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1996 DIGILAW 105 (DEL)

BAL KISHAN KAPUR v. INCOME TAX OFFICER

1996-01-24

A.D.SINGH

body1996
ANIL DEV SINGH ( 1 ) BY this writ petition the petitioner assessee seeks quashing of the assessment order (Annexure P-4) dated February 28, 1975 passed by Income-tax Officer, PSC VII in respect of assessment year 1972-73 and notice of demand under Section 156 of the Income-tax Act, 1961. (Annexure P-5) of the same date issued pursuant thereto by the same authority asking the petitioner to pay the assessed amount of tax as per Annexure P-4. ( 2 ) THE petitioner claims to be the owner of the ground floor of the property No. 36, Faiz Bazar. Delhi. The construction of the building is said to have started in the year 1947-48 and was completed in or around 1949-50. It appears that on November 22,1951 the Rent Controller at the instance of the tenants fixed the standard rent of different portions of the house property standing on plot No. 35-36, Faiz Bazar, Darya Ganj, Delhi under Section 7 of the Delhi-Ajmer Merwara Rent Control Act, 1947. The petitioner claims that standard rent for his portion of the property came to be Rs. 1331. 00 per month as reflected in the return Annexure P-l filed by him for the assessment year 1972-73. It is not disputed that the actual rent of the property which the petitioner received from the tenants was Rs. 24,089. 00 per month. However, the petitioner claimed that house property was liable to tax on its annual value based on standard rent. Therefore, the petitioner claimed that a sum of Rs. 22,758. 00 [rs. 24,089. 00 (actual rent) - Rs. 1331. 00 (standard rent)] was not taxable. It appears that the Income-tax Officer by the impugned order, Annexures P-4, did not agree with the contention of the petitioner and calculated the annual value of the property on the basis of the actual rent received by the petitioner for the house property. The petitioner has impugned the assessment order, Annexure P-4 as well as notice of demand Annexure P-5 issued under Section 156 of the Income-tax Act, 1961. ( 3 ) LEARNED counsel appearing for the petitioner submitted that the annual value of the house property has to be taken to be the sum for which the property might reasonably be expected to be let from year to year and the computation has not to be made on the basis of actual rent received by the petitioner. ( 3 ) LEARNED counsel appearing for the petitioner submitted that the annual value of the house property has to be taken to be the sum for which the property might reasonably be expected to be let from year to year and the computation has not to be made on the basis of actual rent received by the petitioner. ( 4 ) IT is a common ground that income from house property chargeable to tax is computable under Section 22 of the Income-tax Act, 1961 which provides that annual value of property consisting of any buildings or lands appurtenent thereto, of which the assessee is the owner. shall be chargeable to income-tax under the head "income from house property". The mode of determination of annual value as given under sub-section (1) of Section 23. as it existed at the material time. is as follows:- "for the purpose of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year: Provided that where the property is in occupation of a tenant, the taxes levied by any local authority in respect of the property shall, to the extent such taxes are borne by the owner, be deducted in determining the annual value of the property: Provided further that in the case of a building comprising one or more residential units the erection of which is begun and completed after the 1st day of April, 1961, the annual value as determined under this sub-section shall, for a period of three years from the date of completion of the building, be reduced by a sum equal to the aggregate of - (i) in respect of any residential unit whose annual value as so determined, does not exceed six hundred rupees, by the amount of such annual value; (ii) in respect of any residential unit whose annual value as so determined exceeds six hundred rupees, by an amount of six hundred rupees so, however, that the income in respect of any residential unit is in no case a loss. " ( 5 ) LEARNED counsel for the petitioner submitted that the aforesaid Section 23 of the Income-tax Act is in parimateria with Section 116 of the Delhi Municipal Corporation Act. " ( 5 ) LEARNED counsel for the petitioner submitted that the aforesaid Section 23 of the Income-tax Act is in parimateria with Section 116 of the Delhi Municipal Corporation Act. 195 7 He pointed out that in Dewan Daulat Ram Kapur vs. New Delhi Municipal Committee and another AIR 1980 S. C. 541, the question which arose for determination of the apex court in appeals was a to how the annual value should be determined for levy of house-tax where the building is governed by the provisions of the Rent Act, but the standard rent had not been fixed. One of the appeals related to the case where the building was situate within the jurisdiction of New Delhi Municipal Committee and was liable to be assessed to house-tax under the Punjab Municipal Act. 1911 while the other two related to the cases where the building was situate within the limit of Corporation of Delhi and was assessable to house-tax under the Delhi Municipal Corporation Act. 1957. The house-tax under both acts was levied with reference to the annual value of the building. The term annual value was defined in both statutes in almost the same terms. In none of the cases before the Supreme Court. . , standard rent had been fixed in respect of the premises. According to the definition given in both the Acts the annual value of the building meant the gross annual rent at which the building might reasonably0 be expected to be let from year to year. The apex Court held that even if the standard rent of a building has not been fixed by the Controller under Section 9 of the Rent Act, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the provisions of the Rent Act and this would be so equally where the building had been let out to a tenant who had lost his right to apply for fixation of the standard rent by reason of expiration of the period of limitation prescribed by Section 12 of the Rent Control Act or the building is occupied by the owner. The Supreme Court concluded that in either class according to the definition of the annual value given in both the statutes, the standard rent determinable under the provisions of Rent Act and not the actual rent received by the landlord from the tenant would constitute the correct measure of the annual value of the building. This decision in Daulat Ram Kapur s case (supra) was followed by the Supreme Court in Mrs. Shiela Kaushish vs. The Commissioner of Income-tax,delhi, [1981] 131 I. T. R. 435. The Supreme Court construing the provisions of Section 23 of the Income-tax Act in the aforesaid appeals by Special Leave held as follows:- "now this was a decision given on the interpretation of the definition of "annual value" in the Delhi Municipal Corporation Act, 195 7 and the Punjab Municipal Act,. 1911 for the purpose of levy of house tax, but it would be equally applicable in interpreting the definition of annual value" in sub-s. (l) of S. 23 of the I. T. Act, 1961, because these definitions are in identical terms and it is impossible to distinguish the definition of "annual value" in sub-s. (1) of S. 23 of the I. T. Act, 1961, from the definition of that term in the Delhi Municipal Corporation Act, 1957, and the Punjab Municipal Act, 1911. We must therefore, hold, on an identical line of reasoning, that even if the standard rent of a building has not been fixed by the Controller under S. 9 of the Rent Act in respect of a building governed by the Rent Act and the period of limitation prescribed by S. 12 of the Rent Act for making an application for fixation of the standard rent having expired. It is no longer competent to the tenant, to have the standard rent of the building fixed, the annual value of the buidling according to the definition given in sub-sec. (1) ofs 23 of the I. T. Act, 1961 must be held to be the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant" ( 6 ) IT may be pointed out that, like the instant case, the Supreme Court in the aforesaid appeals was concerned with a matter which arose before the Taxation Laws Amendment Act, 1975. However, after the amendment the position has changed. However, after the amendment the position has changed. By virtue of Section 6 of the Taxation Laws Amendment Act, 1975 sub-section (1) of Section 23 has been amended and it has been clarified by the introduction of clause (b) in that Section that where the property is let and the annual rent received or receivable by the owner is in excess of the sum for which the property might reasonably be expected to be let from year to year, the amount so received or receivable shall be deemed to be the annual value of the property. This position has been clarified by the Supreme Court in Sheila Kaushish vs. The Commissioner of Income-tax (supra) itself and in this regard it is observed as follows: "the newly added cl. (b) clearly postulates that the sum for which a building might reasonably be expected to let from year to year may be less than the actual amount received or receivable by the landlord from the tenant. We are therefore, of the view that in the present the standard rent of the warehouse determinable under the provisions of the Rent Act must be taken to be the annual value within the meaning of sub-sec. (1) of S. 23 of the Income-tax Act, 1961, and the actual rent received by the assessee from the American Embassy cannot of itself be taken as representing the correct measure of the annual value. " ( 7 ) THUS the position is that after the coming into force of the Taxation Laws Amendment Act, 1975, the sum for which a building is let out will be regarded as the annual value of the building. Since in the present case the assessment year is 1972-73, the matter will not be governed by the Taxation Laws Amendment Act, 1975, and the annual value of the property for the said year must be held to be the standard rent determinable under the provisions of the Delhi Rent Control Act, 1958. ( 8 ) ACCORDINGLY, the writ it petition Succeeds and the rule is made absolute. The impugned order dated February 28, 1975 (Annexure P-4) passed by the Income-tax Officer, PSC VII, in respect of assessment year 1972-73 and notice of demand under section 156 of the Income-tax Act, 1961 (Annexure P-5) of the same date, are hereby quashed. ( 8 ) ACCORDINGLY, the writ it petition Succeeds and the rule is made absolute. The impugned order dated February 28, 1975 (Annexure P-4) passed by the Income-tax Officer, PSC VII, in respect of assessment year 1972-73 and notice of demand under section 156 of the Income-tax Act, 1961 (Annexure P-5) of the same date, are hereby quashed. The Income-tax Officer will make an order of assessment in accordance with the decision of the Supreme Court in Mrs Sheila Kaushish v. Commissioner of Income-tax, Delhi (supra ).