Standard rent governs annual letting value for rent-controlled property when actual rent is disputed.

Where house property is subject to rent control legislation, annual letting value under section 23(1) must be based on the sum for which the property might reasonably be expected to let, and not on an ad hoc market estimate or merely disputed actual rent. The proper benchmark is the standard rent determinable under the Delhi Rent Control Act. The matter was restored to the Assessing Officer to determine that standard rent and recompute the annual letting value accordingly.

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Issues: Whether the annual letting value of house property should be determined on the basis of actual rent or on the basis of standard rent determinable under the Delhi Rent Control Act where the rent charged was disputed.

Analysis: The method adopted by the Assessing Officer on the basis of local enquiries and estimated market rent was not accepted as the statutory scheme under section 23(1) of the Income-tax Act, 1961 requires the property to be taken at the sum for which it might reasonably be expected to let from year to year. Where the property is covered by rent control legislation, the reasonable letting value is governed by the standard rent determinable under that law and not by an ad hoc estimate or the mere actual rent, especially when the rent is disputed. The proper course, therefore, was to determine the standard rent in accordance with the Delhi Rent Control Act and then compute the annual letting value.

Conclusion: The matter was restored to the Assessing Officer to determine the standard rent under the Delhi Rent Control Act and recompute the annual letting value accordingly, resulting in partial relief to the Revenue.

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