HOPE INDIA LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, 1961, has been made by the Income-tax Tribunal, Bench-C, Calcutta, in respect of the following question ;

(2.) The assessment year involved in this reference is 1984-85. The facts leading to the said reference are as follows : The assessee maintains its books of account by adopting the mercantile system of accounting. A sum of Rs. 49,85,648 was shown towards rent received by it from the tenants of the house property known as "Poddar Court" situated at 18, Rabindra Sarani, Calcutta. The assessee is the owner of 2/3rds share in the said property. The final determination of annual valuation of the Calcutta Municipal Corporation was under revision. The Assessing Officer upon invoking the provisions of Section 23(1) of the Income-tax Act, took the view that the annual value of the property shall be deemed to be the sum for which the property might reasonably be expected to be let from year to year. However, the Assessing Officer was of the view that the fair market annual value of the property being much higher than the actual rent received which was not fair and reasonable in comparison to rent receivable in the locality for other premises similarly situated. He took the view that the assessee could reasonably expect to receive a higher rent than actually revised. The Assessing Officer further stated that in some cases the assessee received rent at the rate of Rs. 8.50 per sq. ft. per month and as per its own admission in Suit No. C-794 of 1987 filed in this court, wherein rent at the rate of Rs. 8.46 per sq. ft. was claimed as a fair and reasonable rent. Allegedly, one tenant, Overseas Communication Services have been paying rent at the rate of Rs. 8 per sq. ft. per month with effect from 1982 and the Post and Telegraph Department occupies some space situated in the same locality was paying the rent at the rate of Rs. 9 per sq. ft. with effect from 1982. The Assessing Officer, therefore, computed the fair rent to be Rs. 8.50 per sq. ft. and the fair market value thereof was assessed at Rs. 4,38,62,652 out of which the 2/3rds share of the assessee was determined at Rs. 2,92,41,768. To the said amount, a sum of Rs. 16,307 was added as rent for car parking and godown. The Commissioner of Income-tax (Appeals) however, assessed the annual value of the property at Rs. 49,35,648 including rent for car parking and godown in the basement. Up to the assessment year 1983-84 assessment was made on the basis of actual rent but the said authority found that the tenants have been occupying the premises for more than 15 years and the provision of the West Bengal Premises Tenancy Act being applicable and any upward revision of rent would not be permissible except with the mutual agreement between the parties. Efforts, however, have been made by the landlord and the Government Departments who occupied a portion of the premises for enhancement of rent. The Commissioner of Income-tax (Appeals), therefore, directed the Assessing Officer to recompute the income from the house property. The Department preferred an appeal thereagainst. The Appellate Tribunal held :

(3.) Mr. N.K. Poddar, learned counsel appearing on behalf of the petitioner, inter alia, submitted that enhancement of rent on a subsequent date with retrospective effect cannot be assessed for the year from which they had been determined. According to learned counsel, the decision of this court in Hamilton and Co. Pvt. Ltd, v. CIT [1992] 194 ITR 391, had wrongly been relied upon by the learned Tribunal inasmuch as the question involved in this reference did not strictly arise therein. Mr. Poddar would urge that keeping in view the amendments made in the provisions of Section 23 of the Income-tax Act, income which did not accrue or had been received or had been received or receivable in terms of the contract entered into by and between the landlord and the tenants cannot be said to be an income accrued in the particular year by reason of agreement entered into by and between the parties for the purpose of enhancement of rent with retrospective effect. In support of his aforementioned submission reliance had been placed on CIT v. Prabhabati Bansali, Madgul Udyog v. CIT, E. D, Sassoon and Co. Ltd. v. CIT, CIT v. Gajapathy Naidu (A.), CIT v. Hindustan Housing and Land Development Trust Ltd., Mariappa Gounder (P.) v. CIT, Ondal Investments Co. Ltd. v. CIT, CIT v. Simplex Concrete Piles (India) (Pvt.) Ltd. Amar Nath Khandelwal v. CIT [1980] 126 ITR 322 (Delhi), CIT v. Askohbhai Chimanbhai, CIT v. Chanchani Brothers (Contractors) Pvt Ltd. [1986] 161 ITR 418 (Patna), CIT v. Burlop Commercial Pvt. Ltd, and CIT v. Nadiad Electric Supply Co. Ltd. [1971] 80 ITR 650 (Bom).