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Issues involved: Interpretation of market rent for property at 19, Tuglak Road, New Delhi and entitlement of trust to exemption under section 11 of the Income-tax Act.
In the judgment, the High Court of Delhi addressed two questions of law raised by the petitioner. Firstly, regarding the addition made on account of the difference in market rent and rent actually paid for a property at 19, Tuglak Road, New Delhi. The Income-tax Officer had added the variance between the calculated market rent and the actual rent paid by the respondent. The Tribunal, citing relevant Supreme Court decisions, concluded that market rent could not exceed the standard rent. As the actual rent paid was higher than the standard rent, no additional amount was justified. The Court deemed the first question as academic due to the precedent set by the Supreme Court. Secondly, the issue of whether the trust, by allowing trustees to use the trust property, infringed section 13 and thus qualified for exemption under section 11 of the Income-tax Act was considered. The Tribunal determined that section 13 did not apply and granted the trust exemption under section 11. The Court noted that this question involved a mixed question of fact and law, necessitating an interpretation of specific sections of the Act. Consequently, the Tribunal was directed to refer the question of the trust's entitlement to exemption under section 11 to the Court for consideration. Ultimately, the petition was disposed of without costs, following the Court's analysis and directions to the Tribunal regarding the two legal issues raised in the case.
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