House property valuation under income tax law: unchallenged municipal rateable value may govern annual letting value despite higher actual rent.

For house property income, an unchallenged municipal valuation of a let property can be adopted as the annual letting value when it forms the proper basis under the statutory scheme. Section 23(1)(b) applies where the actual rent received or receivable exceeds the valuation referable to clause (a); in that situation, the actual rent becomes the annual letting value. On the facts, the rent received was higher than the municipal valuation, but there was no ground to reject the municipal rateable value fixed under municipal law. The Tribunal was therefore justified in using that valuation for assessment, and the issue was decided in favour of the assessee.

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Issues: Whether, for assessment of income from house property, the annual letting value could be determined on the basis of the municipal valuation where the property was let out and the rent received exceeded the municipal valuation.

Analysis: The property's annual letting value had been fixed under the municipal law and that valuation had not been challenged. The statutory rule under section 23(1)(b) applies where the actual rent received or receivable exceeds the amount referable to the valuation under clause (a), in which event the actual rent becomes the annual letting value. On the facts, the rent actually received was higher than the rent referable to the municipal valuation, and there was no ground to discard the valuation adopted by the municipal authority.

Conclusion: The Tribunal was justified in adopting the annual rateable value according to municipal law for assessment under the Income-tax Act, and the answer is in favour of the assessee.

Ratio Decidendi: Where municipal valuation of a let property stands unchallenged and the actual rent received exceeds the rent referable to that valuation, section 23(1)(b) permits the municipal valuation basis to be accepted for determining annual letting value.

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