M/s V.B.Medicare (P) Ltd., Hyderabad V. DCIT, Hyderabad

ITA 483/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66609 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Business income; Depreciation; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 483/HYD/2010 ASSESSMENT YEAR 2006-07 M/S. V.B. MEDICARE (P) LTD. HYDERABAD PAN: AACCV3651M VS. DY. COMMISSIONER OF INCOME-TAX CIRCLE-3(3) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI K.C. DEVDAS RESPONDENT BY: SMT. VIDISHA KALRA DATE OF HEARING: 21.11.2012 DATE OF PRONOUNCEMENT: 20.12.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 29.12.2009 FOR ASSESSMENT YEAR 2006 -07. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE CIT(A)-IV, HYDERABAD, IN UPHOLDING THE ASSESSMENT AND THE TOTAL INCOME OF THE APPELLANT UN DER THE HEAD 'PROPERTY INCOME' AS AGAINST THE HEAD 'BUSINESS INC OME' AS DECLARED BY THE APPELLANT IS UNSUSTAINABLE IN LAW A ND ON FACTS. 2. WITHOUT PREJUDICE TO THE AFORESAID GROUND, THE LEAR NED CIT(A), HYDERABAD, ERRED IN CONFIRMING THE ADOPTION OF THE ALV OF THE PROPERTY AT RS. 45 LACS PER ANNUM AS AGAINST 15 LAC S PER ANNUM RETURNED BY THE APPELLANT. 3. THE LEARNED CIT(A)-IV, HYDERABAD, FAILED TO NOTE TH AT THE NOTIONAL INTEREST OF RS. 33 LACS COMPUTED AND ADOPTED BY THE ASSESSING OFFICER COULD NOT FORM PART OF THE ALV AND, THEREFO RE, ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IN ADO PTING THE ALV AT RS. 48 LACS. 4. THE LEARNED CIT(A)-IV, HYDERABAD, OUGHT TO HAVE CLE ARLY UPHELD THE LEASE RENT OF RS. 15 LACS PER ANNUM AS PER THE UNDERSTANDING BETWEEN THE APPELLANT AND THE LESSEE COMPANY WHICH WAS NOT DOUBTED BY THE ASSESSING OFFICER AND THEREFORE, ERR ED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER. I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS P URCHASED A SHED AND LAND ALONG WITH PLANT AND MACHINERY (THE ASSETS) FROM GO VERNMENT OF KARNATAKA THROUGH OFFICIAL LIQUIDATOR AND LEASED THE SAME TO M/S. BIO PLUS LIFE SCIENCES PVT. LTD. AT A MONTHLY COMPENSATION OF RS. 1,25,000 FOR THE USE OF THE PREMISES FROM 15.8.2004. THUS, THE YEARLY LEASE WAS WORKED OUT TO RS. 15,00, 000 BY THE ASSESSEE. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE RE CEIVED A LUMP SUM ADVANCE OF RS. 2,75,00,000 BEING INTEREST FREE ADVANCE FROM THE AB OVE COMPANY. THE ASSESSEE HAD DISCLOSED THE ABOVE LEASE RENTALS UNDER THE HEAD BU SINESS INCOME AND CLAIMED EXPENDITURE UNDER VARIOUS HEADS SUCH AS AUDIT FEES, INSURANCE PREMIUM, LEGAL AND PROFESSIONAL CHARGES, PRELIMINARY EXPENSES AND RATE S AND TAXES AMOUNTING TO RS. 1,00,273 BESIDES DEPRECIATION OF RS. 14,35,239 AGAI NST THE SAME. HOWEVER, SINCE THE ASSESSEE DID NOT ENGAGE IN ANY BUSINESS ACTIVITY DU RING THE YEAR, THE ASSESSING OFFICER OPINED THAT THE LEASE RENTALS WERE TO BE CO NSIDERED UNDER INCOME FROM HOUSE PROPERTY, ALLOWING STATUTORY DEDUCTION U/S. 24 ONLY FROM THE SAME. 4. THE ASSESSING OFFICER RECOMPUTED THE ANNUAL LETTING VALUE OF THE PROPERTY IN VIEW OF THE INTEREST FREE ADVANCE RECEIVED FROM THE LEASE. THE ASSESSING OFFICER CONCLUDED THAT IN THE EVENT OF THE ASSESSEE TAKING A LOAN FROM BANK TO PURCHASE THE PROPERTY, IT WOULD HAVE PAID THE INTEREST @ 12%, PE R ANNUM WHICH WOULD HAVE BEEN RS. 33,00,000 ON THE ADVANCE AMOUNT OF RS. 2,75,00, 000. THEREFORE, HE ADDED THE NOTIONAL INTEREST ON SUCH ADVANCE AT RS. 33,00,000 TO THE ALREADY ADMITTED LEASE RENTALS. APART FROM THE ABOVE, THE ASSESSING OFFIC ER NOTED IN VIEW OF THE INTEREST FREE ADVANCE THE LESSOR AND LESSEE HAD UNDER STATED THE LEASE RENTALS AND AS SUCH ESTIMATION OF ALV WAS DONE AS ABOVE. HE WORKED OUT THE REASONABLE ALV OF THE PROPERTY AS PER SECTION 23 OF THE ACT AT RS. 48,00, 000 PER ANNUM. HE ALSO ARGUED THAT IF THE LESSEE ITSELF HAD DEPOSITED THE AMOUNT OF RS . 2,75,00,000 IN THE BANK, IT WOULD HAVE FETCHED CERTAIN INTEREST THEREON AND SINCE THI S WAS NOT DONE BOTH THE LESSEE AND LESSOR HAD AGREED TO FIX THE LEASE RENTALS AT 15% O NLY AFTER CONSIDERING SUCH INTEREST ELEMENT. THE ASSESSING OFFICER ALSO ALLOWED STANDA RD DEDUCTION @ 30% FROM SUCH ALV. AGAINST THIS THE ASSESSEE CARRIED APPEAL TO T HE CIT(A) WHO CONFIRMED FINDING OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 3 5. THE LEARNED AR SUBMITTED THAT THE LEASE AMOUNT RECE IVED ON LETTING OUT THESE BUSINESS ASSETS IS TO BE TREATED AS INCOME FROM BU SINESS. FURTHER, HE SUBMITTED THAT THE ASSESSEE WAS UNABLE TO USE ITS ASSETS GAINFULLY AND THEY WERE LET OUT TEMPORARILY TO MAKE USE OF THE SAME MORE PROFITABLY AND THE ASSETS LET OUT WERE CONTINUED TO BE BUSINESS/COMMERCIAL ASSETS OF THE ASSESSEE AND THE INCOME EARNED BY LETTING OUT THE ABOVE ASSETS IS CHARGEABLE ONLY AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY. FOR THIS PURPOSE HE RELIED ON THE ORDER OF THE SUPREME COURT IN THE CASE OF COMMISSIONER OF EXCESS PROFIT TAX V. SRI LAKSHMI SI LK MILLS LTD. (20 ITR 451) (SC). ACCORDING TO THE AR THE INTENTION OF THE ASSESSEE I S TO EXPLOIT THESE ASSETS AS COMMERCIAL ASSETS IN ORDER TO FACILITATE THE RESUMP TION OF THE ASSESSEES BUSINESS FOR USING THEM AS COMMERCIAL ASSETS AND THE INCOME DERI VED FROM SUCH LET OUT IS TO BE CONSIDERED AS INCOME FROM BUSINESS ONLY. FOR THIS PURPOSE HE RELIED ON THE JUDGEMENT IN THE CASE OF CIT VS. KATIHAR JUTE MILLS PVT. LTD. (116 ITR 78) (CAL.). ACCORDING TO THE LEARNED AR THE ASSETS BEING COMMERCIAL ASSETS ARE N OT KEPT BY THE ASSESSEE TO USE ITS ASSETS AND WERE LET OUT TO OTHERS IN THE COURSE OF BUSINESS ACTIVITIES. IT HAS TO BE UNDERSTOOD WITH REFERENCE TO THE CHARACTER OF THE A SSETS NOT WITH REFERENCE TO IT BEING TEMPORARILY PUT OUT OF USE OR LET OUT ANOTHER PERSO N TO USE IT ITS BUSINESS OR TRADE AND THE ASSESSEE IN THIS CASE LET OUT THE UNDERTAKING A S A WHOLE TO EXPLOIT THE SAME AS COMMERCIAL ASSET AND THE INCOME DERIVED FROM SUCH L ET OUT HAS TO BE CONSIDERED AS BUSINESS INCOME. FOR THIS PURPOSE, HE RELIED ON TH E JUDGEMENT OF KERALA HIGH COURT IN THE CASE OF CIT V. MALABAR AND PIONEER HOSIERY PVT. LTD. (221 ITR 117) (KERALA). 6. THE AR FURTHER SUBMITTED THAT DUE TO COMPELLING REA SONS THE ASSESSEE WAS NOT ABLE TO START ITS OWN BUSINESS IMMEDIATELY. AT THAT POINT OF TIME THE ASSESSEE LET OUT THE WHOLE FACTORY BUILDING ALONG WITH THE PLANT AND MACHINERY TO M/S. BIO PLUS LIFE SCIENCES PVT. LTD. FOR RENT. THE INCOME DERIVED SO IS TO BE CONSIDERED AS INCOME FROM BUSINESS. HE RELIED ON THE JUDGEMENT OF CALCUTTA H IGH COURT IN THE CASE OF CIT VS. AJMERA INDUSTRIES PVT. LTD. (103 ITR 245) (CAL.). FURTHER, HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ONKAR ENGINEERS PVT. LTD. V S. ITO (84 TTJ 776). HE RELIED ON THE JUDGEMENT OF PATNA HIGH COURT IN THE CASE OF CI T V. KUYA & KHAS KUYA COLLIERIES CO. (156 ITR 206) (PATNA) FOR THE PROPOSITION THAT THE WHOLE UNDERTAKING HAS BEEN LET OUT AS A BUSINESS ASSET. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AR SUBMITTED THAT THE REVENUE AUTHORITIES HAVE NO POWER TO CHANG E HEAD OF INCOME. ACCORDING TO I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 4 THE AR THE HEADS OF INCOME ARE MUTUALLY EXCLUSIVE, THAT IS TO SAY, IF A RECEIPT CAN BE BROUGHT UNDER THE HEAD INCOME FROM PROFIT AND GAIN S OF BUSINESS OR PROFESSION CANNOT BE BROUGHT UNDER THE OTHER HEAD INCOME FROM HOUSE PROPERTY. THE HEADS OF INCOME MUST BE DECIDED NOT BY CONSIDERING THE ASSESSEES T REATMENT OF THE INCOME BUT BY APPLYING COMMON NOTION OF PRACTICAL MEN. HE SUBMIT TED THAT IN THE PRESENT CASE, THE INCOME DERIVED FROM EXPLOITATION OF COMMERCIAL ASSE TS IS TO BE TREATED AS INCOME FROM BUSINESS ONLY AND NOT ANY OTHER HEAD OF INCOME. FO R THIS PURPOSE, HE RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF NALINIKAN T AMBALAL MODY V. S.A.L. NARAYAN ROW, CIT (61 ITR 428) (SC). 7. THE LEARNED AR FURTHER DREW OUR ATTENTION TO SECTIO N 22 OF THE INCOME-TAX ACT. ACCORDING TO HIM, THE INTENTION OF THE LEGISLATURE HAS TO BE SEEN. IF THEY INTEND TO TAX THE INCOME RECEIVED FROM EXPLOITATION OF COMMERCIAL ASSETS BY LETTING OUT THEY SHOULD NOT HAVE EXCLUDED THE BUSINESS ASSETS FROM SECTION 22 OF THE ACT. THE AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER CONSIDERED THE NOTIONAL INTEREST OF RS. 33 LAKHS ON THE REFUNDABLE SECURITY DEPOSIT RECEIVED BY THE ASS ESSEE FOR COMPUTING THE ANNUAL LETTING VALUE (ALV). ACCORDING TO THE AR, IF THE A SSESSING OFFICER FINDS THAT THE ACTUAL RENT RECEIVED IS LESS THAN THE FAIR RENT FOR THE RE ASON THAT THE ASSESSEE HAS RECEIVED ABNORMALLY HIGH INTEREST FREE REFUNDABLE DEPOSIT, H E SHOULD UNDERTAKE NECESSARY EXERCISE IN THAT BEHALF FOR DETERMINATION OF FAIR R ENT U/S. 23(1)(A); HOWEVER, NOTIONAL INTEREST ON SECURITY DEPOSIT CANNOT BE TAKEN AS A D ETERMINATIVE FACTOR TO ARRIVE AT THE FAIR RENT; AT BEST THE ASSESSING OFFICER CAN CONSID ER MONTHLY VALUATION FOR THE PURPOSE OF DETERMINING THE ALV. FOR THIS PURPOSE, THE AR RELIED ON THE DELHI HIGH COURT FULL BENCH JUDGEMENT IN THE CASE OF CIT VS. MONIKUMAR SU BBA (333 ITR 38). HE ALSO RELIED FOR THE SAME PURPOSE ON THE ORDER OF THE TRI BUNAL IN THE CASE OF JK INVESTORS (BOMBAY) LTD. VS. DCIT (74 ITD 274) (MUM), MIDLAND INTERNATIONAL LTD. VS. DCIT (109 ITD 198) (DELHI), CIT VS. SPEARTHEAD PROPERTIES PVT . LTD. (46 SOT 208) (BOM) AND SRIPAN LAND DEVELOPMENT PVT. LTD. V. CIT (46 SOT 44 7). 8. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT IN THIS CASE THE ASSESSEE HAS PURCHASED THE SHED WITH PLANT AND MACHINERY AND LET OUT THE SAME ON A MONTHLY RENT OF RS. 1.25 LAKHS AND AT THE SAME TIME IT HAS COLLECTED RS. 2.75 CRORES AS INTEREST FREE DEPOSIT. THE ASSESSEE COMPANY WAS INCORPORATE D ON 19 TH FEBRUARY, 2004 AND THE ASSESSEE PURCHASED THE ABOVE MACHINERY FROM THE KAR NATAKA GOVERNMENT THROUGH I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 5 OFFICIAL LIQUIDATOR AND LEASED OUT THE SAME TO M/S. BIO PLUS LIFE SCIENCES PVT. LTD. FOR A PERIOD OF 5 YEARS COMMENCING FROM 15 TH AUGUST, 2004. THE LEARNED DR SUBMITTED THAT ASSESSEE HAS NOT PUT TO USE THE ABOVE LAND AND BUIL DING AND PLANT AND MACHINERY FOR ITS BUSINESS PURPOSES AT ANY TIME BEFORE LETTING OU T THE SAME. THERE IS NO MEANING IN THE SUBMISSION OF THE ASSESSEES COUNSEL THAT IT WA S TEMPORARILY LET OUT. ON THE OTHER, IT WAS SUBMITTED THAT IT WAS LET OUT FOR 5 YEARS WI TH AN OPTION TO THE LESSEE TO PURCHASE THE PLANT AND MACHINERY AT ANY TIME AFTER THREE YEA RS AT A PRICE WHICH MAY BE MUTUALLY AGREED UPON. BEING SO, ACCORDING TO HER, THE ASSES SEES INTENTION IS TO DERIVE RENTAL INCOME FROM THE PROPERTY. ACCORDING TO THE LEARNED DR, THE ASSESSEE HAS NOT CARRIED ON ANY BUSINESS ACTIVITY IN THE SCHEDULED PREMISES; BUSINESS ACTIVITIES SEIZED TO EXIST AND THEREAFTER LETTING OUT OF SUCH ASSETS CANNOT BE TERMED AS EXPLOITATION OF COMMERCIAL ASSETS, CONSEQUENTLY THE INCOME FROM LET TING OUT OF SUCH ASSETS IS NOT BUSINESS INCOME AND IT HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY ONLY. FOR THIS PURPOSE, HE RELIED ON THE JUDGEMENT OF A.P. HIGH CO URT IN THE CASE OF TRIPURA SUNDARI COTTON PRESS CO. LTD. V. CIT (62 ITR 193) (AP). FU RTHER, SHE SUBMITTED THAT WHEN THERE IS A LONG LEASE OF THE PROPERTY AND THERE IS NO EXISTENCE OF BUSINESS PRIOR TO LETTING OUT THE PREMISES AND THERE AND THERE IS NO QUESTION OF TEMPORARY LETTING OUT OF THE PREMISES AND CONSIDERING THE FACTS OF THE CASE IT IS DEEMED TO BE DECIDED AS INCOME FROM HOUSE PROPERTY RATHER THAN INCOME FROM BUSINESS. 9. FURTHER SHE SUBMITTED THAT THE RENTAL VALUE AT WHIC H IT WAS LET OUT IS VERY MEAGRE CONSIDERING THE LOCATION AND MARKET RENT, TH E NOTIONAL INTEREST ON THE SECURITY DEPOSIT WAS CONSIDERED BY THE LOWER AUTHORITIES. S HE PRAYED THAT THE ORDERS OF THE LOWER AUTHORITIES ARE TO BE CONFIRMED. SHE RELIED ON THE JUDGEMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS. CHENNAI PROPERTIES & I NVESTMENTS LTD. (266 ITR 685) (MAD). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE MAIN CONTENTION OF THE ASSESSEES COUNSEL IS THAT THE AS SESSEE HAS LEASED OUT THE COMMERCIAL ASSETS AND THE RENT DERIVED FROM LETTING OUT OF THE COMMERCIAL ASSETS IS TO BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE. IN THE PRESENT CASE THE ASSESSEE BEFORE LETTING OUT THE PROPERTY NEVER CARRIED ON TH E BUSINESS AND WITHOUT PUTTING THE LAND AND BUILDING AND PLANT AND MACHINERY FOR USE I N ITS BUSINESS, IT HAS LEASED OUT THE SAME TO M/S. BIO PLUS LIFE SCIENCES PVT. LTD. FOR A PERIOD OF 5 YEARS FOR A RENT OF RS. I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 6 1.25 LAKHS PER MONTH AND COLLECTED A REFUNDABLE DEP OSIT OF RS. 2.75 CRORES. THE ASSESSEES MAIN OBJECT WAS TO MANUFACTURE OF DRUGS AND PHARMACEUTICALS. HOWEVER, THIS ACTIVITY WAS NOT CARRIED OUT DURING THIS ASSES SMENT YEAR UNDER CONSIDERATION AND EARNED INCOME ONLY BY LEASING OUT THE LAND AND BUIL DING AND PLANT AND MACHINERY, SO THAT THE LEASED ASSETS CANNOT BE CONSIDERED AS PART OF THE BUSINESS ASSETS OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. ITS BUSINESS ACTIVITY HAVING TOTALLY NOT EXISTING, THE ASSETS WERE NOT PART OF T HE BUSINESS ASSETS AND IT IS NOT A COMMERCIAL ASSETS AND THE INCOME FROM RENT FROM SUC H LEASE IS INCOME ASSESSABLE AS INCOME FROM HOUSE PROPERTY. FOR THIS PURPOSE, WE PLACE RELIANCE ON THE JUDGEMENT IN THE CASE OF TRIPURA SUNDARI COTTON PRESS CO. LTD. ( SUPRA) AND ALSO ON THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF BOLLA TIRA PANNA AND SONS VS. CIT (71 ITR 209) WHEREIN IT WAS HELD THAT AN ISOLATED TRANSACTION DO ES NOT AMOUNT TO CARRYING ON OF BUSINESS AND HENCE LEASING INCOME RECEIVED FROM SUC H A SINGLE TRANSACTION IS NOT ASSESSABLE AS BUSINESS INCOME. 11. WE HAVE ALSO CAREFULLY PERUSED THE VARIOUS JUDGEMEN TS CITED BY THE LEARNED AR TO THE PROPOSITION THAT INCOME FROM LEASING OUT COMMERCIAL ASSETS HAS TO BE ASSESSED AS INCOME FROM BUSINESS. BUT IN THE PRESEN T CASE THE FACTS ARE THAT THE ASSETS LEASED OUT BY THE ASSESSEE ARE NOT COMMERCIA L ASSETS AT THE TIME OF LEASING OUT THEM AS THE ASSETS WERE NEVER PUT TO USE BY THE ASS ESSEE FOR ITS COMMERCIAL US BEFORE LEASING OUT THE SAME. ACCORDINGLY, THE RATIO LAID DOWN BY VARIOUS JUDGEMENTS CITED BY THE ASSESSEES COUNSEL CANNOT BE APPLIED TO THE FAC TS OF THE PRESENT CASE. 12. NOW COMING TO THE ISSUE RELATING TO CONSIDERATION O F NOTIONAL INTEREST ON THE REFUNDABLE DEPOSIT RECEIVED BY THE ASSESSEE AS INCO ME OF THE ASSESSEE, IN OUR OPINION, THE ASSESSING OFFICER IS NOT JUSTIFIED IN ESTIMATING THE INCOME BY CONSIDERING THE NOTIONAL INTEREST ON THE SECURITY DEPOSIT. AS DECIDED BY THE CO-ORDINATE BENCH IN THE CASE OF CIT VS. SPEARTHEAD PROPERTIES PVT. LTD. (SUPRA), ALV CANNOT BE DETERMINED ON THE BASIS OF NOTIONAL INTEREST ON INT EREST FREE SECURITY DEPOSIT. THE ASSESSING OFFICER HAS TO TAKE INTO ACCOUNT VARIOUS FACTORS INCLUDING STANDARD RENT WHILE DETERMINING THE ALV. IF THE STANDARD RENT IS NOT F IXED THEN THE PROCEDURE PROVIDED UNDER RENT CONTROL ACT FOR FIXING OF STANDARD RENT HAS TO BE TAKEN INTO CONSIDERATION. WE MAY MENTION THAT MUNICIPAL VALUE OR STANDARD REN T ITSELF IS NOT SOLE BINDING FACTORS ON THE ASSESSING OFFICER BUT THESE ARE ONLY GUIDING FACTORS FOR DETERMINING THE I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 7 REASONABLY EXPECTED RENT TO BE FETCHED BY THE ASSES SEE TO THE PROPERTY AS CONTEMPLATED U/S. 23(1)(A) OF THE IT ACT. IF IN A GIVEN CASE THE ASSESSING OFFICER FINDS THAT THE MUNICIPAL VALUE IS NOT BASED ON RELEVANT M ATERIAL FOR DETERMINING THE FAIR RENT IN THE MARKET AND THERE IS SUFFICIENT MATERIAL ON R ECORD FOR TAKING DIFFERENT VALUATION, THEN THE ASSESSING OFFICER CAN DETERMINE THE FAIR R ENT BY INFLATING OR DEFLATING THE MUNICIPAL VALUE OR STANDARD RENT AS THE CASE MAY BE BY TAKING INTO ACCOUNT THE RELEVANT MATERIAL IN THIS REGARD. IF THE VALUE IS CORRECTLY DETERMINED UNDER THE MUNICIPAL LAW, THE SAME CAN BE TAKEN AS ALV. HOWEVER, THE RA TEABLE VALUE IS NOT BINDING ON THE ASSESSING OFFICER IF THE ASSESSING OFFICER CAN SHOW THAT THE RATEABLE VALUE UNDER THE MUNICIPAL LAW DOES NOT REPRESENT THE CORRECT FAIR R ENT. IF THE ASSESSING OFFICER FINDS THAT THE ACTUAL RENT RECEIVED IS LESS THAN THE FAIR RENT/MARKET RENT BECAUSE OF THE REASON THAT THE ASSESSEE HAS RECEIVED ABNORMALLY HIGH INTE REST FREE SECURITY DEPOSIT AND BECAUSE OF THAT REASON ACTUAL RENT RECEIVED IS LESS THAN THE RENT WHICH THE PROPERTY FETCHES, HE CAN UNDERTAKE NECESSARY EXERCISE IN THA T BEHALF. HOWEVER, NOTIONAL INTEREST ON INTEREST FREE DEPOSIT CANNOT BE TAKEN A S A DETERMINATIVE FACTOR TO ARRIVE AT FAIR RENT. IF THE ASSESSING OFFICER FINDS THAT THE RATEABLE VALUE UNDER THE MUNICIPAL LAW DOES NOT REPRESENT CORRECT FAIR RENT, THEN HE MAY D ETERMINE THE SAME ON THE BASIS OF MATERIAL GATHERED BY HIM. IN VIEW OF THIS, IN OUR OPINION, IT IS APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER AND DIRE CT HIM TO DETERMINE THE ALV WHICH THE PROPERTY MAY REASONABLY BE EXPECTED TO FETCH IN THE OPEN MARKET AND THE ASSESSING OFFICER IS DIRECTED TO CONSIDER ALL RELEVANT FACTOR S. HE IS ALSO REQUIRED TO COMPARE THE SAME WITH THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE ASSESSEE U/S. 23(1)(B) OF THE ACT AND DECIDE THE SAME IN ACCORDANCE WITH LAW. 13. IN THE RESULT, ASSESSEE APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH DECEMBER, 2012 TPRAO I.T.A. NO. 483/HYD/2010 M/S. V.B. MEDICARE (P) LTD. ==================== 8 COPY FORWARDED TO: 1. M/S. V.B. MEDICARE (P) LTD., 23-304-C9, HMT, SAT HAVAHANA NAGAR, KUKATPALLI, HYDERABAD. 2. THE DCIT, CIRCLE-3(3), 5 TH FLOOR, IT TOWERS, SHANTHINAGAR, HYDERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4. THE CIT-III, HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD.