RAJ KUMARI NANDA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question of law referred to the High Court by the Tribunal (Delhi Bench 'B'), reads as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law having regard to the provisions of S. 23 of the Act to adopt the actual rent received as the annual letting value of the property ignoring the annual letting value determined by the municipal authorities -

(2.) THE matter relates to the asst. yr. 1968 -69. The assessee is said to be the owner of property at 16, Ring Road, Lajpat Nagar -IV), New Delhi. This property was let out to the Singapore Embassy at Rs. 6,000 p.m. from June 15, 1967. Rent in advance for 8 1/2 months was received by the assessee amounting to Rs. 51,000. On February 9, 1968, during the accounting year, the tenant wrote to the assessee that since the front part of the front lawn had been reclaimed by the Delhi Municipal Corporation and the land available to the tenant had been reduced, the rent should be reduced by Rs. 1,500 per month effective from March 1, 1968. The assessee agreed. Thus, the rent stood reduced from Rs. 6,000 to Rs. 4,500 from March 1, 1968. This rent was effective till 1972 when the premises were vacated. Though the actual rent received by the assessee was more, she claimed that the rental income from June 15, 1967, to March 31, 1968, should be computed at the rate of Rs. 4,500 per month inasmuch as the fair rent was Rs. 42,750. The difference of Rs. 1,500 per month, it was asserted, was being charged for some period for property which did not belong to the assessee. The ITO did not accept the contention and framed the assessment at Rs. 55,500, the amount actually received by the assessee during the relevant period. In appeal the AAC held that the annual letting value of the property had been fixed by the Municipal Corporation of Delhi at Rs. 46,061 and so, he directed the ITO to compute the annual letting value of the property at that figure. The Department filed an appeal before the Tribunal. There it was held that where the property is actually let out and the rent is being received, no more indication is necessary to ascertain the annual value. The actual receipts have to be regarded as the annual letting value. The Tribunal further held that there was nothing in the language of S. 23 of the IT Act, 1961, to suggest that the annual value of the property as received should be ignored and the municipal value only should be adopted even though it was less. Accordingly, the Tribunal held that the annual letting value of the property for 8 1/2 months should be calculated at the rate of Rs. 6,000 per month and for the subsequent one month at Rs. 4,500 per month. The assessee being dissatisfied asked for a reference to be made to the High Court. That is how the reference is before us.

(3.) SEC . 22 of the Act lays down that the annual value of property consisting of any building or lands appurtenant thereto of which the assessee is the owner, excluding the portion occupied for business or professional purposes, shall be chargeable to income - tax under the head "Income from house property". Sec. 23 of the Act, as it was in force for the relevant period, which laid down how the annual value is to be determined, read as under : "23. (1) For the purposes of S. 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 :