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TMI Blog2012 (9) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 - ITAT, Mumbai ] ALV adopted by Municipal rateable value should be the determining factor for applying provisions of Sec. 23(1)(a) - Thus the ALV adopted by the municipal authorities should be taken into consideration and the matter is restored back to the file of the AO to verify the Municipal rateable value of the property and if the actual rent received by the assessee is more than the municipal rateable value, then to adopt the actual rent of the ALV of the property. Disallow deduction on interest from house property income - Held that:- As the same interest has been taxed under the head income from other sources also there is a direct nexus of interest received on Fixed deposit vis-à-vis the security deposit, therefore the same interest cannot be considered for computing house property income more so we have also held that ALV has to be determined as per the municipal rateable value or actual rent whichever is higher. Determination of the annual let out value of 7 flates at Sunbeam building - Held that:- Municipal rateable value shall be taken into consideration for determining the ALV comparing it with the actual rent whichever is higher shall be taken it as income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsists of income from house property of Rs. 4,10,453/- and income from other sources to the tune of Rs. 4,69,831/-. The return was processed u/s. 143(1) of the I.T. Act. While processing the return of income, the Assessing Officer noticed that the income under the head income from house property from NCPA building at Nariman Point, Mumbai and also flat at Sunbeam, Powai and Nest Marol, Mumbai and have been shown at a lesser value and accordingly the AO was of the view that the income has escaped assessment and accordingly issued notice u/s. 148 of the I.T. Act. In response to the notice, the assessee stated that the return filed on 30.6.2000 may kindly be treated as deemed to have been filed in compliance to the notice u/s/ 148 of the I.T. Act. Subsequently, notices u/s. 143(2) and 142(1) were issued and served upon the assessee. 4. During the course of assessment proceedings, the AO found that the Flat at NCPA was let out to Secretary of State of Foreign of Common Wealth of UK upto 30.7.1999 on a monthly rent of Rs. 2,20,000/-. The AO further noted that thereafter the flat at NCPA was let out to Aptech Ltd. On a monthly rent of Rs. 40,000/- with an interest-free deposit of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining the ALV of flat at Sunbeam building, the AO found that four flats were rented out at an annual rent of Rs. 2,18,000/- and the remaining 3 flats have been let out at an annual rent of Rs. 1,44,000/- and an interest free deposit of Rs. 5,00,000/- has been taken from each tenant. The AO found that the assessee has shown Rs. 3,62,000/- as income from these properties. The AO computed the ALV from these properties by adding an interest at the rate of 1% on deposit of Rs. 35,00,000/- and after giving rebate for repairs computed net annual letting value at Rs. 2,97,750/- and completed the assessment. 5. The assessee took the matter before the Ld. CIT(A) questioning the mode of computation of ALV by the AO, but without any successee. 6. Aggrieved by the decision of Ld. CIT(A), assessee is in appeal before us. The Ld. Counsel for the assessee argued that the basis of calculation of ALV by the AO is not correct. The main argument of the Ld. Counsel was that the ALV cannot exceed the Municipal rateable value. The Ld. Counsel further pointed out that the actual rent received by the assessee was more than the Municipal rateable value and therefore it should be accepted. The Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad income from other sources . Considering these facts, we can say that the direct nexus has been established by the assessee. 9. Now coming to the decision of P H High Court in the case of CIT Vs K. Streetlite Electric Corpn.(supra) relied upon by the DR. We find that the Hon ble High Court has decided in favour of the Revenue on finding that the security deposit was a sham device to circumvent real rent. However, in the instant case, the lower authorities have not brought anything on record to establish that the rent interest free deposit was a sham transaction to circumvent real rent. 10. We have gone through the Leave and Licence agreement executed on 30th day of June, 1999 between the Co-owner including the assessee as licensors and M/s. Aptech Ltd a company incorporated in the Companies Act, 1956 as licencee. We find that this agreement was for a period of 48 months as per clause-5 of the said agreement, we find that the Licensors (co-owner) shall bear and pay all taxes and outgoings payable in respect of the said flat and all increases thereto including all Municipal taxes, ground rent, cesses, duties, Society charges and the licensee shall not be required to make an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal, in our humble opinion, the ALV adopted by the municipal authorities should be taken into consideration and following the findings of the Tribunal, we restore this matter back to the file of the AO. We also direct the AO to verify the Municipal rateable value of the property , after giving reasonable opportunity of being heard to the assessee , and if the actual rent received by the assessee is more than the municipal rateable value, then to adopt the actual rent of the ALV of the property. Ground No. 2 3 are accordingly allowed for statistical purposes. 13. In ground No. 4, the assessee has challenged the decision of the Ld. CIT(A) who did not allow deduction on interest of Rs. 2,70,000/- from house property income. 14. As the same interest has been taxed under the head income from other sources also, we have already given a categorical finding that there is a direct nexus of interest received on Fixed deposit vis- -vis the security deposit, therefore the same interest cannot be considered for computing house property income more so we have also held that ALV has to be determined as per the municipal rateable value or actual rent whichever is higher. Ground No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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