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TMI Blog2015 (10) TMI 2026X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the ground that the Bank Loan is utilized for other than business purpose - Held that:- As it has been argued that part of the loan raised during the year has been utilized for repayment of the old loan. This fact has not been controverted by the Ld. DR. Also stated before us that no disallowance has been made out to the amount of interest paid on the old loans in earlier years. In view of all these facts and circumstances, we direct the AO to allow the proportionate amount of interest paid on amount of loan of Bajaj Finance which has been utilized in making repayment of the old loans. The balance disallowance out of the amount of interest is confirmed. With regard to disallowance of loan processing charges and bank charges it is noted by us that these have been incurred for the purpose of the business of the assessee and therefore these are directed to be allowed. - Decided in favour of assessee in part. - ITA NO.6878/Mum/2013 - - - Dated:- 11-9-2015 - Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Assessee : Shri Vishwas Mehendole (AR) For The Revenue : Shri Satyajit Mandal (DR) ORDER Per Ashwani Taneja (Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, the AO noticed that the assessee has given on rent Ground Floor of Bungalow at St. John s Road, Bandra (W), Mumbai @ of ₹ 60,000/- per month. The AO observed that the rental income shown was on lower side as assessee has not taken into account the interest element as there was interest free security deposit of ₹ 25,15,000/- received by the assessee from the tenant of the aforesaid property. According to the AO, as per section 23(1)(a), house property income was taxed on annual value which was deemed to be sum for which the property might reasonably be extracted let from year to year. The assessee claimed that municipal valuation of the aforesaid party was only of ₹ 35,595/- But, claim of the assessee was not accepted by the AO. It was observed by the AO that the fair rent of the property would be determined, keeping in mind that for extraneous consideration property has been let out for lower rent. According to the AO, annual value of the property was required to be calculated on the basis of interest on security deposit utilized by the assessee company and accordingly AO computed 12% interest per annum for working out the rental income as value of fair ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore same should be upheld. 3.4. We have heard both the parties and have gone through the judgments relied upon the Ld. Counsel which are directly on this issue. We have also gone through the relevant material placed on record for the purpose of computation of annual value of the property. The relevant procedure in this regard has been prescribed u/s 23(1) of the Income Tax Act. This very issue has been dealt with and discussed in detail by the coordinate bench of Mumbai ITAT in the case of ACIT vs. Mrs. Bharati Anirudh Kilachand (supra), relevant portion of the judgment is reproduced below: 6. We have considered the rival submissions as well as relevant material on record. For the purpose of computation of annual value of the property, the procedure is stipulated u/s 23(1) of the Income Tax Act. As per the prescribed procedure, the Assessing Officer has to first determine the sum for which the property might reasonably be expected to fetch the rent from year to year as per clause (a) of sub-section 1 and then if the property is let out, compare the same with the annual/actual rent received or receivable. Therefore, the reasonable rent expected to be fetched by the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prevailing rate or the attempt is to deflate or inflate the rent by such methods, then, as held by the Delhi High Court, the Assessing Officer is not prevented from carrying out the necessary investigation and enquiry. He must have cogent and satisfactory material in his possession and which will indicate that the parties have concealed the real position. He must not make a guess work or act on conjectures and surmises. There must be definite and positive material to indicate that the parties have suppressed the prevailing rate. Then, the enquiries that the Assessing Officer can make would be for ascertaining the going rate. He can make a comparative study and make an analysis. In that regard, transactions of identical or similar nature can be ascertained by obtaining the requisite details. However, there also the Assessing Officer must safeguard against adopting the rate stated therein straightway. He must find out as to whether the property which has been let out or given on leave and license basis is of a similar nature, namely, commercial or residential. He should also satisfy himself as to whether the rate obtained by him from the deals and transactions and documents in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, or the like that the Assessing Officer can adopt a fair rent based on the opinion obtained from reliable sources. There as well, we do not see as to how we can uphold the submissions of Mr. Chhotaray that the notional rent on the security deposit can be taken into account and consideration for the determination. If the transaction itself does not reflect any of the afore stated aspects, then, merely because a security deposit which is refundable and interest free has been obtained, the Assessing Officer should not presume that this sum or the interest derived there from at Bank rate is the income of the assessee till the determination or conclusion of the transaction. The Assessing Officer ought to be aware of several aspects and matters involved in such transactions. It is not necessary that if the license is for three years that it will operative and continuing till the end. There are terms and conditions on which the leave and license agreement is executed by parties. These terms and conditions are willingly accepted. They enable the license to be determined even before the stated period expires. Equally, the licensee can opt out of the deal. A leave and license does not cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and to which our attention is not invited the principles laid down in the decisions of the Hon ble Supreme Court and referred to by the Full Bench of the Delhi High Court would govern the enquiry. 54.As a result of the above discussion, we are of the opinion that wherever the Assessing Officer has not adhered to the above principles, and his finding and conclusion has been interfered with, by the higher Appellate Authorities, the revenue cannot bring the matter to this Court as no substantial question of law can be arising for determination and consideration of this Court. Then, the findings by the last fact finding Authority, namely the Tribunal and against the revenue shall have to be upheld as they are consistent with the facts and circumstances brought before it. If they are not vitiated by any perversity or error of law apparent on the face of the record, the appeals of the revenue cannot be entertained. They would have to be accordingly dismissed. 8. Having regard to the facts and circumstances of the case, where the Assessing Officer has not conducted any enquiry or investigation and by following the Judgment of Hon ble Jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,26,301 2. Loan Processing Charges Rs.1,88,815 3. Bank Charges Rs.53,452 Total Rs.10,68,568 5.2. The assessee contested this issue before Ld. CIT(A), wherein no relief was granted by the Ld. CIT(A) and disallowance made by the AO was confirmed. 5.3. Before us, Ld. Counsel has fairly stated that disallowance with regard amount utilized for acquiring the land was not allowable; but other amount has been wrongly disallowed by the AO. On the other hand, Ld. DR has supported the orders of authorities below. 5.4. We have gone through the assessment order and order passed by the Ld. CIT(A) and material placed before us. It has been argued that part of the loan raised during the year has been utilized for repayment of the old loan. This fact has not been controverted by the Ld. DR. It has been further stated before us that no disallowance has been made out to the amount of interest paid on the old loans in earlier years. In view of all these facts and circumstances, we direct the AO to allow the propo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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