Municipal valuation governs annual letting value for an unsold flat not actually let out; market rent basis rejected.

Where a house property was not actually let out during the relevant year, its annual letting value could not be fixed by reference to prevailing fair market rent. The tribunal applied the co-ordinate bench view that, in such cases, Municipal Valuation or Rateable Value is the proper basis for computing annual value. On that footing, the adoption of area-wise market rent was held unsustainable, the addition was set aside, and the matter was restored for recomputation on the basis of Municipal Value / Rateable Value and the assessee's share in the property.

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Issues: Whether the annual value of a flat not let out during the relevant year was to be determined on the basis of Municipal Value or by adopting fair market rent prevailing in the locality.

Analysis: The assessment was made by adopting area-wise prevailing rent, but the material showed that the flat was not let out and the assessee had taken possession during the relevant period. Following the co-ordinate bench view that, where a property is not given on rent, its annual letting value is to be determined on the basis of Municipal Valuation, the adoption of market rent was held to be unsustainable.

Conclusion: The annual value was required to be computed on the basis of Municipal Value / Rateable Value and not on the basis of fair market rent; the assessee succeeded on this issue.

Final Conclusion: The addition was set aside and the matter was restored to the Assessing Officer for recomputation in accordance with Municipal Value / Rateable Value and the assessee's share in the property.

Ratio Decidendi: Where a house property is not actually let out, its annual letting value cannot be determined by reference to prevailing market rent and must be based on Municipal Valuation / Rateable Value.

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