory limit, no deduction for such excess is allowed. The deductions for municipal taxes and repairs are not allowed to the extent they are borne by the tenant. However, even such actual reimbursements for municipal taxes, insurance, repairs or maintenance of common facilities are not considered as part of the rent and added to the annual value. Accordingly, there can be no scope or justification whatsoever for making any addition for any notional interest for determining the annual value. Whatever benefit or advantage which is derived from the deposits - whether by way of saving of interest or of earning interest or making profits by investing such deposit - the same would be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness." 16. Thus the rateable value, if correctly determined, under the municipal laws can be taken as ALV under section 23(1)(a) of the Act. To that extent we agree with the contention of the learned Counsel of the assessee. However, we make it clear that rateable value is not binding on the assessing officer. If the assessing officer can show that rateable value under municipal laws does not represent the correct fair rent, then he may determine the same on the basis of material/evidence placed on record. This view is fortified by the decision of Patna High Court in the case of Kashi Prasad Kataruka v. CIT [1975] 101 ITR 810. 17. The above discussion leads to the following conclusions: (i) ALV would be the sum at which the property may be reasonably let out by a willing lessor to a willing lessee uninfluenced by any extraneous circumstances, (ii) An inflated or deflated rent based on extraneous consideration may take it out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reference to the rent at which the property might reasonably be expected to let from year to year, various methods of valuation are applied in order to arrive at such hypothetical rent, for instance, by reference to the actual rent paid for the property or for others comparable to it or where there are no rents by reference to the assessments of comparable properties or to the profits carried from the property or to the cost of construction." 22. We have also taken note of the judgment of the Bombay High Court in the case of J.K. Investors (supra) wherein the Court hinted that various factors may become relevant in determining the "fair rent". The precise observations of the Court in the said judgment are as under: "At the cost of repetition it may be mentioned that under section 23(1)(a), the Assessing Officer has to decide the fair rent of the property. While deciding the fair rent, various factors could be taken into account. In such cases various methods like the contractors method could be taken into account. If on comparison of the fair rent with the actual rent received, the Assessing Officer finds that the actual rent received is more than the fair rent d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l/evidence placed on record. The Hon. Full Bench of the Delhi High Court has observed in paragraph 21 of the decision that to determine the reasonable/fair rent extraneous circumstances may inflect or deflect the fair rent which can be taken into consideration by the AO. Since, the reasonable rent under section 23(1)(a) has not been determined. The Municipal Value or Standard Rent was also not before the AO as well as CIT(A). and it is also not clear from the record as under which clause, the AO has made this addition. Accordingly we restore the issue to record of the AO and direct the AO to determine the sum for which the property mighty reasonably expected to let from year to year under section 23(1)(a) after considering all relevant factors as discussed above and thereafter compared the same with the annual rent received or receivable by the assessee under section 23(1)(b) and then decide the issue as per law. 30. Grounds of appeal No. 1 is allowed for statistical purposes. Additional Issue 31. The has also raised an additional ground in this appeal vide letter dated 20-10-2003. The only issue raised by the assessee in this additional ground is that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired office No.72 at 7th floor of the Sakhar Bhavan, Building No.230, Backbay Reclamation, Nariman Point, Mumbai-400021 vide agreement dated 26-6-1982. The ownership of the flat/office was acquired by the assessee according to the Ownership Flat Act (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act. Though initially the land was allotted by the Government for 99 years lease to Maharashtra Rajya Sahakari Sakhar Karkhana Sangh, which is a co-operative society, subsequently the said society after taking the permission from the Government handed over the land in question to Aesthetic Builders (P.) Ltd. for its construction and development. The said builder was also allowed to sell the surplus built up area to the outside parties on ownership basis. Accordingly, the assessee acquired the property which is a office at 7th floor of the building through agreement to sale, the assessee paid the entire sale consideration and took possession of the property in question. Thus, it is clear that the assessee acquired the property under the provisions of Maharashtra Ownership Flats Act, 1963 and even otherwise, the assessee falls under the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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