income from H/P

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surendra (Querist)

24 October 2007 a coy is receiving rs.18000 p.a. of rent from sister concern for last 10 years on verbal agreement though market value is appx.6 lacs & ALV as per MCD is Rs.70,000/. AO is making the assessment at market value. pl. comment

CA. Dashrath Maheshwari

CA. Dashrath Maheshwari (Expert)

24 October 2007 A.O. is correct on the matter

R.V.RAO

R.V.RAO (Expert)

24 October 2007 UNDER SECTION 23(1) OF THE IT ACT,UNDER INCOME FROM HOUSE PROPERTY,THE TAX IS NOT A TAX ON RENT, BUT A TAX UPON INHERENT CAPACITY OF A PROPERTY TO YIELD INCOME.
THE EXPECTED RENT IN MAJORITY OF CASES IS DECIDED BY MUNCIPAL VALUATION OF PROPERTY,FAIR RENT OF PROPERTY.HIGHER OF THE TWO IS GENERALLY TAKEN AS EXPECTED RENT.
REASONABLE EXPECTED RENT CANNOT EXCEED AMOUNT OF STANDARD RENT.
STANDARD RENT IS THE MAXIMUM RENT WHICH A PERSON CAN LEGALLY REVCOVER FROM THE TEANANT UNDER RENT CONTROL ACT.
REASONABLE EXP. RENT CAN BE LOWER THAN STANDARD RENT.(DR.BALBIR SINGH VSMCD(1985)
152ITR388(SC).
IN CASES WHERE THE RENT RECEIVED OR RECEIVABLE IS LOWER BECAUSE OF FACTORS OTHERTHAN VACANCY,THE REASONABLE EXPECTED RENT BECOMES GROSS ANNUAL VALUE.
SO ALV AS PER MCD IS COMPELLING BASIS UNLESS YOU HAVE DISPUTABLE GROUNDS.
R.V.RAO

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