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TMI Blog1985 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... donation an old two storeyed bungalow (tiled sheds described as servants quarters, garrage and kitchen, etc.), at Race Course Road, Coimbatore from one Peerless Co. Ltd. (the limited company) under a deed of donation/settlement. At that time, the assessee-trust got vacant possession of this gifted bungalow. Later on1-7-1971, the said bungalow was let out by the assessee-trust to Peria Karamalai Tea Produce Co. Ltd.,Coimbatore(the Tea Co.) at Rs. 650 per month. The said Tea Co. made a contribution of Rs. 7,000 to the assessee-trust in 1972. Thus, the learned Commissioner noticed that insofar as this contribution exceeded Rs. 5,000, the Tea Co. became, for the purposes of section 13(3)(b) (as it stood for the assessment year in question) a person who had made a substantial contribution to the assessee-trust. The learned Commissioner was of the view that the rent of Rs. 650 per month could not be considered as adequate rent. He, therefore, came to the conclusion that insofar as the said land and building of the assessee-trust continued to be made available to the Tea Co. [which was covered under section 13(3)(b)] during the assessment year in question without charging adequate re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or not regard had also to be had to repairs and municipal tax which were the responsibility of the Tea Co. as the tenant. He, therefore, pointed out that the rent charged was quite adequate. 6. Thirdly, he pointed out that the building was an old one built in 1919 with tiled sheds. He also pointed out that the municipal valuation of the building was only Rs. 2,664 per annum. In this connection, reference was also made by him to the following decisions for the proposition that the municipal valuation afforded an indication as to the reasonable annual letting value of a building which could be rebutted and either reduced or enhanced only on the basis of other materials on the record---Kashi Prasad Kataruka v. CIT [1975] 101 ITR 810 (Pat.), CIT v. H.P. Sharma [1980] 122 ITR 675 (Delhi), Dewan Daulat Rai Kapoor v. NDMC [1980] 122 ITR 700 (SC) and CIT v. Prabhabati Bansali [1983] 141 ITR 419 (Cal.). Elaborating on his submission further, Dr. Devi Pal referred to the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 and pointed out that under section 4(2) of that Act, the fair rent for any residential building was to be fixed by the Controller at 9 per cent gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned departmental representative pointed out that since the assessment year 1982-83 inquestion fell after 1-4-1977, when section 13(3)(b) had been amended, the amendment was attracted and, therefore, the fact that the property had been given on rent much before the receipt of donation from the Tea Co. was not material. He also supported the observation of the learned Commissioner that the amendment in question was clarificatory in nature and that even prior to1-4-1977, section 13(3)(b) could be attracted in cases where the contribution was substantial. According to him, the contribution of Rs. 7,000 by the Tea Co. was certainly substantial. 10. He submitted that having regard to the value of the building let out with land, the rent charged was certainly inadequate. He pointed out that in the calculation sheet relied upon on behalf of the assessee (page 8 of the assessee's paper book), the figures of repairs and municipal tax at Rs. 1,300 and Rs. 1,000 have not been taken correctly. In this connection, he referred to the report dated28-10-1972of the assessee's valuer wherein the amount of tax had been taken at Rs. 586 and the cost of annual repairs at Rs.300. Inother respects, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration. Therefore, on the basis of the said report, the learned Commissioner was not justified in deducing that on the basis of the built in area of9,152 sq. ft. the rent should have been Rs. 4,500 per month and that any rent lower than that was to be treated as inadequate. It may be that the figures of the expenses for repairs and municipal tax as given at page 8 of the assessee's paper book, did not accord with the figures as appearing in the report of the assessee's valuer, but even apart from them, the question of 'adequate rent' can be examined. The learned Commissioner, has at pages 5 and 6 of his order considered the concept of adequate rent. The said concept is not a matter of controversy before us. 'Adequate' means legally sufficient or such as is lawfully and reasonably sufficient. In the case of CGT v. Indo Traders Agencies (Madras) (P.) Ltd. [1981] 131 ITR 313, reference to which was made on behalf of the assessee before us, it was held by the Hon'ble Madras High Court that if the consideration which passed between the parties can be considered to be reasonable or fair, it cannot be considered to be inadequate. It was held that adequate consideration was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,152 1,15,007 ------------ ---------------- (The depreciated cost taken in the report of the assessee's valuer at Rs. 64,818). The learned Commissioner had proceeded on the basis as if the entire land (after excluding the land sold in 1976) was part of the tenancy. That is why he took its value at Rs. 3,52,367 and he expected 10 per cent return on it at Rs. 35,000. He was not justified in doing so. In terms of the Tamil Nadu Buildings (Lease and Rent Control) Act, as referred to on behalf of the assessee, we could only take fair rent at 9 per cent of the total cost of such building, i.e., the value of the site in which the building is constructed plus the cost of construction of the building plus the value up to 50 per cent of the site on which the building is constructed. As we have already seen above, the plinth area of the main building was7,194 sq. ft. Therefore, the area of the building site plus 50 per cent thereof would be10,791 sq. ft. (Rs. 7,194 + 3,59 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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