2011 (11) TMI 214 - HC - Income Tax

Determination of annual value where premises are not regulated by Delhi Rent Control A/C - income from house property - Held That - In view of Commissioner of Income Tax v. Moni Kumar Subba (2011 - TMI - 205926 - DELHI HIGH COURT) Standard Rent Cannot be adopted - the rateable value if correctly determined under the municipal law can be taken as ALV under Section 23(1)(a) of the Act

Summary

Issues:
Interpretation of annual letting value for property tax assessment under the Income Tax Act, 1961.

Analysis:
The appeals under Section 260-A of the Income Tax Act, 1961 pertain to the determination of the annual letting value of a property not regulated by the Delhi Rent Control Act. The primary issue is whether the annual letting value can be determined with reference to the standard rent under the Rent Control Act. The case involves two assessment years, 1993-1994 and 1995-1996, where the Assessing Officer added notional interest on a security deposit while computing the annual letting value. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision for 1993-1994 but determined the annual letting value based on the rateable value fixed by the Municipal Corporation for 1995-1996.

For the assessment year 1993-1994, the Full Bench decision in the case of Commissioner of Income Tax v. Moni Kumar Subba clarified that the standard rent determinable under the Delhi Rent Control Act is not applicable to properties outside its purview. Instead, the rateable value determined under municipal laws can be considered as the annual letting value under Section 23(1)(a) of the Income Tax Act. The Assessing Officer has the discretion to determine fair rent based on material/evidence if the rateable value does not represent the correct fair rent.

In light of the Full Bench decision, the High Court directed the remittance of the matter to the Assessing Officer for both assessment years to compute the annual letting value based on the rateable value. The court emphasized that notional interest on an interest-free security deposit cannot be a determinable factor for fair rent as per Section 23(1)(a) of the Act. Therefore, the appeals were disposed of with the question answered in the negative, affirming the need to determine the annual letting value based on rateable value for properties not covered by the Delhi Rent Control Act.