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TMI Blog1990 (3) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of 6% on land investment and 9% on construction. 3. The learned counsel for the assessees, relying upon the order of the Tribunal in WTA Nos. 122 to 129/Bom/1989, dated 12-2-1990 for assessment year 1983-84, submitted that the provisions of rule 1BB were applicable to the property and, there were no such fact and circumstances warranting the opinion that it was not practical to apply the provisions of the rule to the property under consideration. He also referred to the order of the Tribunal in the case of Arun R. Patel v. IAC [1988] 35 TTJ (Bom.) 13 and also the judgment of the Bombay High Court in the case of M.V. Sonavala v. CIT [1989] 177 ITR 246 and that of the Calcutta High Court in the case of CIT v. Prabhabati Bansali [1983] 141 ITR 419 for the proposition that municipal value was the gross maintainable rent. The learned Departmental Representative, on the other hand, supporting the orders of the CWT, submitted that the construction of the property was such that no flat therein could be said to be independent so as to be occupied by persons who are strangers to each other. In any case, it was further submitted, the standard rent alone would be gross maintainable rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consist of recreation hall, pooja room, music room and connected facilities like toilets, etc. He also observed that another common facility is flat Nos. 9 and 10 on the fourth floor which are being used as accommodation for guests. While flat No. 9 has 3 bed rooms, flat No. 10 has only one bed room with an open terrace garden. Terrace gardens have also been provided on top of flat Nos. 2 and 4 at the second floor level. It is further stated that terrace garden has also been provided between the two blocks on top of the mezzanine floor. All these gardens are stated to be for common use of the various persons residing in the building. 5. On the basis of the aforesaid description of the building, the CWT was of the opinion that the building was such as could not be occupied by persons who are strangers to each other and it was meant only for the members of the family and that the ten flats were not independent in themselves. We do not find any force in this finding of the CWT. This conclusion is not supported by any cogent or convincing reasons. The emphasis appears to be on the common facilities like staircases, recreation hall, pooja room, music room, terrace gardens, accomodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dewan Daulat Rai Kapur, and Mrs. Sheila Kaushish's case, held that the annual value had to be determined under the Municipal Act/Income-tax Act on the basis of the standard rent. The gross maintainable rent, therefore, had to be the value a willing tenant offers to a land-lord in the open market but in view of the restrictions under the Rent Control Act, the rent determinable thereunder is the maximum rent which could be expected reasonably from a person. The rateable value determined under the Municipal Act normally represents the reasonable rent provided the same is within the parameters of the Rent Control Act. If the rent determined under the Municipal Act is not in accordance with the Rent Control Act, it may not represent an accurate assessment of the reasonable rent. 9. We do not find any merit in the contention of the assessee that the municipal value has necessarily to be taken as the gross maintainable rent as per the decision of the Calcutta High Court in the case of Prabhabati Bansali and that of the Tribunal in Arun R. Patel. In these cases, it has been specifically stated that there may, however, be cases in which the annual value fixed under the Municipal law may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y might reasonably be let from year to year and the annual municipal value. " (Italicised by us.) 11. The assessee's reliance on the order of the Tribunal in WTA Nos. 122 to 129/Bom/1989 is also of no help on this point as in that case, nothing was brought to the notice of the Tribunal that the municipal valuation was lower than the standard rent. The CWT in the present case found that the municipal reteable value is fixed at Rs. 1,68,080 for the entire building. It works out to only 1.09% on the disclosed investment of the assessees which was too low a percentage than that being adopted by the High Court under the Bombay Rent Control Act, 1947. He brought on the record the rates fixed for determining the standard rent under the Bombay Rent Control Act by extracting the following passage from Kulkarni's book on The Bombay Rents Hotel and Lodging House Rates Control Act, 1947, 1988 Edition, p. 48: " The High Court and the subordinate courts have been fixing the standard rent at an amount which gives net return to the landlord at the rate of 6% of the land value and 8 2/3 or 9% on the investment made on construction of the building. " 12. We may also state here that the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case (Sorab D. Talati v. Joseph Michem, Appeal No. 101 of 1949); Lalkaka Ch. J. and Barodawalla J. (decided on 15-12-1949) erred in quantifying the particular rates for return on the investment and the outgoings and in laying down a general principle that the rent which includes the outgoings and return on a general principle that the rent which includes and return on the investment in excess of the particular rates is excessive. This has been recognised by the appeal court of the Bombay Small Causes Court in other cases. In one case, looking to the insecure nature of the tenure, i.e., a monthly lease and semipermanent nature of the construction (i.e., having been erected with secondhand materials), the court permitted 1 per cent allowance for repairs, 0.125 per cent for insurance and 8.723 per cent for depreciation on 90 per cent of the cost of construction (Nathalal Mohanlal v. Bai Sitabai Desai, Appeal No. 169 of 1950). In respect of the buildings erected after November, 1951, the court has in view of the rise in the rate of interest of gilt edged securities and of the bank rate since November, 1951 allowed a higher return than that of 4 1/2 per cent on land value and 5 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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