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TMI Blog1984 (9) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... month 54 274 ----------- ---------------- Net chargeable income from house property : 1,047 ---------------- Dealing with this issue, it is seen that the ITO accepted the municipal rateable value at Rs. 4,840 (as disclosed by the assessment order) even though such figure is not to be seen in the computation of property income as filed by the assessee and reproduced earlier. The ITO proceeded to observe that : " The annual value of property is computed on the basis of the sum for which the property might reasonably be expected to let from year to year, which is estimated at Re. 1 per sq. ft. The assessee has property on a floor of 2,000 sq. ft. area and as such, the annual value of property is estimated at Rs. 24,000. " Proceeding on the basis that the annual letting value of the property was Rs. 24,000 as against the figure returned by the assessee of Rs. 476, the ITO computed the assessee's income from property at Rs. 16,370, against the income from property returned at Rs. 1,047. 3. On appeal to the AAC, the assessee relied on the decision of the Supreme Court in Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 and urged that the assessee's income from self-occupied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o accept the valuation as made by the corporation authorities. In this regard, Shri Dastur heavily relied on the decision of the Calcutta High Court in CIT v. Prabhabati Bansali [1983] 141 ITR 419. Shri Dastur pointed out that even though that was a decision of the Calcutta High Court, the Court was considering the computation of property income of a house property known as 'Radia House' situated in Bombay. Shri Dastur urged that as such the Calcutta High Court had to consider the provisions of the Bombay Municipal Corporation Act. Shri Dastur urged that the Calcutta High Court applied the principles laid down by the Supreme Court in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 and Mrs. Sheila Kaushish's case. On that basis, stated Shri Dastur, the Calcutta High Court observed as under : "...Therefore, in view of that position and the municipal law and in view of the decision of the Supreme Court, it appears to us that the income from house property must be computed on the basis of the sum which might reasonably be expected to let from year to year and with the annual municipal value provided such a value is not above the standard rent receivable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi Municipal Committee or the Corporation of Delhi, even if the standard rent had not been fixed by the Controller under the Delhi Rent Control Act, 1958, the landlord could not reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under that Act. This would be so equally whether the building had been let out to a tenant who had lost his right to apply for fixation of standard rent or the building was occupied by the owner himself. This principle, as the Supreme Court noted, would apply to self-occupied house and further when rent control legislation provided for fixation of standard rent which along and nothing more than which the tenant should be liable to pay to the landlord, it did so because it considered the measure of the standard rent prescribed by it to be reasonable. It laid down the norm of reasonableness in regard to the rent payable by the tenant to the landlord. Any rent which exceeded this norm of reasonableness was regarded by the Legislature as unreasonable or excessive. The Legislature obviously regarded recovery of rent in excess of the standard rent as exploitative of the tenant and would it be proper f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be seen from the headnote, which is as under : "...that the annual value of the warehouse had to be determined on the basis of the standard rent of different portions of the warehouse determinable as follows : (a) since five years had elapsed from the first letting of the first floor its standard rent had to be determined on the basis of cost of construction and market value of land under section 6(1)(B)(2) of the Delhi Rent Control Act for both years ; (b) since five years from the first letting of the northern portion of the ground floor and the mezzanine floor would elapse only on March 31, 1969, the standard rent of those portions would be Rs. 6,907 per month for the accounting period ending March 31, 1969, relevant to the assessment year 1969-70 under section 6(2)(b), and the standard rent for the assessment year 1970-71 had to be ascertained on the basis of cost of construction and market value of land under section 6(1)(B)(2) ; (c) since five years from the first letting of the southern portion of the ground floor would elapse only on December 6, 1969, the standard rent would be the agreed rent for the whole of the accounting period for the assessment year 1969-70 and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the annual value of the building was not limited to the standard rent determinable in accordance with the principles laid down in the Act, but was liable to be assessed by reference to the contractual rent recoverable by the landlord from the tenant . . . ." The Court answered by observing that for the purposes of income-tax assessment, one has to ignore the contractual rent and proceed on the basis of the standard rent. As would be seen from the head-note, the Court observed : ". . . It is difficult to see how the annual value of a building could vary according as it is tenanted or self-occupied. (ii) 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. The Legislature obviously regards recovery of rent in excess of the standard rent as exploitative of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are additional amenities of lift, electricity and water or the landlord renders other services to the tenants, a reasonable return therefor should be added to the outgoings. " The learned authors observed as under : " The aforesaid discussion is sufficient to show that the appeal court of the Bombay Small Causes Court in that case [Sorab D. Talati v. Joseph Michem, Appeal No. 101 of 1949 ; Lalkaka Ch. J. and Barodawala J. (decided on 15-12-1949)] erred in quantifying the particular rates for return on the investment and the outgoings and in laying down a general principle that the rent which includes the outgoings and return on a general principle that the rent which includes and return on the investment in excess of the particular rates is excessive. This has been recognised by the appeal court of the Bombay Small Causes Court in other cases. In one case, looking to the insecure nature of the tenure, i.e., a monthly lease and semi-permanent nature of the construction (i.e., having been erected with secondhand materials), the court permitted 1 per cent allowance for repairs, 0.125 per cent for insurance and 8.723 per cent for depreciation on 90 per cent of the cost of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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