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TMI Blog2016 (1) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... same has to be considered in the light of the partnership deed and as the partnership deed is silent on charging of such interest, we do not find any reason for such disallowances - Decided in favour of assessee. - ITA No. 3727 & 3728/Mum/2015 - - - Dated:- 21-1-2016 - Saktijit Dey, JM And Rajesh Kumar, AM For the Appellant : Shri Nishit Gandhi For the Respondent : Shri J Saravanan ORDER Per Rajesh Kumar, A. M. These appeals by the assessee are directed against the orders dated 16.04.2015 of Commissioner of Income Tax (Appeals)-32, Mumbai (Hereinafter called as the CIT(A)) for assessment year 2009-10 2010-11. The assessee has raised following grounds of appeal in ITA No.3727/M/2015 are as under. 1. The Learned Commissioner of Income-tax (Appeals) erred in upholding the order of learned Assessing Officer estimating annual value of profit at ₹ 34,22,500/- instead of ₹ 6,60,000/- by adding notion interest on interest free security deposit resulting into an addition of ₹ 27,62,500/-. It is submitted that the notion interest on interest free security deposit cannot be taken as a determined factor to arrive at the 'fair rent' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 804 Sq Ft carpet area on ground floor of Shivani Millinium Tower which was let out to Toscano Infrastructure (P) Ltd with amenities and rent and other charge for services were ₹ 3,60,000/- p.a. 2.2. During the course of assessment proceedings the AO found from the profit and loss account that the assessee had charged expenses of ₹ 54,27,568/- against the rental income credited of ₹ 6,60,000/- thereby showing net profit of ₹ 47,67,567/-.The AO observed that the rent in respect of ground and basement floor let to M/S Shivani Transporter Pvt Ltd was quite low as compared to the market rent and a show cause was issued as to why the rent and compensation received from the property should not be assessed as income from house property and annual letting value of the property u/s 23(1) of the Act should not be calculated by taking interest on the security deposit on the lines of decision of Bombay Tribunal in the case of Trivili Investmentsts Ltd. The AO framed the assessment u/s 143(3) of the Act vide order dated 22/12/2011 by working out the ALV by adding interest @ 8.5% on ₹ 3,25,00,000/- i.e ₹ 27,62,500/- to the rent received for such property an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions and documents in relation thereto can be applied or whether a departure there from can be made . 8. The Hon ble High Court further observed as under: We are of the opinion that market rate in the locality is an approved method for determining the fair rental value but it is only when the Assessing Officer is convinced that the case before him is suspicious, determination by the parties is doubtful that he can resort to enquire about the prevailing rate in the locality. We are of the view that municipal rateable value may not be binding on the Assessing Officer but that is only in cases of afore-referred nature. It is definitely a safe guide . 9. In the light of the aforementioned observations of the Hon ble Jurisdictional High Court as mentioned elsewhere the report is cryptic without there being any comparable case brought on record. The determination of the ALV by the Revenue authorities is erroneous and as mentioned elsewhere, the Municipal rateable value exhibited at page-31 of the Paper Book is much less than the annual let out value disclosed by the assessee. We, therefore, do not find any reason for making the impugned addition. Finding of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2007-08 we find the an identical issue on the basis of which the FAA upheld the order of AO was decided in favour of the assesse the relevant paras of which are reproduced below:- 14. We have given a thoughtful consideration to the orders of the authorities below. On similar set of facts, the Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs CIT 288 ITR 01 has held that What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. What the Hon ble Supreme Court meant was when the borrowed amount is not utilised by the assessee in its own business and has been advanced as interest free loan to its sister concern the relevancy is the measure of commercial expediency. 15. The Hon ble Supreme Court further observed that once it is established that there was nexus between the expenditure and the purpose of the business, the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ought to be deleted. 2.b The learned Commissioner of Income-tax (Appeals) erred in upholding the order of learned Assessing Officer disallowing a sum of ₹ 17,52,408/- out of interest expenditure on the ground that appellant had given interest free loans and advances. It is submitted that the interest expenditure is incurred wholly and exclusively for the purpose of business of the appellant and as such no disallowance is called for. The conclusion arrived at by the learned Commissioner of Income-tax (Appeals) and by the learned Assessing Officer is erroneous, contrary to the facts based on the presumptions and conjectures and as such the disallowance made is ought to be deleted. 4.1. We find that issues involved in I.T.A. No. 3728/Mum/2011 Assessment Year: 2010-11 are same as in ITA 3727/Mum/2011 Assessment Year: 2009-10 and therefore our findings on the issue in ITA No 3727/M/2011 would mutatis mutandis apply to this appeal as well. The appeal of the assessee is therefore allowed. The AO is directed accordingly. 5. In result the appeal of the assessee is allowed. Order pronounced in the open court on 21.1.2016. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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