N NATARAJ Vs. DEPUTY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee owns a building known as "Nataraj building" which consists of ground floor, first floor and second floor with vacant space for parking cars situate at Dr.Nanjappa Road (Jail Road), Coimbatore. The building was constructed in the year 1981 by the assessee. Immediately after its completion, a lease deed was entered into between the assessee and the firm Lakshmi & Co consisting of wife and daughter of kartha of assessee H.U.F. and a trusted employee of the kartha as Partners, under which the entire building was leased out to the firm on a monthly rent of Rs.6,250/-. The firm, in turn, entered into several agreements of lease with different tenants in respect of several portions of the building. The building was occupied immediately after its completion by such tenants. A lease deed dated 9.12.1982 was entered into between the firm and Indian Bank which is on record. That lease deed shows that the tenant had to occupy the portion that was leased out on 11.12.1981 within three months from the date of completion of construction of the building. The rental received by that firm from its tenants was nearly three times the rent stipulated in the lease agreement between the assessee and the firm.

(2.) For the assessment year 1982-83, the Tribunal held that the firm so constituted was a genuine firm as the capital was brought in by the wife and the daughter and the other partner not having brought in any capital, but having declared that he had worked and received certain sum from the firm. The firm was assessed to tax on the income received by it by letting out the property. For the assessment year 1988-89, the assessing officer held that the amount which was received by the firm from its tenants was, in fact, the amount that was reasonably to be expected to be received from letting out the property and therefore, the amount was required to be taken into account for the purpose of determining the annual value of the building under Section 23(1)(a) of the Act. The assessing officer took note of the amount of rental actually received by the firm Laskhmi & Co in which the wife and the daughter of the kartha of assessee H.U.F. are partners. The rent of Rs.3,61,864/- received by the firm was included as the attributed income of the assessee. The rent received by the assessee for the year from the firm Lakshmi & Co was Rs.75,000/-. The amount which the assessee claims to be assessable as income from property was thus less than one fourth of the amount of rent that the property was capable of yielding, and did yield.

(3.) That order of the assessing Officer was affirmed by the Commissioner and the assessee was unsuccessful in persuading the Tribunal to reverse the order of the Commissioner.