Annual value taxation of house property applies despite non-receipt of rent, absent proven diversion by overriding title.

Where legal ownership of house property continues, sections 22 and 23 of the Income-tax Act fasten tax on the annual value notwithstanding that no rent was actually received. On the facts, there was no reliable written agreement or enforceable arrangement showing diversion of income by overriding title, and the plea based on section 53A of the Transfer of Property Act failed because no written sale agreement was proved. The claim under section 24(1)(x) and reliance on municipal valuation did not displace the statutory method of assessment. The property's annual value was therefore includible in total income.

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Issues: Whether the assessee, remaining the legal owner of the house property till execution of the sale deed, could exclude the property's annual value from assessment for the relevant year merely because no rent was actually received after an alleged earlier agreement to sell.

Analysis: Under the scheme of sections 22 and 23 of the Income-tax Act, house property income is charged on the annual value of the property once ownership is established, and the charge is not dependent on actual receipt of rent. On the facts found, there was no reliable material to show any written agreement or any enforceable arrangement by which the income stood diverted at source by overriding title. The surrounding circumstances showed only negotiations for sale, payment of advance, and later execution of the conveyance, but not a proved waiver of rent binding on the assessee from 1 May 1965. The reliance on section 53A of the Transfer of Property Act also failed on the factual finding that no written agreement of sale existed. The claim under section 24(1)(x) and the contention based on municipal valuation did not alter the statutory method of assessment of house property income.

Conclusion: The assessee remained assessable on the property's annual value for the relevant assessment year, and the absence of actual rent receipt did not prevent inclusion of the amount in total income.

Ratio Decidendi: Where legal ownership of house property continues, liability under sections 22 and 23 of the Income-tax Act is attracted on the annual value of the property notwithstanding non-receipt of rent, unless a legally effective diversion of income by overriding title is proved.

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