1981 (8) TMI 3 - SC - Income Tax

Supreme Court: Annual house value determined by standard rent under Delhi Rent Control Act.

The Supreme Court held that the annual value of a house in New Delhi for income-tax assessment should be based on the standard rent under the Delhi Rent ... Question arising in these appeals relates to the annual value of a house belonging to the assessee and situate in New Delhi for the purpose of assessment to income-tax under s. 22 - question of law relating to determination of annual value of the house should not have been rejected by the High Court. Issues:Assessment of income-tax for the years 1967-68 to 1971-72 based on the annual value of a house in New Delhi for tax purposes under section 22. Dispute on whether the annual value should be determined based on actual rent received or the standard rent under the Delhi Rent Control Act, 1958.Analysis:The appeals before the Supreme Court involved the assessment of income-tax for the years 1967-68 to 1971-72 concerning the annual value of a house in New Delhi. The primary issue revolved around whether the annual value should be calculated based on the actual rent received by the assessee or with reference to the standard rent determinable under the Delhi Rent Control Act, 1958. The tax authorities and the Tribunal had initially determined the annual value using a combination of actual rent received for the rented portion and an artificial basis of 10% of the total income for the self-occupied part of the house. The assessee contended that the annual value should be based on the standard rent under the Rent Act, but the Tribunal and High Court rejected this argument, citing a previous Full Bench decision.The Supreme Court acknowledged that a legal question arose regarding the determination of the annual value of the house, specifically whether it should be based on actual rent received or the standard rent under the Rent Act. The High Court had declined to refer this question to the Tribunal, relying on the earlier Full Bench decision. However, the Supreme Court noted that a recent decision by the Court had overturned the Full Bench ruling, emphasizing that the annual value should be the standard rent determinable under the Rent Act, even if the standard rent had not been fixed by the Controller.Given the recent Supreme Court decision on a similar matter, the Court decided to address the legal question directly rather than requesting a reference from the Tribunal to the High Court. The Court concluded that the annual value of the house belonging to the assessee must be considered as the standard rent under the Rent Act. Consequently, the appeals were allowed, the High Court's order rejecting the reference applications was set aside, and the revenue was directed to pay the costs of the appeals to the assessee.