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September 2018

21. [2018] 194 TTJ (Mumbai) 102 Owais M Husain vs. ITO ITA No.: 4320/Mum/2016 A. Y.: 2006-07 Dated: 11th May, 2018 Section 23(1)(a)- Income from house property –– AO is directed to compute the deemed rent of the house property as per the municipal rateable value and assess the income from house property accordingly instead of estimating the letable value on the basis of the prevailing rate of rent of the building situated in the surrounding areas.

By JAGDISH T. PUNJABI I DEVENDRA JAIN I TEJASWINI GHAG
Chartered Accountants
Reading Time 2 mins

FACTS


  •   The assesse owned 3 flats
    i.e. one at Chennai which is treated as self-occupied property by the AO and
    other two properties being flat at Queens Court, Worli and Dhun apartment,
    Worli, Mumbai.

 

  •  The AO estimated the reasonable let out value of the house
    property after taking IT inspector’s report. The report was on the basis of the
    local enquiry conducted in the surrounding area of the building situated and
    the going rent per square feet of Rs.50.70 per square feet per month. Based on
    inspector’s report, the AO estimated the rent per month for each of the flats
    at Rs. 75,000 per month. Therefore, the AO worked out ALV of the flat at Dhun
    cooperative society, Worli, Mumbai, at Rs. 9 lakh and for the other flat at
    Queens Court, Worli, Mumbai at Rs. 9 lakh. 

 

  • Aggrieved by the
    assessment order, the assessee preferred an appeal to the CIT(A). The CIT(A)
    confirmed the action of the AO.

 

HELD


  •     The Tribunal while
    relying upon the judgement of the Hon’ble Bombay High Court, held that the
    municipal rateable value could be accepted as a bona fide rental value
    of the property and there could not be a blanket rejection of the same.


  •     The market rate in the
    locality was an approved method for determining the fair rental value but it
    was only when the AO was convinced that the case before him was suspicious,
    determination by the parties was doubtful that he could resort to enquire about
    the prevailing rate in the locality.

 

  •     In the result, the
    Tribunal directed the AO to compute the deemed rent as per municipal rateable
    value and assess the income accordingly.

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