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TMI Blog1985 (7) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... O. Ltd. (hereinafter referred to as the Limited Company) under a deed of donation/settlement. At that time, the assessee Trust got vacant possession of this gifted bungalow. Later on1st July, 1971, the said bungalow was let out by the assessee trust to Peria Keranalai Tea Produce Co. Ltd.,Coimbatore(hereinafter referred to as the Tea Company) at Rs. 650 P. M. the said Tea Company made a contribution of RS. 7,000 to the assessee Trust in 1972. Thus, the ld. CIT noticed that in so far as this contribution exceeded RS. 5,000 the Tea Company became, for the purposes of s. 13 (3) (b) of the Act (as it stood for the asst. yr. in question) a person who had made a substantial contribution to the assessee Trust. The ld. CIT was of the view that the rent of Rs. 650 p. m. could not be considered as adequate rent. He, therefore, came to the conclusion that in so far as the said land and building of the assessee Trust continued to be made available to the Tea Company (which was covered under s. 13 (3) during the asst, yr. in question without charging adequate rent or other compensation the property of the Trust was to be deemed to have been used or applied for the benefit of the Tea Company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 made by him to the following decision 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 a building which could be rebutted and either reduced or enhanced only on the basis of other materials on the record: 1. Kashi Prasad Kataruka vs. CIT 1975 CTR (Pat) 63 : (1975) 101 ITR 810 (Pat) 2. CIT vs. H. P. Sharma (1980) 122 ITR 675 (Del) 3. Dewan Daulat Rai Kapoor vs. N. D. M. C Another (1980) 122 ITR 700 (SC) and 4. CIT vs. Prabhabati Bansal (1982) 21 CTR (Cal) 15 : (1983) 141 ITR 419 (Cal). Elaborating on his submission further, Dr. Devi Pal referred to the provision of the Tamil Nadu Buildings (Lease Rent Control) Act, 1960 and pointed out that under s. 4(2) of that Act, the fair rent for any residential building was to be fixed by the Controller at 9per cent gross return pre annum on the total cost of such building. Referring to sub-s. (iv) of s. 4, he pointed out that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded, the amendment was attracted ad therefore, the fact that property had been given on rent much before the receipt of donation from the Tea Company was not material. He also supported the observation of ld. CIT that the amendment in question was classificatory in nature and that even prior to 1st April, 1977, s. 13 (3) (b) could be attracted in cases where the contribution was substantial. According to him, the contribution of Rs. 7000 by the Tea Co. was certainly substantial. 10. We 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, the figures of repairs and municipal tax at Rs. 1300 and RS. 1000 have not been taken correctly. In this connection, he referred to the report dt.28th Oct., 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. In other respects, Shri Kapil strongly relied upon the order of the ld. CIT He, therefore, argued that there was no warrant or justification for any interference with the order of the ld. CIT. 11. We have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dequate. It may be that the figures of the expenses for repairs and municipal tax as given at page No. 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 ld. CIT has at pp. 5 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 CIT vs. Indo Traders Agencies (Madras) Pvt. Ltd. (1981) 131 ITR 313 (Mad), 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 not necessarily what is ultimately determined by some one else as the market value and that unless the price was such as to shock the conscience of the Court, it was not possible to hold that the transaction was otherwise than for adequate consideration. This is a test which the rent u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already seen above, the plinth area of the main building was 7,194 sq. ft. therefore, the area of the building site plus 50per cent thereof would be 10,791 sq. ft. (7,194 + 3,597). At he rate of Rs. 9.4 per sq. ft. (the rough rate at which land was sold in 1976 by the assessee trust to the three companies), the value would come to Rs. 80,900. The value of the construction as given in the assessee s valour s report was RS. 64,818 i. e. the total value comes to Rs. 1,45,718. In our view, the value at RS. 1,62,367 derived on the basis of the valuation as given in the deed of settlement is the reasonably acceptable value. Before the ld. CIT as well as before us, it was stated on behalf of the assessee that it is the tenant (Tea Co.) who was to effect repairs and pay house tax. this had not been controverted before us on behalf of the Revenue. Except against adjudging suspicion, taking the same into consideration, the rent of RS. 650, p.m. could not be said to be inadequate. Further, under s. 7 of the Tamil Nadu Buildings (Lease and Rend Control) Act. 1960 a landlord cannot claim or received anything in excess of fair rent or agreed rent. In the present case, it has not been shown ..... X X X X Extracts X X X X X X X X Extracts X X X X
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