Per Dixit - In this case, the Commissioner in exercise of his powers under section 263 of the Income-tax Act, 1961 (‘the Act’) directed the ITO to allow rent of Rs. 1,250 per month only instead of Rs. 2,500 paid by the assessee to his HUF in respect of certain construction used by the assessee for his nursing home. The facts are that the assessee is running a nursing home in a building which is owned by him. The terrace covering an area of about 3,000 sq. ft. on the first floor of this nursing home was given by the assessee on lease to his own HUF on an annual rent of Rs. 500 only. The assessee constructed six or seven rooms on this terrace covering area of 1,529 sq. ft. at a cost of Rs. 91,000 to the HUF. The assessee then paid rent to the HUF at the rate of Rs. 2,500 per month for a period of 8 months and claimed the total amount of Rs. 20,000 in respect thereof as a deduction from his income.

2. The Commissioner’s order, in brief, is that the rent paid to the HUF by the assessee was too high and the rent received from the HUF by the assessee was too low with the result that there was a large gap by which the assessee actually diverted his own income to the HUF. He has stated