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TMI Blog2010 (11) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-. The AO called upon the Assessee to show cause as to why notional interest on interest free deposit of ₹ 60,00,000/- received from the tenant should not be added to rent received and annual value determined accordingly. 3. The Assessee relied on the decision of the Hon ble Bombay High Court in the case of J.K.Investors (Bombay) Ltd. 248 ITR 723 (bom) for the proposition that notion interest on interest free security deposit should not be added to the annual value while determining annual income u/s.23(1)(b) of the Act. The AO however held that in the case of Tivoli Investment Trading Co. P. Ltd. (ITA No.3269/Bom/93, the Hon ble Tribunal has held that the language of sec. 23(1)(a) provides that for the purpose of sec. 22, the Annual value of any property shall be deemed to be the sum of which the property might reasonably be expected to let from year to year. It is pertinent to note the word used is might and not can or is . It is thus a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis irrespectively of the fact whether the property is let out or not. The Hon ble Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as irrelevant. By the Taxation Laws (Amendment) Act, 1975 w.e.f. 1.4.1976, Section 23(1)(b) was introduced, whereby it was provided that if the actual rent received by an assessee is in excess of the sum for which, the property might reasonably be expected to let from year to year, annual value will be the rent received. While explaining the aforesaid amendment, CBDT in Circular 204 dated 24.7.1976 in paragraph 9 has stated as follows :- Hitherto, the annual value of house property, chargeable to income tax under the head income from house property was deemed to be the sum for which the property might reasonably be expected to let from year to year. In many cases, however, the actual rent received or receivable in a year exceeds the municipal valuation of the property. Sub section (1) of section 23 has been amended to provide that the where any property is in occupation of a tenant and the annual rent received or receivable by the owner is in excess of the sum for which the property might reasonably be expected to let from year to year, the annual rent received or receivable shall be taken as the annual value of the property . 18. From the aforesaid Circular, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Act for making an application for fixation of the standard rent having expired, it is no longer competent to the tenant to have the standard rent of the building fixed, the annual value of the building according to the definition given in sub-section (1) of section 23 of the I.T. Act, 1961, must be held to be the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant. This interpretation which we are placing on the language of sub-section (1) of Sec.23 of the IT Act,1961, may be regarded as having received legislative approval, for, we find that Sec.6 of the Taxation Laws (Amendment) Act, 1975 sub-section (1) has been amended and it has now been made clear by the introduction of clause(b) in that sub-section that where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum for which the property might reasonably be expected to let from year to year, the amount so received or receivable shall be deemed to the annual value of the property. The newly added cl.(b) clearly postulates that the sum for which a building might reasonably be expected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable value cannot be equated to standard rent. In this context, it may be desirable to refer to the Calcutta High Court s decision in the case of CIT Vs. Prabhabati Bansali, (1983) 141 ITR 419. One of the questions involved in that case was whether the Tribunal was justified in directing the Income Tax Officer to re-determine the annual value of the property under section 23(1) afresh with reference to its rateable value as determined by the Municipal Corporation. The question was answered in the affirmative and the court held that the income from house property had to be computed on the basis of the sum for which the property might reasonably be let from year to year and the annual municipal value. Following the Calcutta High Court decision (1983) 141 ITR 419, which we think, has taken the right view, we answer the questions in the negative and against the department with a direction that the annual value of different properties will now be determined by the Tribunal in accordance with the directions set out above. No order as to costs . 22. The Hon ble Bombay High Court in the case of Smitaben N. Ambani Vs. CWT 323 ITR 104 (Bom) in the context of Rule 1BB to the Wealth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Kashi Prasad Katarvka Vs. CIT 101 ITR 810 (Patna). We find that the Bombay High Court which is the jurisdictional High Court has held that the rateable value under the municipal law has to be adopted as annual value u/s.23(1)(a) of the Act and therefore the decision in the case f Makrupa Chemicals (supra) to the contrary cannot be followed. Further In para-13 of its decision in the case of Makrupa Chemicals, the Tribunal has very categorically held that if ratable value is less than the standard rent (where the property is subject to rent control laws) then only standard rent has to be taken. In coming to the above conclusion the Tribunal has followed the decision of the Hon ble Supreme Court in the case of Dewan Daulat Rai kapoor (supra). Thus the decision in the case of Baker Technical Services (P) Ltd. (supra) being contrary to the decision of the Hon ble Bombay High court in our view cannot be followed. 24. The decision relied upon by the learned D.R. in the case of Fizz Drinks Ltd.(supra), are distinguishable on facts. The facts in that case were that the agreed rent was Re.1/- per month and interest free security deposit of ₹ 1,62,36,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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