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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 ..... ble rent' should be adopted on the basis of 'annual reasonable rent' as per the U. P. rent control legislation?" 2. The present reference relates to the assessment years 1968-69 to 1976-77. 3. Briefly stated the facts giving rise to the present reference are as follows 4. The assessee, a Hindu undivided family, owns a building, which was occupied by the assessee for its own residential purposes. The value of that property was to be determined in accordance 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was applicable up to July 14, 1972, and thereafter its place was taken by the U. P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972. In that Act also, similar provision with regard to higher rent was there. But the question that arises for consideration is whether, on the basis of its having been provided that higher rent could be charged by agreement it would be justified to adopt the market rent as the gross maintainable rent. To find an answer to 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 accom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l also agree to pay higher rent ? Even if the assessee is getting higher rent from the existing tenant, he may not be able to maintain that when a new tenant comes. The term used in rule 1BB is 'gross maintainable rent', which means the rent that can be expected to be maintained. When we have to decide as to what is the rent for which the assessee can be reasonably expected to let the house, we have to proceed on the basis of a hypothetical tenant and we do not think that 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 prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laxmi Kumari Devi, saw no reason to depart from the view which had been already taken in the case of P. D. Singhania v. CWT [1979] 118 ITR 376. We do not find anything in this decision in the case of Maharani Raj Laxmi Kumari Devi, which could give support to the contention of the Departmental representative that the Commissioner of Income-tax (Appeals) was justified in coming to the conclusion that the market rent was required to be adopted as the 'gross maintainable rent' for the 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 legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be expected to speak with more than one voice. The intention of the rent control law was to put an end to the exploitation of the tenant by the landlord. It was with that view in end that it was laid down as to what was to be regarded as being reasonable rent. Now, when it comes to the question of levying municipal taxes or income-tax or wealth-tax, can the Government say that a landlord can be reasonably expected to get more than what is, as per rent control legislation, 'reasonable rent'? We will 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 unreas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar to year. There is no such stipulation for the rent which might have been fixed by the Rent and Eviction Officer where the property is subject to rent control legislation of the State, should be taken to be "gross maintainable rent". According to him, if the intention of the Legislature is that the amount of rent which might have been fixed by the Rent Control and Eviction Officer under the State rent control legislation or municipal value, the legislation would have specifically provided for the same in rule 1BB 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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