Municipal rateable value governs annual letting value for rent-controlled property unless credible evidence shows rent suppression.

For premises covered by rent control legislation, municipal rateable value is a safe and rational basis for determining annual letting value under the house property provisions. The Assessing Officer may depart from that value only where cogent and satisfactory material shows that the declared rent is artificially suppressed or otherwise distorted; absent such material, a conjectural higher market rent cannot replace the municipal valuation. The Tribunal applied the same reasoning as in the assessee's earlier year, and the addition based on higher notional rent was not sustainable.

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Issues: Whether the annual letting value of the property for computation of income from house property should be determined on the basis of the municipal rateable value rather than by adopting a higher notional fair rent.

Analysis: The dispute concerned computation of deemed rent under the house property provisions. The Tribunal followed the binding principle that where the property is governed by rent control legislation, the municipal rateable value is a reliable and rational yardstick for determining annual letting value, unless the Assessing Officer has cogent and satisfactory material showing that the declared rent is artificially suppressed or inflated. In the absence of such material, the Assessing Officer cannot substitute a conjectural market rent or override the rent control framework. The prior decision in the assessee's own case for the earlier assessment year was applied on the same reasoning.

Conclusion: The addition based on higher notional rent was not sustainable, and the assessee succeeded on this issue.

Ratio Decidendi: For premises covered by rent control legislation, municipal rateable value is a safe and rational guide for annual letting value under section 23(1)(a) of the Income-tax Act, 1961, and it may be displaced only on the basis of cogent material showing suppression or distortion of the real rent.

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