1996 (1) TMI 103 - HC - Income Tax

Summary

Issues:
1. Quashing of assessment order and notice of demand under the Income-tax Act, 1961 for the assessment year 1972-73.
2. Determination of the annual value of a property for taxation purposes based on standard rent versus actual rent received.

Analysis:

The petitioner sought the quashing of the assessment order and notice of demand issued by the Income-tax Officer for the assessment year 1972-73. The petitioner claimed to be the owner of a property in Delhi and argued that the annual value of the property should be based on the standard rent, not the actual rent received. The Income-tax Officer calculated the annual value based on the actual rent received, leading to a dispute.

The petitioner contended that as per the Income-tax Act, the annual value of a property should be determined based on the sum for which the property might reasonably be expected to be let from year to year. Reference was made to section 22 of the Income-tax Act, 1961, which governs the taxation of income from house property. The petitioner argued that the computation should not be based on the actual rent received but on the standard rent.

Citing the Supreme Court's decision in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee, it was highlighted that the annual value of a property should be based on the standard rent determinable under the provisions of the Rent Act, not the actual rent received. The Supreme Court's interpretation of the definition of 'annual value' in various Acts supported the petitioner's argument that standard rent should be the basis for determining the annual value for taxation purposes.

It was noted that post the Taxation Laws (Amendment) Act, 1975, a change occurred where the actual rent received could be considered as the annual value if it exceeded the sum for which the property might reasonably be expected to be let. However, since the assessment year in question was 1972-73, the standard rent determinable under the Delhi Rent Control Act, 1958, should be considered as the annual value of the property.

Consequently, the High Court ruled in favor of the petitioner, quashing the assessment order and notice of demand. The Income-tax Officer was directed to make an assessment in accordance with the Supreme Court's decision in Mrs. Sheila Kaushish v. CIT, emphasizing the importance of standard rent in determining the annual value of the property for taxation purposes.