1999 (8) TMI 974 - SC - Income Tax

Tenant's Belief of Prohibition on Rent Payment Not Wilful Default

The Supreme Court held that the tenant's non-payment of rent to the landlord, following a prohibitory order and notice under the Income Tax Act, did not ... - Issues Involved:1. Effect of the prohibitory order dated March 6, 1979, and notice dated January 18, 1988, issued u/s 226(3) of the Income Tax Act.2. Whether non-payment of rent by the appellant to the landlord after service of the said order/notice amounts to wilful default u/s 10(2)(i) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.3. Legality of the High Court's decision in allowing CMP No.13064 of 1996 and ordering eviction u/s 10(3)(c) of the Act.Summary:Issue 1 & 2: Effect of Prohibitory Order and Notice u/s 226(3) of the Income Tax ActThe appellant, a tenant, stopped paying rent to the landlords after receiving a prohibitory order from the Tax Recovery Officer on March 6, 1979, and subsequently paid the accumulated rent to the Tax Recovery Officer upon receiving a notice u/s 226(3) on January 18, 1988. The Supreme Court analyzed whether this non-payment constituted 'wilful default' u/s 10(2)(i) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. The Court held that the prohibitory order did not cover future rent, and the appellant's belief that he was prohibited from paying rent to the landlord was reasonable. Hence, the non-payment of rent during the period from March 6, 1979, to February 24, 1988, was not considered wilful default. Similarly, for the periods after February 24, 1988, the appellant's non-payment of rent to the landlord was justified as the notice u/s 226(3) suspended the landlord's right to receive rent until the tax dues were cleared. Therefore, the appellant was not liable for eviction on the ground of wilful default.Issue 3: Legality of High Court's Decision Allowing CMP No.13064 of 1996 and Ordering Eviction u/s 10(3)(c)The High Court allowed the landlords to raise an additional ground u/s 10(3)(c) for additional accommodation and ordered eviction. The Supreme Court noted that while the High Court was correct in allowing the additional ground, it should have required an amendment of pleadings and given the tenant an opportunity to contest the new ground. The Court emphasized that the requirements of clause (a) and clause (c) of Section 10(3) are distinct and must be separately established. The High Court failed to consider the comparative hardship to the tenant as required by the proviso to Section 10(3)(c). Consequently, the Supreme Court set aside the High Court's order and restored the Appellate Authority's judgment, allowing the landlords to seek eviction under clause (c) if permissible by law. The appeal was allowed with no order as to costs.