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TMI Blog1992 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was correct in holding that the value of additional land available for separate development should be added in addition to the value of the building as such? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in adding to the valuation of the said premises any further separate value for part of the land in the said premises on the alleged ground that such land was available for future development? (5) Whether, on the facts and in the circumstances of the case, the rental income of the self-occupied portion of the said premises could be computed at a higher rate than taken in income-tax assessments and/ or higher than the reasonable rent under the provisions of the West Bengal Premises Tenancy Act, 1956 ? (6) Whether, on the facts and in the circumstances of the case, the rental income in respect of the self-occupied portion of the said premises could be computed by the Tribunal on an increased basis for later years ?" Out of the above six questions, questions Nos. 1, 2 & 3 are not pressed by learned counsel appearing for the assessee. We, therefore, decline to answer those questions. Shortly stated, the facts are as under: On the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able case. It was further argued that, once the rent capitalisation method is adopted, it could not be any more open to the taxing authorities to depart from the rent adopted as the annual letting value of the property for income-tax purposes. Reliance was placed upon a judgment of the Madras High Court in M. V. S. Kathirvelu Nadar v. Commr. of Agrl. L T. [1968] 68 ITR 786 for the proposition that once view has been accepted by the taxation authorities, the same should no be departed from by it. All the arguments, however, did not impress the Tribunal. The assessment orders tinder the Income-tax Act in respect of the assessee for the years as produced before the Tribunal led the Tribunal to the inference that the assessee had substantial interest in the firm, M/s. Rameswarlal Dedraj & Co., which had been the tenant of the assessee and the assessee earned a substantial income from the said firm. Therefore, the plea of the assessee that the rent in question was being computed by an independent tenant would hardly be of any help to the assessee, in the view of the Tribunal. The Tribunal, therefore, questioned the independent inter se relation of landlord and tenant between the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to rates of rent prevailing in the locality is of material consideration, the contracted rent not being the rent arising from a genuine agreement between the parties. The Tribunal went to the length of holding that the tenancy in the present case is practically a case of a person letting his property to himself and, therefore, there could not be any restriction on the amount of rent that he could charge because he would not apply the fixation of a fair rent against himself. Coming to the actual instance, the Tribunal referred to some instances quoted by the Valuation Officer before the, authorities below as well as before the Tribunal. Such actual instances need not detain us ; suffice it at this moment to say that there were a number of cases cited by the Valuation Officer which show that the actual rent realised by a number of landlords in the locality are in the range of Re. 1 per sq. ft. as against Re. 0.11 p. per sq. ft. received by the assessee. On this issue, learned counsel for the assessee laid particular emphasis that no rent can be estimated at any figure higher than what is accepted as the standard rent or the fair rent under the legislation regulating and controll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rent which the landlord could squeeze out from the tenants. Such rent cannot be taken as a yardstick for measuring the legitimacy of the rent. The Tribunal itself has taken judicial notice of the notorious fact that there has been an exorbitant rise in the rates of rent in the city, obviously on account of increasingly acute shortage of housing facilities. Therefore, in our view, the fair rent has a major place in deciding the issue. The task of finding out the fair rent within the meaning in section 8(d) of the West Bengal Premises Tenancy Act, 1956, has not at all been addressed. The first step that we consider necessary before rejecting the rent tinder the tenancy agreement as understated was to give a clear finding that the fair rent under the relevant statute is higher than the rent at which the assessee had let out its property to the tenant, a firm, regardless of the fact that the assessee was one of the partners of the said firm. The assessee's interest in the tenant-firm may be an alerting factor but not a conclusive one to warrant straightaway rejection of rent as being below the fair rent. If the rent agreed upon and received by the assessee is equal to or more than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dependent, in connection with a house property, on what the annual value of the property is. Therefore, the Tribunal was wrong in excluding from consideration the authoritative value and the binding nature of tile decision of the Supreme Court in Dewan Daulat Rai Kapoor's case [1980] 122 ITR 700. In fact, the Supreme Court later acknowledged this unity of the two Acts, i.e., the Municipal Act and the Income-tax Act, on tile question of annual value and the Supreme Court applied the ratio in Dewan Daulat Rai Kapoor's case [1980] 122 ITR 700 to cases falling for decision under the Income-tax Act with regard to the question as to what the annual value of a property within the meaning of section 23 of the Income-tax Act should be. The ratio decidendi in Dewan Daulat Rai Kapoor's case [1980] 122 ITR 700 (SC) was applied in Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 (SC) and Amolak Ram Khosla v. CIT [1981] 131 ITR 589 (SC). The Supreme Court held that such annual value should not exceed what the regulatory legislation for tenancy of premises determines as standard rent or, for that matter, fair rent under the West Bengal Premises Tenancy Act. In all these cases, the assessee conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive criterion. The Tribunal fell into error by not holding that the fair rent is the ultimate test. If this principle is correct for a tenant-occupied portion of a property, it should be equally correct for valuing the self-occupied portion of the property. The quantum of annual value is an invariable quantum. It does not vary depending on whether it is self-occupied or tenant-occupied. Therefore, the annual value of the property for the capitalisation should in all cases be the fair rent. We, therefore, decline to answer questions Nos. 5 and 6 and remand the matter to the Tribunal with the direction to determine the issues in the light of our observations and the principles laid down by the Supreme Court in the decisions relied upon. We now turn to question No. 4. It relates to the addition of the value of the excess appurtenant land to the valuation of the existing structure. Here, the Tribunal's view point is that since there was some land in the said property in excess, the same could be available for development as a separate house-site for sale. The assessee raised multiple contentions against such additions before the Tribunal. The first plea was that the open area was in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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