Annual letting value cannot be based on investment cost; vacancy allowance and rental value enquiry are required under house property taxation.

Section 23 requires annual letting value to be determined by reference to the rent a property might reasonably fetch, not by a percentage of investment cost. The note states that the assessing authority's investment-based formula was applied without the necessary enquiry into expected rental value and without allowing vacancy relief, and that the appellate record also contained computational errors. On that basis, the addition under house property income was treated as unsustainable in full and was restricted to a lump-sum estimate, with the balance deleted.

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Issues: Whether the addition made under the head income from house property by adopting a percentage of investment as annual letting value and by denying vacancy allowance was sustainable.

Analysis: The statutory scheme under section 23 requires the deemed value of property to be linked to the rent for which it might reasonably be expected to let from year to year, and not to the investment cost. The assessing authority adopted an investment-based formula without undertaking the requisite enquiry into expected rental value and also did not grant vacancy allowance. The appellate record further showed computational errors and the material did not justify sustaining the entire addition as confirmed in first appeal.

Conclusion: The addition was held to be unsustainable in full and was restricted to a lump sum estimate of Rs. 2 lakhs, with the balance deleted. The assessee succeeded partly.

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