Standard rent governs annual value of rent-controlled property under pre-amendment income tax law.

Income from house property under section 22 and the pre-amendment section 23(1) is to be assessed on the annual value a property might reasonably be expected to fetch. Where the property is governed by rent control law, that ceiling is the standard rent determinable under the statute, even if it has not been formally fixed, because the landlord cannot reasonably expect more. The 1975 amendment to section 23 changed the position only for later periods by making actual rent relevant where it exceeds the expected annual value. For assessment year 1972-73, the annual value was therefore confined to standard rent under the applicable rent control law.

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Issues: Whether, for assessment year 1972-73, the annual value of the house property had to be determined on the basis of the standard rent under the rent control law or on the basis of the actual rent received by the owner.

Analysis: Income from house property is chargeable under section 22 of the Income-tax Act, 1961, and section 23(1), as it then stood, deemed the annual value to be the sum for which the property might reasonably be expected to let from year to year. The governing principle, as applied in the cited Supreme Court decisions, was that where a property is subject to rent control legislation, the landlord cannot reasonably expect a rent higher than the standard rent determinable under that law, even if the standard rent has not been fixed. The later amendment introduced by section 6 of the Taxation Laws (Amendment) Act, 1975 altered the position only for periods after that amendment, by making actual rent relevant where it exceeds the expected annual value. Since the assessment year in question was 1972-73, the amended provision did not apply, and the annual value had to be confined to the standard rent determinable under the applicable rent control law.

Conclusion: The annual value was required to be computed with reference to the standard rent and not the actual rent received; the challenge to the assessment therefore succeeded in favour of the assessee.

Ratio Decidendi: For assessment years governed by the pre-amendment form of section 23(1) of the Income-tax Act, 1961, the annual value of property subject to rent control is the standard rent determinable under the rent control law, and not the actual rent received.

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