1988 (12) TMI 53 - HC - Income Tax

Summary

Issues Involved: Determination of whether the salary paid to the caretaker is an admissible deduction from the annual rent to determine the annual value of the property under section 23 of the Income-tax Act, 1961.

Summary:
- The assessee claimed a deduction of Rs. 3,000 for the salary paid to the caretaker against the income from house property, which was initially negatived by the Income-tax Officer.
- The Appellate Assistant Commissioner allowed the deduction, stating that engagement of a caretaker was necessary for earning rent from the property.
- The Revenue appealed before the Tribunal contending that the deduction was not allowable under section 24 of the Income-tax Act, 1961.
- The Tribunal upheld the Appellate Assistant Commissioner's order, emphasizing the necessity of a caretaker for maintaining big properties to earn rental income.

Judgment Analysis:
- The Tribunal confirmed the deduction, stating that the amount paid to the caretaker is to be deducted before arriving at the bona fide annual value of the property under section 23 of the Act.
- The Tribunal's decision was based on the premise that the salary of a caretaker is a necessary expense for earning rental income and should be deducted before determining the annual value of the property.
- However, the High Court disagreed with the Tribunal's reasoning, stating that the salary of a caretaker is not a relevant factor in determining the municipal valuation or the annual value of the property.
- The High Court clarified that deductions under sections 23(1) and 24(1) are exhaustive, and the salary of a caretaker does not fall under any specific item for deduction from the annual value of the property.
- Ultimately, the High Court answered the reference question in the negative and in favor of the Revenue, concluding that the salary paid to the caretaker cannot be considered in determining the annual value of the property.

Separate Judgment by J. N. HORE:
- Justice J. N. HORE agreed with the decision of the High Court, supporting the conclusion that the salary paid to the caretaker cannot be taken into account in determining the annual value of the property.