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TMI Blog2024 (10) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... A(a) of the Act vide registration dated 19.08.1987. The assessee has its corporate office at Surabhi Arcade, Hyderabad which was purchased out of part of corpus fund provided by Swiss Agency for Development and Corporation (SDC). 4. During the course of assessment proceedings, the Assessing Officer observed that the assessee had rented out its premises to M/s Bhartiya Samriddhi Finance Ltd (BSFL) and M/s Bhartiya Samriddhi Investment & Consulting Service (BASIC), organizations who are persons specified within the meaning of section 13(3) of the Income-tax Act, 1961 [the Act, for short], which fact was noted in the Audit Report. 5. The assessee was asked to explain details of property given on rent alongwith agreements and justify the rental value. 6. In response, the assessee filed rent agreement along with rent valuation report dated 25.07.2007 prepared by a registered valuer and chartered engineer. The assessee contended that the rent was within the market limits. 7. However, the Assessing Officer found no clause regarding termination of the agreement in the agreement entered into on 03.04.2006 and no security deposit was taken. The total rental charges was Rs. 17,68,000/- pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of properties to interested persons at highly subsidised rent was a clear-cut violation of section 13(2)(b) and, therefore, the assessee was liable to lose its exemption. In this case, a portion of the property was let out at a meagre amount of rent to a firm, in which one of the trustees was a partner and the property of the trust was also utilised by the members of the family of the settlor. The Income-tax Officer was of the view that the rent of the first floor of the trust property let out to the firm was only Rs. 200 per month, as against the estimated rent Rs. 16,000 and, therefore, this was hit by the provisions of section 13(2)(b). 4.1.10 From the facts of the case as noted above, it is seen that the rent received was Rs. 17.68 lakhs and the rent which could have been received as per the value given by the valuer taken at the lower side and as determined by the ld. CIT(A) in the earlier proceedings was Rs. 19,18,824/- on the basis of which it was held that the provisions of section 13 were applicable since the rent charges was lesser than the fair market value. When considered in view of the observation of the Hon'ble Madras High Court as above and also in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent or other compensation; xxxxx (3) The persons referred to in clause (c) of sub-section (1) and sub- section (2) are the following, namely:-- 15. At the outset, there is no dispute to the fact that property of the assessee at Hyderabad was rented out to two companies in which one director is connected by directorship and shareholding and are thus covered u/s 13(3) as specified person. The assessing officer has taken the area of the rented premises at 13,438 sq ft and calculated the rent @ 26.2 per sq.ft at Rs 42,73,284/-. The CIT(A) has corrected the area of rented premise to 9406 sq.ft on the basis of Annexure to statement of total income of the assessee for AY 2007-08 and taken the rent @17 per sq.ft. at Rs 19,68,000/- adopted by the earlier CIT(A). The rent received by the assessee from the specified person is Rs 17,68,000/- which works out to be @ Rs 15.66 per sq.ft. The issue, therefore, for our determination is whether the rent received by the assessee from its 'specified persons' were 'adequate rent or other compensation' to escape the mischief of section 13(2)(b). To understand the meaning and concept of "adequate consideration", the judgement of the hon'ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction between "good consideration" and "adequate consideration" was pointed out and in the judgment of Manohar Lall J., reference was made to some of the earlier authorities on the point. In Tennent v. Tennent [1870] LR 2 Scotch and Divorce Appeal Cases 6, Lord Westbury observed: "But the transaction having been clearly a real one, it is impugned by the appellant on the ground that he parted with the valuable property for a most inadequate consideration. My Lords, it is true that there is an equity which may be founded upon gross inadequacy of consideration. But it can only be where the inadequacy is such as to involve the conclusion that the party either did not understand what he was about or was the victim of some imposition. It is impossible to say that the inadequacy of consideration in this case amounts to anything like proof to warrant either of those conclusions". The same conclusion was reached by the other members, who decided the case in the House of Lords. 21. In the present case, the learned ITAT has observed that the revenue had failed to bring on record any cogent evidence to show that the rent received by the respondent/assessee, in the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, convinced with the reasoning given by the Ld. CIT(A) in his order for the Assessment Year 2008-09 wherein while dealing with this issue in detail, the Ld. CIT(A) reached a conclusion that on the date of the observations of the learned Assessing Officer that there is no mechanism with the Department to determine valuation of rents imperative the adjudicatory authorities to look further corroborative evidence in the absence of which it is not desirable to disturb the consistent view taken over a period of more than two decades. We are in agreement with the Ld. CIT(A) that not only on the basis of the rule of consistency but also on the basis of the facts relating to the rent received by the assessee from HLI vis-à-vis the rent under the Delhi Rent Control Act. Without vouchsafing the correctness of the information received from the website and without correlating the information furnished by the property dealers without realities on ground with a specific reference to the property in dispute, it is not open for the Assessing Officer to proceed to make addition, that disturbing the accepted position for about more than two decades. No change of facts and circumstances are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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