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TMI Blog2014 (3) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... its being usu-fructuous of the property. In our view, the approach adopted by the AO in the de novo assessment was not proper. It can be said to be a case where the AO did not properly comply with the directions while making de novo assessment. It may be observed that while making de novo assessment, though the AO was required to make necessary enquiries as directed by the ld. Commissioner vide his order under section 263 but, at the same time the AO was also at liberty to take into consideration the other facts and circumstances and the case law, if any, available before him. So taking into consideration the overall facts and circumstances, in our view, it will be fit if the matter is restored to the file of the AO for de novo assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(a) of the Act. The AO did not examine the cost of assets leased/rented to see whether the rent was adequate in the light of interest free deposit of ₹ 7 crores and whether the said interest free deposit was not in lieu of the rent which was not offered as income from house property. The comparative market rates were not called for/furnished and hence the applicability of section 23(1)(a) was not examined by the AO. He therefore held that the issue needs to be examined afresh by the AO and therefore he set aside the order of the AO with a direction to do the assessment de novo, on this issue only after affording the necessary opportunity to the assessee to represent its case. 2. In the de novo assessment, the AO observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per month and when applied to the entire property the annual rental value of the property was computed at ₹ 72,57,600/-. 3. Before the Commissioner of Income Tax, it was submitted that the AO did not follow the directions issued by the Commissioner in his order under section 263 of the Act and that the calculation of deemed interest by naming it as usu-fructuous was wrong and illegal. The Commissioner of Income Tax vide impugned order though observed that the AO did not follow the directions of the Commissioner given vide order under section 263 for arriving at the fair market rental value of the property, yet, he observed that the method adopted by the AO for calculating the fair rent of the property was absolutely correct and ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Punjab Haryana High Court has observed that where the security deposit was disproportionate to the actual contractual rent which amounted to 140 times the monthly rent, the payment of security deposit was to circumvent to the real rent. On the other hand, the ld. A.R. has relied upon the decision of the full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Moni Kumar Subba (2011) 333 ITR 38 and further on the decision of the co-ordinate bench of this Tribunal in the case of DCIT vs. Diven Dembla (2013) 37 taxmann.com 127 (Mumbai- Trib.). 5. We have considered the rival submissions of the ld. representatives of both the parties and also have gone through the records. A perusal of the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of fair rent, the AO can take into account various factors including standard rent. If the standard rent is not fixed then the procedure provided under the Rent Control Act for fixation of standard rent can be taken into consideration. However, the ALV fixed by the municipal authorities cannot be the sole criteria for determining the fair rent of the property. The AO can ignore the municipal valuation if he finds that the same is not based on relevant material for determining the fair rent in the market and there is sufficient material on record for taking a different valuation. In determining the reasonable/fair rent, extraneous circumstances may inflate/deflate the fair rent . Various circumstances can be taken into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, it comes out from the facts that the payment of security deposit is to circumvent the real rent then the same may be considered for computing the income from house property. In the case in hand, the ld. Commissioner had directed the AO to undertake the necessary exercise for determining the fair rent of the property. However, the AO instead of making enquiries as per the directions given by the ld. Commissioner vide his order passed under section 263, by relying upon the decision of the co-ordinate bench of the Tribunal in the case of Trivoly Investment Trading Co. (P.) Ltd. (supra) assessed the income taking into account the reasonable interest on the security deposits being usu-fructuous of the property. In our view, the approach ado ..... X X X X Extracts X X X X X X X X Extracts X X X X
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