Case Law Details
Vidya Education Vs ITO (ITAT Delhi)
The operative words in Section 23(1)(a) are the sum, for which, the property might reasonably be expected to let from year to year. These words provide a specific direction to the Revenue for determining the fair rent. The A.O. having regard to the aforesaid provisions is expected to make an enquiry as to what would be the reasonable rent that the property under reference might fetch. If the A.O. finds that actual rent received is less than the fair rent/market rent because of certain reasons, the A.O. can take necessary exercise in that behalf. Hon’ble Delhi High Court in the case of CIT vs. Moni Kumar Subba (supra), in para-20 has given its conclusion, reproduced above, in which, it was observed that willingness of the lessor and lessee shall have to be considered and extraneous considerations should be avoided. Such annual letting value, however, cannot exceed the standard rent as per Rent Control Legislation applicable to the property. If the standard rent has not been fixed by the Rent Controller, then, it is the duty of the A.O. to determine the standard rent as per provisions of Rent Control enactment. The standard rent is upper limit, if the fair rent is less than the standard rent, then, it is the fair rent which shall be taken as annual letting value and not the standard rent.
In the present case, the assessee explained all the facts before A.O. with regard to rent received and that the property was let out earlier and in the case of lessee CVT, it is pleaded before ITAT, Mumbai Bench that the rent has been gradually increased from time to time. This fact has not been disputed by the Revenue Department. Therefore, the A.O. accepted the claim of assessee of receiving fair and reasonable rent of Rs. 1.80 crores in assessment year under appeal. The Ld. CIT(A) was however, influenced by the fact that the assessee-company and the lessee is controlled by Shri Vineet Nayyar and his family members and investment in building. Therefore, he has considered that assessee has received a low rent. However, it is an extraneous consideration, which has no bearing on the issue of determination of annual letting value of the property. The Ld. CIT(A) did not undertake any necessary exercise to compute annual letting value of the assessee as per above guidelines. No comparable case have been brought by him on record. Ld. CIT(A) simply rejected the claim of the assessee for applying 8% of the total investment to compute annual letting value. He has not determined the standard rent in the case of assessee as per Rent Control Legislation and has also not considered even municipal value determined by the municipality. The Ld. CIT(A) also failed to note that the lessee was a charitable institution providing education to the students. Therefore, it could not be compared with commercial or residential occupancy of demised property which is not involved in charitable institution. For commercial and residential user of the property, the rent may be high as compared to property given on rent to the educational and charitable institutions. Thus, there were no basis for Ld. CIT(A) to enhance the annual letting value of the property in question. We may also note that identical issue was considered in the case of lessee i.e., CVT by ITAT, Mumbai Bench and the entire addition made by the A.O. have been deleted by the Tribunal. Though this case pertains to subsequent A.Y. 2011-2012, but the fact remains that the Tribunal accepted the claim of lessee of fair rent paid by them to assessee. The demised property was let-out though agreement which follow in year under appeal. So, facts are identical. The claim of assessee has been supported by opinion/report of M/s. Atharva Land Developers who have determined fair rent against which Ld. CIT(A) has not brought any report of expert. So, it could not be disputed. In the case of assessee and lessee, the rent paid in earlier year have not been disputed by the Revenue Authorities. Considering the totality of the facts and circumstances and in the light of decisions relied upon by the Learned Counsel for the Assessee, we are of the view that the lessee has paid fair reasonable rent to the assessee. Therefore, there were no basis to enhance the fair rent paid by lessee to the assessee-company. We, accordingly, set aside the orders of the Ld. CIT(A) and delete enhancement in rent made by him of Rs. 1,67,74,073/-.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by assessee has been directed against the order of the Ld. CIT(A)-19, New Delhi, Dated 30.09.20 13, for the A.Y. 2010-2011.
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