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TMI Blog1993 (8) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the direction of the Commissioner of Income-tax (Appeals) to adopt the Annual Value of the house property at 10, Sarat Chatterjee Avenue, Calcutta-29, taking the municipal valuation and adding 1/9th of it? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in ignoring the concrete evidence of tenancy in adjoining flat and relying on the Municipal valuation for determination of annual value? 5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no material to make addition on account of interest to the rental income in respect of the interest-free deposit of ₹ 10,40,000 given by the tenant Vinit Traders Investment Ltd. to the Landlord assessee-company as part consideration for obtaining the tenancy right ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in ignoring the valuation of fair rental value of the house property made by the Assessing Officer on the basis of concrete evidence of fair rent in an adjoining house and deposit of ₹ 10,40,000 as interest- free advance with the Landlord assessee-company by a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar to year or where the property is let and the annual rent received or receivable is in excess of such sum, the amount so received or receivable. The annual value for the purpose of assessment under section 23(1) is a deemed value as the section itself says 'For the purpose of section 22 of the Act, the annual value of any property shall be deemed to be. The annual value for determining the income from house property has to be strictly computed as provided in section 23(1) since it is a fictional or deemed value. 7. Prior to the amendment with effect from 1-4-1976 such deemed value was the sum for which the property could reasonably be expected to let from year to year. The fair rent as postulated in section 23 was similar and/or akin to the provisions of the municipal laws for levy of municipal taxes and that such municipal valuation afforded a proper guide. Such fair rent could not be more than what was the fair rent under the relevant rent control legislations even though the actual rent received was much higher than such fair rent. 8. The law was amended with effect from 1-4-1976 to provide that where the actual rent was higher, then such actual rent could be taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, section 23(1)(a) of the Income-tax Act is in pari materia with section 168 of the Calcutta Municipal Act, 1951, as well as section 154 of the Bombay Municipal Corporation Act, 1988. These matters were duly considered by this Court in CIT v. Prabhahati Bansali [1983] 141 ITR 419. The Tribunal was not right in saying that there will be a double deduction for repairs in case the municipal valuation was adopted. The Tribunal failed to appreciate that the rateable value fixed by the municipality has to be increased by 1/9th so as to determine the annual value being the gross annual rent at which the property is reasonably expected to be let from year to year. The view that the annual value cannot exceed the municipal valuation is supported by the decisions in CIT v. R. Dalmia [1987] 163 ITR 517 (Delhi), CIT v. M.R. Alagappan [1987] 164 ITR 690 (Mad.) and C.J. George v. CIT [1973] 92 ITR 137 (Ker). Since there is no material difference between section 168 of the Calcutta Municipal Act and section 23(1)(a) of the Income-tax Act, there is no reason why the Tribunal should disregard the municipal valuation. In this context, may be relevant to refer to the decision of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. With regard to question Nos. (5) and (6) which are only for the assessment years 1984-85 and 1985-86 the further issue involved is whether any addition to the annual rental value can be made with reference to any notional interest on the deposit made by the tenant. When the annual value is determined under sub-clause (a) of sub-section (1) of section 23 with reference to the fair rent then to such value no further addition can be made. The fair rent, takes into consideration everything. The notional interest on the deposit is not any actual rent received or receivable. Under sub-clause (b) of section 23(1) only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of money which is payable by the tenant for use of the premises to the landlord. Any advantage and/or perquisite cannot be treated as rent. Wherever any such perquisite or benefit is sought to be treated as income, specific provisions in that behalf have been made in the Act by including such benefit, etc., in the definition of the income under section 2(24) of the Act. Specific provisions have also been made under different heads for addin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such actual rent under sub-clauses (a) and (b) shall be increased in the manner specified below : ( iii)where the owner has accepted any amount as deposit (not being advance payment towards rent for a period of three months or less), by the amount calculated at the rate of 15 per cent per annum on the amount of deposit outstanding from month to month for the number of months (excluding part of a month) during which such deposit was held by the owner in the previous year, and if the owner is liable to pay interest on such deposit, the increase to be made under this clause shall be limited to the sum by which the amount calculated as aforesaid exceeds the interest actually paid; 16. There is no such corresponding provision in section 23(1). Even this Schedule III has come on the statute book only with effect from 1-4-1989 and the same has been inserted only in the Wealth-tax Act. In the absence of any such corresponding provision in sub-section (1) of section 23 of the Income-tax Act, the ITO in our view was not justified in calculating any notional interest on the deposit of ₹ 10,40,000 made by the tenant Vinit Traders Investment Ltd. in fixing the annual rental value ..... X X X X Extracts X X X X X X X X Extracts X X X X
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