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TMI Blog2006 (9) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with rule 1BB of the Wealth- tax Rules. The question that arose was as to what should be the "gross maintainable rent". The contention of the assessee before the Commissioner of Wealth-tax (Appeals) was that "gross maintainable rent" should be taken to be the municipal valuation as determined by the Cantonment Board. It was stated that that was the rent which the assessee could be reasonably expected to receive from a hypothetical tenant and hence that rent should be taken as "gross maintainable rent". 5. This contention of the assessee did not find favour with the Commissioner of Wealth-tax (Appeals). According to the Commissioner of Wealth-tax (Appeals), the municipal assessment was not the safe-guide for the determination of the "gross maintainable rent". He observed that the municipal annual letting value could not give correct idea of the actual rent, which the assessee would be in a position to get, if he let out the property. The Commissioner of Wealth-tax (Appeals) hence held "Although rule 1BB is held to be applicable, but while deciding the annual maintainable rent, we have to disregard the municipal assessment and determine the fair market rent of the property t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this, we will have to examine the scheme of the rent control legislation operative in U. P. Section 7(1) (a) of U. P. (Temporary) Control of Rent and Eviction Act, 1947, provides that 'every landlord shall, within 7 days after an accommodation becomes vacant, by his ceasing to occupy it ... give notice of the vacancy in writing to the District Magistrate', and, then, as per sub-section (2) of section 7, the District Magistrate was authorised to require a landlord to let or not let to any person any accommodation which was or had fallen vacant or was about to fall vacant. It is provided under sub-section (1) of section 3A that the District Magistrate may, on an application of a person, who has been allotted any accommodation, to which sub-clause (1) of clause (f) of section 2 applies, declare the 'annual reasonable rent' payable therefor. As per section 2(f)(1), 'reasonable annual rent' in the case of accommodation constructed before July 1, 1946, which is the case in the present appeals, means municipal assessment plus 25 per cent. thereon. It is thus obvious that on an application being made by the person, to whom the accommodation has been allotted, the District Magistrate is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee can be reasonably expected to let the property from year to year for anything more than the reasonable rent as per the rent control legislation. We will draw attention to the decision of the Supreme Court in the case of Mrs. Sheila Kaushish v. CIT [1981] 131 1TR 435. In that case, the assessee had let out the property on rent which was higher than the standard rent under the Delhi Rent Control Act. The period of limitation prescribed for making an application to the Controller for fixation of the standard rent had already expired. As such, the assessee was to continue to get the contractual rent, as the tenant had not made any application for the fixation of the standard rent and the time prescribed for the making of the standard rent and the time prescribed for the making of such an application had already expired. The question arose as to the determination of the annual rent for the purposes of chargeability to tax under the Income-tax Act. It was held by the Supreme Court that standard rent determinable under the provisions of rent control law is to be taken as the annual value for the purposes of charging tax under income-tax law. The Supreme Court repelled the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of valuing the property under rule 1BB. At the outset, we will point, out that in the case of Maharani Raj Laxmi Kumari Devi, the question was about the determination of the market value of the property that is, the value which the property would fetch, if sold in the open market. The question in that case was not the determination of the concessional value as envisaged by the provisions of rule IBB. It was in the context of the determination of the market value of the property that they had said that the municipal annual value was not the safe-guide for determining the market value of the property. It is true that they had also noticed difference between the U. P. rent control legislation and such other legislations, in so far as the former permitted for the charging of higher rent by agreement in coming to the conclusion that municipal value was not the safe-guide for working out the market value of the property. The argument of the Departmental representative is that on account of the U. P. Rent Control Act being different from other such legislations, we should also hold in the present appeals that the gross maintainable rent under rule 1BB cannot be fixed on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill draw attention to the following observation of the Supreme Court in the case of Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700: 'The problem can also be looked at from a slightly different angle. When the rent control legislation provides for fixation of standard rent, which alone and nothing more than which the tenant shall be liable to pay to the landlord, it does so because it considers the measure of the standard rent prescribed by it to be reasonable. It lays down the norm of reasonableness in regard to the rent payable by the tenant to the landlord. Any rent which exceeds this norm of reasonableness is regarded by the Legislature as unreasonable or excessive. When the Legislature has laid down this standard of reasonableness, would it be right for the court to say that the landlord may reasonably expect to receive rent exceeding the measure provided by this standard? Would it be reasonable on the part of the landlord to expect to receive any rent in excess of the standard or norm of reasonableness laid down by the Legislature and would such expectation be countenanced by the court as reasonable? The Legislature obviously regards recovery of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been done by Parliament in Schedule III to the Wealth-tax Act, 1957, which was inserted by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989. According to him, rule 5 of Part B of Schedule III specifically provides for computation of "gross maintainable rent" in case where the property is not let out. It provides for taking annual rent assessed by the local authority in whose area the property is situated for the purpose of levy of property tax or any other tax on the basis of such assessment and where no such assessment is made, or the property is situated outside the area of any local authority the amount which the owner can reasonably be expected to receive as annual rent had such property been let out. According to him, as there is no specific provision under rule 1BB for taking the valuation as assessed by the local authority, the rent which the property may fetch is to be taken as "gross maintainable rent". The submission is misconceived. 10. From a perusal of the sub-rule (2) of rule 1BB, it is absolutely clear that the "gross maintainable rent" has to be taken to be the rent which the property is reasonably expected to fetch if let from year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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