INCOME TAX ACT, 1961

Section 23

Income from house property - Annual value - Addition on account of notional rental value -

Assessee showed notional rental value of a flat owned by him at Rs. 64,800 that was based on valuation determined by Municipal Corporation. According to AO, the value determined by the Municipal authority was way back in 1994 and did not accept the same. Thereby he conducted enquiries through various web sites and also deputed one of his inspectors to enquire into the credible value of the said property. Taking into consideration the information received from the said websites and his inspector, the AO determined the annual rental value of the flat at Rs. 7, 20,000.Held: In view of High Court decision in the case of CIT v. Moni Kumar Subba & Miracle Exporters (P.) Ltd. (2011) 10 Taxmann.com 195 (Del-HC) : 2011 TaxPub(DT) 989 (Del-HC), valuation certificate issued by Municipal authority is a reasonable yardstick to determine annual market value but however it would be subject to the condition when the said value was determined and it should be proximity to the assessment year under consideration. In subject case, assessee relied on the valuation as determined by the Municipal authority way back in 1994 and thus, the said valuation was not at all relevant nor was a base to determine the valuation of the property relating to the assessment year under consideration, i.e., A.Y. 2011-12. Accordingly, the AO did not accept such valuation and proceeded to elicit information from relevant websites and deputing his Inspector. Hence, the AO was justified in ignoring the valuation determined by the municipal authority in the year 1994 and determining the annual rental value for the said flat at Rs. 7, 20,000.