1979 (12) TMI 3 - SC - Income Tax

Assessment of annual value for the levy of house tax where the building is governed by the provisions of the rent control legislation, but the standard rent has not yet been fixed - held that in the case of self-occupied building also the annual value must be determined on the basis of the standard rent determinable under the provisions of the Delhi Rent Control Act, 1958

Issues Involved:
1. Assessment of annual value for house tax under rent control legislation.
2. Applicability of standard rent in determining annual value.
3. Comparison of different municipal acts and rent control acts.
4. Determination of annual value in the absence of fixed standard rent.

Detailed Analysis:

1. Assessment of Annual Value for House Tax Under Rent Control Legislation:
The primary issue in these appeals is the assessment of the annual value of buildings for the levy of house tax under the Punjab Municipal Act, 1911, and the Delhi Municipal Corporation Act, 1957. The key question is how to determine the annual value when the building is governed by rent control legislation, but the standard rent has not yet been fixed.

2. Applicability of Standard Rent in Determining Annual Value:
The court examined whether the annual value of a building, in the absence of fixed standard rent, should be based on the contractual rent received by the landlord or limited to the standard rent determinable under the rent control legislation. The court emphasized that the standard rent, even if not fixed, provides the measure for the reasonable expectation of the landlord. The court referred to several precedents, including the cases of Corporation of Calcutta v. Sm. Padma Debi, Corporation of Calcutta v. Life Insurance Corporation, and Guntur Municipal Council v. Guntur Town Rate Payers' Association, to support the principle that the annual value should not exceed the standard rent determinable under the rent control acts.

3. Comparison of Different Municipal Acts and Rent Control Acts:
The court compared the provisions of different municipal acts and rent control acts to determine the applicability of the standard rent in assessing the annual value. It was noted that the definition of "annual value" under the Punjab Municipal Act, 1911, and the Delhi Municipal Corporation Act, 1957, is similar, and the existence of a proviso in the latter does not alter the interpretation. The court also discussed the differences in the provisions of the West Bengal Premises Rent Control Act, 1950, and the Delhi Rent Control Act, 1958, but concluded that these differences do not affect the principle that the annual value should be limited by the standard rent determinable under the rent control legislation.

4. Determination of Annual Value in the Absence of Fixed Standard Rent:
The court held that even if the standard rent has not been fixed by the Controller, the landlord cannot reasonably expect to receive more than the standard rent determinable under the rent control legislation. The assessing authority must arrive at its own estimate of the standard rent by applying the principles laid down in the rent control acts. The court rejected the argument that the contractual rent should be the basis for determining the annual value, emphasizing that the hypothetical tenant would be entitled to apply for fixation of the standard rent, which would influence the reasonable rent expectation.

Conclusion:
The court concluded that the annual value of buildings governed by the Delhi Rent Control Act, 1958, must be limited to the standard rent determinable under the act. The assessments of annual value in excess of this measure were declared illegal and ultra vires. Appeals Nos. 1143 and 1144 of 1973 were allowed, and Appeal No. 1201(N) of 1973 was dismissed, upholding the High Court's judgment for self-occupied buildings. The assessee in each case was awarded costs throughout.

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