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TMI Blog2023 (1) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... the court or tribunal under the said legislation - Also held until then the AO may not be justified in applying any other formula or method and determine the fair rent . In the present case, it is evident that the AO did not follow the applicable rent control legislation while determining the deemed rent of the property @8.5% of the value of the flat. Further, nothing has been brought on record to support that the findings of the learned CIT(A) were reached after undertaking the exercise to fix the standard rent in terms of applicable rent control legislation. Thus, we deem it appropriate to remand this issue to the file of the AO for determination of annual letting value in terms of the applicable rent control legislation in light of aforesaid decisions of the Hon ble Jurisdictional High Court. Accordingly, grounds raised in assessee s appeal are allowed for statistical purposes. - ITA no.495/Mum./2018 - - - Dated:- 3-1-2023 - SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER Assessee by : Shri K. Gopal Revenue by : Shri Purnesh Gururani ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head of salary, house property, and income from other sources. The return filed by the assessee was initially processed under section 143(1) of the Act and thereafter was selected for scrutiny assessment through compulsory category. During the assessment proceedings, it was observed that the assessee owns more than one house property. However, no deemed income from house property has been offered to tax. It was further observed that the property in a Capri Tower has been treated as self-occupied property by the assessee. Further, the value of flat at Bandra Breeze as appearing in the balance sheet is Rs. 2,49,19,440. The Assessing Officer ( AO ) vide order dated 31/08/2016 passed under section 143(3) of the Act, following the decision of the learned CIT(A), determined deemed rent in respect of this flat @8.5% of the cost. Accordingly, the AO calculated income from the house property at Rs. 14,82,007, after allowing deduction under section 24(a) of the Act and added the same to the total income of the assessee. 5. In its appeal before the learned CIT(A), the assessee submitted that the flat at Bandra Breeze is owned 65% by the assessee and 35% by another individual. The value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ography (supra) following substantial questions of law came up for consideration before the Hon ble Jurisdictional High Court: (i) Whether on the facts and circumstances of the case and in law, Tribunal was right in holding that the fair rental value specified in section 23(1)(a) is the municipal value or actual rent received whichever is higher and not the annual letting value on the basis of comparable instances as adopted by the Assessing Officer, though the property under consideration was not covered by Rent Control Act? (ii) Whether on the facts and circumstances of the case and in law, Tribunal was right in remitting the matter back to the file of the Assessing Officer with a direction to verify the rateable value fixed by the Municipal Authorities and if the same is less than the actual rent received, then the actual rent received should be taxed? 9. The Hon ble Jurisdictional High Court decided the appeal by observing as under: 47] We are of the view that where Rent Control Legislation is applicable and as is now urged the trend in the real estate market so also in the commercial field is that considering the difficulties faced in either retrieving bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session to the parties. He must not proceed to rely upon the material in his possession and disbelieve the parties. The satisfaction of the Assessing Officer that the bargain reveals an inflated or deflated rate based on fraud, emergency, relationship and other considerations makes it unreasonable must precede the undertaking of the above exercise. After the above ascertainment is done by the Officer he must, then, comply with the principles of fairness and justice and make the disclosure to the Assessee so as to obtain his view. 48] We are not in agreement with Shri Chhotaray that the municipal rateable value cannot be accepted as a bonafide rental value of the property and it must be discarded straightway in all cases. There cannot be a blanket rejection of the same. If that is taken to be a safe guide, then, to discard it there must be cogent and reliable material. 49] 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 ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the third year and not otherwise. Everything depends upon the facts and circumstances in each case and the nature of the deal or transaction. These are not matters which abide by any fixed formula and which can be universally applied. Today, it may be commercially unviable to enter into a lease and, therefore, this mode of inducting a 'third party' in the premises is adopted. This may not be the trend tomorrow, therefore, we do not wish to conclude the matter by evolving any rigid test. 52] We have also noted the submissions of Shri Ahuja. We are of the opinion that even in the cases and matters brought by him to our notice, it is evident that the Assessing Officer cannot brush aside the rent control legislation, in the event, it is applicable to the premises in question. Then, the Assessing Officer has to undertake the exercise contemplated by the rent control legislation for fixation of standard rent. The attempt by the Assessing Officer to override the rent control legislation and when it balances the rights between the parties has rightly been interfered with in the given case by the Appellate authority. The Assessing Officer either must undertake the exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay Rent Control Act is to be fixed @8.5% of the total investment. As noted above, the Hon ble Jurisdictional High Court in Tip Top Typography (supra) held that the AO either must undertake the exercise to fix the standard rent himself and in terms of rent control legislation, if the same is applicable or leave the parties to have it determined by the court or tribunal under the said legislation. Further, it was held that until then the AO may not be justified in applying any other formula or method and determine the fair rent . In the present case, it is evident that the AO did not follow the applicable rent control legislation while determining the deemed rent of the property @8.5% of the value of the flat. Further, nothing has been brought on record to support that the findings of the learned CIT(A) were reached after undertaking the exercise to fix the standard rent in terms of applicable rent control legislation. Thus, in view of the above findings, we deem it appropriate to remand this issue to the file of the AO for determination of annual letting value in terms of the applicable rent control legislation in light of aforesaid decisions of the Hon ble Jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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