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TMI Blog2005 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. Accordingly, we answer the questions referred to us in the affirmative, in favour of the Revenue and against the assesee - - - - - Dated:- 28-7-2005 - Judge(s) : P. R. RAMAN., K. T. SANKARAN. JUDGMENT The judgment of the court was delivered by P.R. Raman J.-The Income-tax Appellate Tribunal, Kochi Bench, has referred for the opinion of this court, the following questions under section 256(1) of the Income-tax Act, 1961: "1. Whether, on the facts and in the circumstances of the case, and having regard to the provisions of rule 1BB(2)(a)(ii) read with the Explanation to the said rule, the Appellate Tribunal is right in law in holding that the maintainable rent should be arrived at on the basis of rent of Rs. 7,000 per month, when the actual rent received in the relevant previous year was Rs. 2,414 per month? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in valuing the property on the basis of gross maintainable rent taken at Rs. 7,000 per month in accordance with sub-clause (i) of rule 1BB(2)(a)?" The assessment year is 1983-84. During the previous year ending on March 31, 1983, the assessee transferred ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of 20 per cent, and so, sub-rule (5) of rule 1BB did not apply, that the working given by the assessee's counsel on the valuation of the property was on the basis of the maintainable rent of Rs. 23,864, i.e., on a monthly rent of Rs. 2,414, which the property was fetching earlier, that immediately after the gift the property was let out on a rent of Rs. 7,000 per month to the Central Ground Water Board, that in view of the fact that the property was let out to a Government Department the rent given by the Government Department would give the correct picture of the market rent, that considering the fact that the built-up area was nearly 7500 sq. ft. in a plot of 70 cents and that the Government had agreed to give a rent of nearly three times the rent which the property was fetching previously, the maintainable rent should be arrived at on the basis of the rent of Rs. 7,000 per month, that by applying the multiple factor as per rule 1BB of the Wealth-tax Rules the value of the property would exceed Rs. 6,50,000 as fixed by the Commissioner of Income-tax (Appeals), but since there was no appeal by the Revenue it is necessary to sustain the value of Rs. 6,50,000 as fixed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of this rule,- (a) 'gross maintainable rent', in relation to a house, means- (i) the sum for which the house might reasonably be expected to let from year to year; or (ii) where the house is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in sub-clause (i), the amount so received or receivable: Provided that where the house is in the occupation of a tenant and the taxes levied by any local authority or any expenditure on repairs in respect of the house is borne wholly or partly by the tenant, the sum referred to in sub-clause (i) or, as the case may be, the annual rent referred to in sub-clause (ii) shall be increased by the amount of the taxes or, as the case may be, the expenditure on repairs so borne by the tenant. Explanation.- For the purposes of this clause, 'annual rent' means- (a) in a case where the property is let through out the previous year, the actual rent received or receivable by the owner in respect of such year; and (b) in any other case, the amount which bears the same proportion to the amount of the actual rent received or receivable by the owner for the period for which the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of execution of the gift. Therefore, according to him, the rental value which it fetched earlier, long prior to the gift deed in question especially when the property was lying vacant as on the date of the gift, the maintainable rent cannot be taken as the rental value of the property fetched long prior to the gift in question. According to him, immediately after the gift deed in question, the property was let out to a Government Department and the assessee received a rent of Rs. 7,000 per month. Hence, the reasonably expected let out value from year to year has to be calculated on a monthly rent of Rs. 7,000 per month. As per sub-rule (1) of rule 1BB of the Wealth-tax Rules, for the purpose of section 7(1) the value of a house which is wholly or mainly used for residential purposes shall be the aggregate of the amounts specified in clauses (a) and (b) thereunder. As per clause (a) the amount arrived at by multiplying the net maintainable rent in respect of the part of the house used for residential purposes by the fraction 100/8 and as per clause (b) the amount arrived at by multiplying the net maintainable rent in respect of the remaining part of the house, if any, by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rustees of the Estate of Late Sh. Ambalal Sarabhai [1988] 170 ITR 144 and contended for the position that the valuation has to be done as on the date of the gift and the rental value existing prior thereto alone is relevant. We are unable to accept this contention. In the abovesaid decision, the question that arose for consideration was as to whether the value should be ascertained on the basis of the balance-sheet of the company as on March 31, 1963, being a document of published information in preference to the average break-up value indicated by the balance-sheet of the company as on March 31, 1964 and March 31,1965. The apex court referred to the earlier decision reported in CWT v. Mahadeo Jalan [1972] 86 ITR 621 which upheld the decision in McCathie v. Federal Commr. of Taxation (69 CLR 1) wherein it was held that "the real value of the shares will depend more on the profits which the company was making and should be capable of making, having regard to the nature of its business, than upon the amounts which the shares would be likely to realise upon liquidation". Reference was also made to the decision in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC) wherein the ape ..... 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