1969 (12) TMI 10 - HC - Income Tax

Irrecoverable rent - claim for deduction under item No. 38 of the Govt. Notification No. 878-F dated March 21 1922 as regards unrealised rent in previous years - assessee is entitled for each of the years under consideration to the exclusion from the income under the head Property of any amount equal to the irrecoverable rent

Summary

Issues:
1. Whether the assessee is entitled to the exclusion of irrecoverable rent from income under the head 'Property' for multiple years.
2. Interpretation of item No. 38 of the Government notification dated March 21, 1922, regarding deductions for unrealized rent.
3. Comparison of the provisions under the Income-tax Act, 1961, and the Income-tax Rules, 1962, with the Government notification.

Detailed Analysis:
1. The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, involving an assessee, Smt. Indermani Jatia, for the assessment years 1957-58, 1958-59, and 1959-60. The issue revolved around the claim for deduction under item No. 38 of the Government Notification No. 878-F dated March 21, 1922, for unrealized rent from the Grand Hotel property in Delhi. The Tribunal allowed the deduction for subsequent years despite a similar claim being granted for the assessment year 1956-57. The Commissioner of Income-tax, U.P., challenged this decision, leading to the reference to the High Court.

2. The key question raised was whether the assessee could claim the exemption under item No. 38 of the Government notification for multiple years, considering the conditions outlined in clauses (a) to (e) were satisfied. The notification exempted the amount of rent proven to be lost and irrecoverable, subject to specific conditions. The Tribunal found all necessary conditions fulfilled, leading to the interpretation of whether the exemption could be precluded due to a previous grant for a different assessment year.

3. The judgment delved into the comparison between the provisions of the Income-tax Act, 1961, and the Income-tax Rules, 1962, with the Government notification. The counsel for the applicant argued that the exemption under the notification was available for one assessment year only, citing the wording of the notification. However, the Court disagreed with this interpretation, emphasizing that the relief for one assessment year could not exceed rent for one year but did not preclude similar relief for successive years. A precedent from the Punjab High Court was discussed, but the High Court of Allahabad differed in its interpretation, allowing for deductions in subsequent years if the period of unpaid rent extended beyond a year.

In conclusion, the High Court answered the reference in the affirmative, in favor of the assessee, allowing the claim for exclusion of irrecoverable rent for the relevant assessment years. The Tribunal's decision to permit the deduction for subsequent years was upheld, emphasizing that the mere allowance of a similar deduction in a prior year did not preclude the assessee from claiming it in subsequent years.