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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Annapurna Gupta & Shri Siddhartha Nautiyal
Date of hearing : 24-02-2022 Date of pronouncement : 13-04-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-4, Vadodara in Appeal No. CAB/4- 10035/2016-17 vide order dated 18/09/2018 passed for the assessment year 2013-14.
The assessee has raised the following grounds of appeal:-
Page No. 2 Shri Narendra R. Vyas vs. DCIT
Grounds of Appeal Tax effect relating each 10 Ground of appeal a That the Learned CIT [Appeal] has erred in Rs. 2,80,480 law & facts by disallowing House property loss of Rs 7,69,954/- without considering our submission and documents put forwarded. So, it is prayed to your honor that addition may please be deleted. b Any other ground that may meet at the end of justice shall be submitted at the time of hearing.
Total tax effect Rs. 2,80,480
The facts of the case are that the assessee was working in Cadila Pharmaceutical Ahmedabad and earned income from salary (Rs. 49,37,668/), loss from house property (Rs. (-)7,69,954/-) and income from other sources (Rs. 17,869/-). During the course of assessment proceedings, the Ld. AO enquired into the loss of Rs. (-)7,69,954/- claimed under the head house property and asked the assessee to produce copies of evidences and materials in respect of the same. The assessee submitted that the property was let out for a rent of Rs. 30,000/- per month and after claiming statutory deduction of Rs. 81,000/- and interest on housing loan u/s 24(b) of the Act of Rs. 9,58,954/-, there was a loss of Rs. 7,69,954/- under the Income from House Property. The Ld. AO however disallowed the loss by holding that the assessee has not produced copy of rent agreement to prove genuineness of rental income. The assessee has also not furnished details Page No. 3 Shri Narendra R. Vyas vs. DCIT regarding municipal valuation, fair rent as well as standard rent, to show the correct valuation for which the property was let out. He accordingly disallowed the loss claim of Rs. (-) 7,69,954/- under the head ‘income from house property’.
In appeal before CIT(A), the appeal was dismissed by Ld. CIT(A) by holding as below:
“3.2 In appeal the ld. Authorized Representative has made written submission as under:- “Disallowance of House Property loss of Rs. 7,69,954/- The Assessee was employed in Cadila Pharmaceuticals Ltd till 6th Jan, 2013. His main source of income was from salary. He had purchased a house on loan at his place of employment i.e. at Ahmedabad. The house was rented at Rs. 30,000/- per month for a part of period to Mrs. Mauli Vyas. Accordingly, he had shown the rental income of Rs. 2,70,000/- and claimed standard deduction of Rs. 81,000/- and deduction of Housing loan interest of Rs. 9,58,954/- against the same. So, it comes to House Property loss of Rs. 7,69,954/-. We had also submitted all other bank account statement vide our letter dated 04th August 2015 & 29th September 2015. All the relevant documents for home loan, rental income (i.e. Debit Notes) & interest paid to the bank were submitted to Assessing Officer on 12th October, 2015. Further the learned Assessing Officer had asked during the course of assessment regarding standard rent & municipal valuation, in response to that vide letter dated 21st January 2015 we has submitted that the house has been leased out to daughter in law Mrs. Mouli Vyas as she was doing some business in HR over there. There is no relevant of any municipal valuation or any other valuation, as it was given for a short period.”
Page No. 4 Shri Narendra R. Vyas vs. DCIT
As per section 24b of the Income tax act. “income chargeable under the had “income from house property” shall be computed after making the following deduction, namely:-
(a) A sum equal to thirty per cent of the annual value: (b) where the property has been acquired, constructed repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital.”
Since the property was given on rent for a short period and all the details in this regard was submitted, the interest paid to bank should be admissible u/s. 24B of the Act.
From the above it is evident that the Learned DCIT has erred in law by disallowing House property loss of Rs. 7,69,954/- without considering our submission put forwarded. So, it is prayed to your honor that addition may please be deleted.
Relief claimed in appeal –
Addition of House Property loss of Rs. 7,69,954 made by learned DCIT may please be deleted”
3.3 I have considered the submission of the learned Authorized Representative and the order of the Assessing Officer. The A.O. has disallowed the claim of deduction of losses from income from House Property from Salary income as the appellant has not furnished any evidence regarding rent income such as copy of rent agreement. Further, the appellant has not furnished any evidence before this office during the course of appellate proceedings. Considering the same the addition made by the Assessing Officer is confirmed and this ground of the appeal is dismissed.”
Page No. 5 Shri Narendra R. Vyas vs. DCIT
Before us, the Ld. Counsel for the assessee submitted that the house has been rented to close relative (daughter-in-law) of the assessee and drew our attention to Page 18 of Paper-Book, wherein he pointed out that the confirmation of the tenant, along-with PAN number has been placed on record. He further drew our attention to pages 19-20 of the Paper-Book i.e. bank statement reflecting receipt of rent through banking channels. The Ld. Counsel for the assessee also drew out attention to interest certificate issued by Axis Bank at page 21 of Paper Book. He further drew out attention to Pages 22-23 of paper book reflecting loan statement issued by Axis Bank and pages 24 to 28 reflecting home loan agreement for a loan of Rs. 1,18,00,000/- for a period of 15 years. The Department in response placed reliance on the observations of Ld. AO and Ld. CIT(A) in their respective orders.
We have heard the rival submissions and perused the material on records. The Ld. counsel for the assessee has placed on record confirmation of the tenant along-with PAN number, bank statement reflecting receipt of rent through banking channels to substantiate receipt of rental income and interest certificate issued by Axis Bank and loan statement issued by Axis Bank to substantiate details of interest paid to bank. The Department has not disputed the genuineness of any of the above documents furnished by the assessee. The Department has not alleged that the premises have not been given for rent or that the stated consideration is incorrect. The only contention raised by Department is that there is no Rent Agreement in place between the tenant and the assessee and further that the assessee has not furnished the municipal valuation, fair rent as well as standard rent to Page No. 6 Shri Narendra R. Vyas vs. DCIT demonstrate that the value of rent has been correctly reflected in the return of income. Now, in our view, so far as the first contention is concerned i.e. absence of rent agreement, the assessee has placed on record confirmation of the tenant, along-with PAN number and also bank statement reflecting receipt of rent through banking channels. The same has not been disputed by the Department and therefore, in our view the assessee has adequately substantiated that the premises have been given on rent. Now, on the issue of municipal valuation/ standard rent, the Department has also not come up with any alternate figure of rent for which the property should have been let out. It has cast the upon the assessee to furnish such alternate figure albeit without disputing the fact that the assessee has received monthly rent of Rs. 30,000/- per month which has also been correctly reflected in the return of income. Section 23 of the Act deals with the method of the determination of the ‘annual value’ of a house property. Section 23(1)(a) defines the ‘annual value’ of a house property as ‘the sum for which the property might reasonably be expected to let from year to year’. In our view, the Ld. AO has not disputed the receipt of monthly rent of Rs. 30,000/- as having been received by the assessee. Further, the Ld. AO has not brought anything to on record to prove that the value of rent reflected by the assessee did not reflect the ‘reasonable’ rent for which the property could have been let out or that the value of rent has been undervalued by the assessee. The Ld. AO has simply denied the entire deduction of interest paid against rental income without bringing on record anything to dispute any of the documents furnished on record by the assessee. In the above facts, in our view the Ld. CIT(A) has erred in law and in facts in dismissing assessee’s appeal and erred in disallowing loss of Rs. 7,69,954/- claimed under head ‘income from Page No. 7 Shri Narendra R. Vyas vs. DCIT house property’ by the assessee. The appeal of the assessee is accordingly allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13-04-2022