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TMI Blog1991 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ?" The year of assessment is 1978-79. The assessee claimed that a sum of Rs. 30,000 being the rent was not recoverable from its tenant, Gem Enterprises. This sum of Rs. 30,000 was the rent not paid during the relevant accounting year. The Income-tax Officer noted that a civil suit has been filed by the assessee for the recovery of the arrears of rent and the suit is still pending and, therefore, it was not established that the rents have become unrealisable. The Commissioner of Income-tax (Appeals) affirmed this order. However, the Appellate Tribunal held that the fact that rent due from the tenant has become irrecoverable would, in a majority of cases, be known only in subsequent years and not the year during which the tenant has remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenancy is bona fide ; (b) the defaulting tenant has vacated or steps have been taken to compel him to vacate the property ; (c) the defaulting tenant is not in occupation of any other property of the assessee ; (d) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Income-tax Officer that legal proceedings would be useless ; and (e) the annual value of the property to which the unpaid rent relates has been included in the assessed income of the previous year during which that rent was due and tax has been duly paid on such assessed income : Provided that the deduction to be allowed on this account shall not exceed the income under the head 'Income from h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 24(1)(x) of the Act ; for the deductibility of the unrealised rent, it should be incapable of realisation. In enacting this provision, Parliament certainly considered that, normally, the landlord may wait for some more time to take legal steps to realise the rent and an assessee need not venture into a litigation to recover the rents as and when the rents become due. The law of limitation provides a three-year period for the filing of a suit for recovery of the arrears of rent. The income from the house property for the purpose of assessment is based on the annual value referred to in section 22 of the Act read with section 23. Section 23(1)(b) states that the annual value in the case of leased property is the annual rent received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple involved pertains to the rule of "carrying forward" of the unrealised rent. In fact, the observation of the Supreme Court at page 182 to the effect that the rent due from the tenant has become irrecoverable would, in a majority of cases, be known only in subsequent years and not in the year during which the tenant has remained in occupation, is a clear indication that the assessee may not be able to claim deduction of the unrealised rent in the year in which the rents accrued because whether the said rent would become irrecoverable would be known only during the subsequent years. It is the above irrecoverability that has to be established in terms of rule 4. In the instant case, there has been no proof of such irrecoverability. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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