TaxTMI 
TaxTMI 
1981 (8) TMI 1
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.... together with the mezzanine floor to the same tenant at the rent of Rs. 6,907 per month and on 7th December, 1964, the southern portion of the ground floor was let out to the same tenant at the rent of Rs. 6,640 per month. Thus, the entire warehouse was let out by the assessee to the American Embassy with different portions let out under different tenancies commencing on different dates. On 17th July, 1967, however, a new lease was entered into between the assessee and the American Embassy for the letting out of the entire warehouse at the rent of Rs. 34,797 per month and this lease came into effect from 1st April, 1968. The assessee thus started receiving rent at the rate of Rs. 34,797 per month in respect of the entire warehouse from 1st April, 1968. The question arose in the course of the assessment of the assessee to income-tax for the assessment years 1969-70 and 1970-71, as to how the annual value of the warehouse should be determined for the purpose of chargeability to income-tax under the head " Income from house property ". Now, income from house property chargeable to tax is computable under s. 22 which provides that the annual value of property consisting of any buildi....
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....received by her. The Tribunal held relying on the decision of this court in M. M. Chawla v. J. S. Sethi [1970] 2 SCR 390 that, in the absence of fixation of standard rent, the agreed rent which is legally recoverable and not tainted by fraud, relationship or any other consideration must be taken to be the standard rent and hence the actual rent received by the assessee was rightly taken as the annual value of the warehouse. In the mean time, an application was made for the fixation of the standard rent of the warehouse by the new tenant who came to occupy the warehouse after the American Embassy vacated it and on this application, the Rent Controller by an order dated 13th March, 1973, fixed the standard rent at Rs. 34,848 per annum under the provisions of the Rent Act. The assessee, aggrieved by the order dated 28th September, 1973 made by the Tribunal, preferred two applications, one in respect, of each assessment year, seeking reference of five questions which, according to the assessee, arose out of the order of the Tribunal, but the Tribunal by a common order dated 26th February, 1974, rejected the applications on the ground that there was only one question of law which arose ....
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....ut to the Bank of Baroda and Indian Oxygen Company Ltd. were let at rents considerably lower ? " This court accordingly made an order directing that these two questions of law should be disposed of by the court directly, without calling for a reference from the Tribunal. However, since some doubt was felt whether this court could directly dispose of the two questions of law arising out of the order of the Tribunal without calling for a reference, the assessee by way of abundant caution preferred two petitions for special leave to appeal directly against the order of the Tribunal dated 28th September, 1973, and on these petitions, special leave was granted by this court and that is how Civil Appeal Nos. 1184-1185 of 1981 have come up for hearing before us along with C.A. Nos. 2110 and 2111 of 1978. Though two questions have been formulated by this court as arising out of the order of the Tribunal dated 28th September, 1973, it is in the first which really formed the subject-matter of controversy between the parties since, in our view, that question has to be answered in favour of the, assessee, it is not necessary to embark upon, a consideration of the second question. So far as th....
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....the contractual rent from the tenant without any legal impediment and hence the annual value of the building was not limited to the standard rent determinable in accordance with the principles laid down in the Rent Act, but was liable to be assessed by reference to the contractual rent recoverable by the landlord from the tenant. The municipal authorities urged that if it was not penal for the landlord to receive the contractual rent from the tenant, even if it be higher than the standard rent determinable under the provisions of the Rent Act, it would not be incorrect to say that the landlord could reasonably expect to let the building at the contractual rent and the contractual rent, therefore, provided a correct measure for determination of the annual value of the building. This argument was, however, rejected by the court and it was held that even if the standard rent of a building has not been fixed by the Controller under s. 9 of the Rent Act, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the provisions of the Rent Act and this would be so equally whether the building has been let out to a t....
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....be held to be the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant. This interpretation which we are placing on the language of sub-s. (1) of s. 23 of the I.T. Act, 1961, may be regarded as having received legislative approval, for, we find that by s. 6 of the Taxation Laws (Amendment) Act, 1975, sub-s. (1) of s. 23 has been amended and it has now been made clear by the introduction of cl. (b) in that sub-section that where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum for which the property might reasonably be expected to let from year to year, the amount so received or receivable shall be deemed to be the annual value of the property. The newly added cl. (b) clearly postulates that the sum for which a building might reasonably be expected to let from year to year may be less than the actual amount received or receivable by the landlord from the tenant. We are, therefore, of the view that in the present case the standard rent of the warehouse determinable under the provisions of the Rent Act must be taken to be annual value within....
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....the clause applicable in the present case, since the warehouse was constructed on or after 19th June, 1955, that in the case of such premises "... the annual rent calculated with reference to the rent agreed upon between the landlord and the tenant when such premises were first let out shall be deemed to be the standard rent for a period of five years from the date of such letting out". Now, the first floor of the warehouse was first let out at the rent of Rs. 5,810 per month from 19th March, 1962, and, therefore, under cl. (B) of sub-s. (2), the rent of Rs. 5,810 per month would be the standard rent of the first floor of the warehouse for the period of five years from 19th March, 1962 up to 18th March, 1967, and there after the standard rent would have to be determined under para. (b) sub-cl. (2) of cl. (B) of sub-s. (1) and this latter figure would represent the standard rent of the warehouse determinable under the provisions of the Rent Act for the accounting years 1st April, 1968, to 31st March, 1969, and 1st April, 1969, to 31st March, 1970. The next portion of the warehouse let out to the American Embassy was the northern portion of the ground floor together with the mezzanin....