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TMI Blog2019 (12) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... the condition that the value determined by the municipal value should be a close proximity with the Assessment Year under consideration. As noticed from Page No.28 wherein is a written submission, before the CIT(A) showing municipal value is far less than the rent received by the assessee. It is noted from the record as held by the CIT(A) that no evidence whatsoever brought on record by the AO for comparison that the rent received by the assessee is far less than to any of the property located in the similar area. The CIT(A) also held that Assessing Officer erred in applying the method provided in Schedule III of Wealth Tax Act. It is correct to note that the Assessing Officer did not accept the claim of rent received by the assessee and he doubted that it has been received between M/s Ballarpur Industries Ltd. and the assessee according to their suit will. Admittedly, the value determined by the municipal authority regarding the seven properties of assessee is much less than the rental income as shown by the assessee. Hon ble High Court of Delhi opined that in the case of Moni Kumar Subba (supra), that if the Assessing Officer finds the value determined by the Municipal auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case. 4. Brief facts emanating from the record is that the assessee is a company and engaged in the business of finance, investment and also real estate. The real estate division of M/s Ballarpur Industries Ltd. has been demerged and vested with the assessee from Assessment Year 2007-08. On perusal of the relevant material, the Assessing Officer found that the assessee offered income from house property of ₹ 5,40,00,000/- was the property of M/s Ballarpur Industries Ltd. before demerger and held that the transaction between the said M/s Ballarpur Industries Ltd. and the assessee falls u/s 40(a)(2)(b) of the Act. It was submitted by the assessee that the annual ratable value issued by the municipal authority is much less than the actual rent received as per rent agreement and claimed the rent received should be considered as annual value u/s 23(1) of the Act. The Assessing Officer did not find merit in the submissions of the assessee and applying the method as per Schedule III of Wealth Tax Act 1957 calculated the rental value of the above said properties at ₹ 8,21,41,216/- (₹ 102,67,65,198/- 12.5) and added to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant s case and the legal position, he had deleted the addition on account of increase in annual value with following remarks: The Assessing Officer has not brought any data of rent of other similar property vis-a-vis these properties. The fair market rental value which a property out of these can fetch in the market and whether the assessee has shown the lesser rental value from its Group Company has not been brought on record. There is no document or other evidences in the form of comparison to show that the assessee has shown lesser value of rent than the prevalent market rate. Every agreement between the two companies of a Group does not make the transaction suspicious. There are so many factors which are to be observed while giving the property on rent including the tenant s goodwill of vacating it in future and agreeing for increase in rent, amount of advance and rate of interest on advance given thereon etc. The cost of properties and the rent is dependent on a number of factors and not merely on the cost price of the immovable property. The method followed by the Assessing Officer is not an appropriate method to determine the market rental value of a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 23 of the Act. The Court opined that the fair rent fixed under the Municipal laws, which takes into consideration everything, would form the basis of arriving at annual value to be determined under Section 23(1)(a) and to be compared with actual rent and notional advantage in the form of notional interest on interest free security deposit could not be taken into consideration. It is clear from the following discussion therein: 6. With regard to question Nos. (5) and (6) which are only for the asst. yrs. 1984-85 and 1985-86 the further issue involved is whether any addition to the annual rental value can be made with reference to any notional interest on the deposit made by the tenant. When the annual value is determined under sub-cl. (a) of sub-s. (1) of s. 23 with reference to the fair rent then to such value no further addition can be made. The fair rent, takes into consideration everything. The notional interest on the deposit is not any actual rent received or receivable. Under sub-cl. (b) of s. 23(1) only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of money which is payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be made under the Income Tax Laws. If there is a change in circumstances because of passage of time i.e. the annual value was fixed by the municipal authorities much earlier in point of time on the basis of rent then received, may not provide a safe yardstick in the assessment year in question when assessment is to be made under the Income Tax Act. Further he argued in such circumstances the Assessing Officer in a given case, can ignore the municipal valuation for determining ALV 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. The ld. DR, Shri C.J. Singh prayed to allow the grounds raised by the Revenue and placed reliance in the case of Moni Kumar Subba (supra) and submitted that the facts and circumstances of the present case is similar to the facts and circumstances of the aforesaid judgment of High Court of Delhi. The ld. DR referred to Page No.28 of the Paper Book and submitted that the municipal value as shown by the assessee by way of statement is only 1,87,907/- and the assessee received a rent of ₹ 5,41,00,000/- from seven properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like Mumbai, Delhi and Pune and according to ld. DR the value as determined by the municipal laws is not binding on the assessee, the Hon ble High Court of Delhi observed that the municipal value is not a yardstick to follow in determining the annual ratable value of any property. We find that the Hon ble High Court of Delhi in the case of Moni Kumar Subba (supra) held that the annual value fixed by the Municipal authorities can be valuable yardstick, however, it would be subject to the condition that the annual value fixed bears a close proximity with the Assessment Year in question in respect of which assessment is to be made under the Income Tax proceedings. 10. Further it held that it may not be a safe yardstick if there is a change in the circumstances because of passage of time that the annual value fixed by the municipal authorities much earlier. Therefore it is clear that the Hon ble High Court of Delhi pleased to say the annual value fixed by the municipal authorities can be rationale and reasonable but subject to the condition that the value determined by the municipal value should be a close proximity with the Assessment Year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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