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TMI Blog2018 (1) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... operty made by the AO without appreciating the fact that the facts of Surge Enterprises are distinguishable from the facts in the instant case. 3. Brief facts of the case are as under: During the course of assessment proceedings, the assessing officer observed from the records and details submitted that the assessee had shown rental income of Rs. 5,44,332/- as annual value of the property for the purpose of computation of "Income from House Property". Further, the assessing officer observed that the property being a flat situated at Cuffe Parade, Mumbai admeasuring area at 2100 sq.ft, and considering the location and area of the property, the annual value of the property adopted by the assessee was on a lower side. Therefore, the assessee was asked how and why the annual value adopted appeared to be on lower side considering the fair rent of the property. In response, vide letter dated 04.03.2015, the assessee made and from the contention the assessing officer observed that tax under the head 'Income from House Property" is not a tax upon rent of property but on inherent capacity of a building to yield income. Hence, the standard selected measure "annual value" of property w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had also invested the said security deposit interest bearing funds on which it had enjoyed interest income. Hence, the annual value of the should be taken as per the provisions of section 23(1) of the Act. 5. The assessee had also contended that the rateable value of the flat had been fixed at Rs. 5,10,690/- and as actual rent received was higher than municipal rateable value, the assessee had offered rental income actually received. It was the contention of the assessee that since in metros or big cities like Delhi, Mumbai, Chennai, Kolkata, municipal authorities determine net rateable value after deducting 10% of gross rateable value, and net municipal valuation therefore required adjustment for determining reasonable expected rent for Income Tax purposes. Thus, after taking into account the above facts, full amount of municipal value came to Rs. 5,67,433/- which was greater than actual rent received of Rs. 5,44,332/-. Also the case laws relied and cited upon by the assessee were distinguishable on the facts and circumstances of the present case. Therefore, the assessing officer concluded that the gross annual value in respect of property i.e. Flat no.103-A to be similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to let from yoar to year, the actual rent received should be the annual value of me property u/s.23(1)(b)of the Act. 5.1.9 Thus, the Assessing Officer has to first consider municipal value/rateable value as the base deemed figure for the purpose of clause (a) of section 23(1). If the actual rent received during the year is higher than that then the Assessing Officer has to consider it as the deemed annual value of the property as per clause (b). When the actual rent received or receivable during the year is less than municipal value deemed as annual value under clause (a) due to nonletting, the provisions of clause (c) apply. The Assessing Officer has not the copy of society bill that gives the municipal letting value. Therefore, clause (b) to section 23(1) would apply and the deemed annual value has to be taken as the actual rent received during the year i.e. Rs. 5,44,332/-. As long as the rent received exceeds the municipal value, the same has to be taken for the purpose of calculating deemed annual value of the property on which tax has to. be charged in accordance with law. In the case of ITO vs Surge Enterprises Ltd. (supra), the Hon'ble ITAT had deleted the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requisite details. However, there also the AO 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 relation thereto can be applied or whether a departure therefrom can be made, for example, because of the area, the measurement, the location, the use to which the property has been put, the access thereto and the special advantages or benefits. It is possible that in a high rise building because of special advantages and benefits an office or a block on the upper floor may fetch higher returns or vice versa. Therefore, there is no magic formula and everything depends upon the facts and circumstances in each case. However, we emphasize that before the AO determines the rate by the above exercise or similar permissible process he is bound to disclose the material in his possession to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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