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TMI Blog2016 (9) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... e determination of income from house property by way of ALV. The basis of assessing the tax and income from house property is the ownership of the property and not the actual realization of income. The ownership by itself attracts the charge. The assessee was thus under the law liable to disclose the ALV from the said property. In fact, the assessee had shown the ALV on the municipal ratable value which again is one of the accepted method for showing the ALV in terms of various decisions which has been relied upon before the authorities below. Hence, it cannot be held that, income from house property was not assessable in the case of the assessee in this year. Once the income from house property is assessable, then as a natural corollary deduction of interest paid on the borrowed funds for the purpose of house property has to be allowed in terms of section 24(b). Accordingly, the claim of the assessee was not only bona fide but also was duly supported under the provisions of law. Thus, we hold that, no penalty for disallowance of loss of income from house property can be made and we direct the AO to delete the penalty - Decided in favour of assessee - ITA No. : 7251/Mum/2011 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring the assessee to pay the Maintenance charges and accordingly, final payment was made by the assessee on 02.08.2007. Thus, the entire payment was made as well as the possession was also received by the assessee during the relevant financial year 2007-08. However, the assessee had made a request to the builder to delay the possession, due reasons like, assessee wanted to customize the flat by undertaking civil work and wood work to suit his personal needs and also to finish it in a habitable condition so as to occupy and use the flat for the purpose of residence. The actual possession of flat was deferred and was finally taken on 13.04.2009. In the return of income, the assessee showed the annual letting value (ALV) of the property on municipal valuation rate which was ₹ 1,31,500/- from the said ALV, Municipal taxes of ₹ 1,09,800/- was reduced and deduction under section 24(a) @ 30% was claimed. That apart, assessee also claimed deduction of interest on borrowed capital amounting to ₹ 21,40,286/-. Accordingly, loss of ₹ 21,25,096/- was computed under the head income from house property . The working of the computation under the head income from house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole premise of the Ld. CIT(A) for confirming the penalty is that, assessee has claimed before the AO that he is not liable for tax because assessee had specifically stated that, since he has not taken the possession of the flat formally by the builder, therefore, ALV has been shown by way of abundant precaution on the municipal ratable value. However, he submitted that such an observation of Ld. CIT(A) is not correct an in support, he drew our attention to letter dated 04.12.2010 filed before the AO during the course of the assessment proceedings. In the said letter, the assessee has duly explained the entire facts which are as under:- The assessee has acquired the subject property vide agreement for sale dated 8th November, 2004, which was duly registered with the Sub- Registrar on the same day; The aggregate purchase consideration of the admeasuring 4575 sq. ft. is ₹ 3,68,28,586/-; The purchase of flat was furnished by HDFC Bank and the assessee had paid interest of ₹ 21,40,286/- during the previous year relevant to assessment year under consideration post completion of construction of building; The construction of the building was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 2009 the assessee took up the interior decoration and balance finishing work like civil work, electrical wiring, furnishing etc. during July/December 2009 and the flat became fit and habitable for residential use and capable for letting out effectively from January, 2010. The assessee has acquired flat No.2051 in his name and similarly flat No.2401 was acquired by his wife Mrs. Madhu Gupta, assessed with you under PAN AAFPG 1617C to be used as a single residence unit akin to a Pent House combining a large area of 9150 sq.ft.. Such a larger area premises has a very limited rental demand in the market and its fair rental value cannot be bench marked to a small size flat . Thereafter the assessee had referred to various decisions as to why municipal value should be adopted and finally summarized the entire contention in the following manner: 1. Even though the physical possession of the subject flat was not actually received by the assessee, the assessee had suo moto declared deemed let out value as measure of abundant caution as BMC Occupation Certificate was received, Municipal Taxes demanded by the builders for the period under consideration were paid and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in the return of income had taken municipal ratable for the purpose of ALV under section 23(1)(a). From such computation, the assessee has claimed the interest paid on the borrowed capital for the said house property. The Ld. AO has disallowed the loss claimed under the head income from house property on the ground that, the assessee himself has admitted that, he has not taken the actual possession in the relevant financial year. Such contention of the Ld. AO cannot be upheld, because it cannot be denied on the present facts that the assessee was the actual owner of the said property during the relevant previous year and once the assessee was the owner of the house property, then charge is created for the determination of income from house property by way of ALV. The basis of assessing the tax and income from house property is the ownership of the property and not the actual realization of income. The ownership by itself attracts the charge. This proposition has been upheld by the Hon ble Bombay High Court in the case of CIT vs Union Bank Building Society ( supra ). The relevant ratio of the Hon ble High Court reads as under:- The word owner in section 9 of the Act m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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