INCOME TAX ACT, 1961

Section 23(1)(a) Rule 29

Income from house property - Determination of annual value - Consideration of leave and license agreement of parties on similar footing as guideline in deciding annual value for purpose of section 23(1)(b) in case of assessee -

Assessee offered income from house property amongst other income. AO made addition on allegation that there was large decrease in annual lettable value for relevant assessment year, though there was no corresponding sale of property. Assessee contended that rental income was less as compared to previous year mainly because of monthly rent from tenant company was reduced and reason for such reduction was change in management of said company. Assessee also produced leave and license agreement of certain parties in similar footing and pleaded that said agreement was in same area as of assessee and thus, it could provide valuable guideline in deciding annual value for purpose of section 23(1)(b). Held: In determining reasonable rent, several factors were to be taken into consideration, such as, location of property, annual ratable value of property fixed by municipalities, rents of similar properties in neighborhood, rent which property is likely to fetch having regard to demand and supply, cost of construction of the property and nature and history of the property. These factors play vital role in determining reasonable expected rent of a house property. AO observed in his order that as per website of MCA assessee was a major shareholder and director in company to whom property was rented. Principles in case of Tip Top Typography were applicable to instant case. Therefore, additional evidence filed by assessee was admitted and matter was remanded back to AO to make an order afresh by examining leave and license agreement, as produced by assessee.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2014-15

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