TaxTMI 
TaxTMI 
TaxTMI 
2005 (8) TMI 97
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....erest-free loan of Rs. 50 lakhs from the lessee for the period of continuation of the lease. The assessee declared its income from the said house property at an annual rent of Rs. 2,52,000. Whereas, on the basis of the fact that the lessee HMPS let out the said house property at an annual rent of Rs. 18,33,000 to different tenants including a nationalized bank, the Assessing Officer assessed the annual value at Rs. 18,33,000 as the income of the assessee from the said house property. Admittedly, HMPS is being assessed to tax in respect of its actual receipt of Rs. 18,33,000 under the head "Income from other sources". It was also found that apart from the nationalized bank, which was paying a very high rate of rent, all the other tenants are paying rent at a rate that would justify the annual income at Rs. 2,52,000. The order of the Assessing Officer, however, was reversed by the Commissioner (Appeals) and this reversal was affirmed by the learned Tribunal, against the order of which the present appeal has been filed. It may also be noted that for the earlier years the annual value of the house property was assessed at Rs. 2,52,000 right from the year 1987-88. This was followed in....
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....ol Act was held to be the annual value of the building according to the definition given in section 23(1) of the Act as it stood prior to its amendment in 1975 and not the actual rent received by the landlord from the tenant. By the 1975 amendment clause (b) was inserted in section 23(1) postulating a case in 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. In the said decision in Mrs. Shiela Kaushish v. CIT [1981] 131 ITR 435 (SC), the question, whether the actual rent received by the assessee or the standard rent determined under the Delhi Rent Control Act should be taken to be the annual value of the property within the meaning of section 23 of the Act, was held to be concluded and covered by the decision in Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC) ; [1980] 2 SCR 607. In the said decision in Dewan Daulat Rai Kapoor [1980] 122 ITR 700 the apex court had held: "... in either case, according to the definition of 'annual value' given in both statutes, the standard rent determinable under the provisions of the Rent Act and not the....
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....d that by section 6 of the Taxation Laws (Amendment) Act, 1975, sub-section (1) of section 23 has been amended and it has now been made clear by the introduction of clause (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 clause (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 the meaning of sub-section (1) of section 23 of the Income-tax Act, 1961, and the actual rent received by the assessee from the American Embassy cannot of itself be taken as representing the correct measure of the annual value." In Dr. Balbir Singh v. Municipal Corporation of Delhi [1985] 152 IT....
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....tion where the rent received or receivable by the assessee is higher than the expected market rental value of the property itself. But this does not mean that because of the presence of clause (b), clause (a) of section 23(1) must refer to, and only to, vacant property, which is not let out. If a property is actually let out, then the expectation of its letting out become an actual reality and the proof of the expectation, can be made in the best manner possible by producing evidence of the rental which is being actually received by the assessee. In the absence of any finding that the deed was a sham deed, created for the purpose of showing the property as tenanted, though in reality, a vacant property, and the learned Tribunal having accepted the deed as genuine, since the assessee was not receiving the higher standard rent, the expected rent of the property according to section 23(1)(a) was the rent actually received, for the simple reason that even if the standard rent were assumed to be higher, yet the assessee was not receiving that higher standard rent. Another Division Bench of this court in CIT v. Indra Co. Ltd. [2004] 268 ITR 240, in a case where none of the agreements wa....
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....pal Act. On a plain reading of section 23(1)(b) it would be the actual rent received by the assessee which would be the determining factor for assessment of the income from the house property on account of the fact that such actual receipt is higher than the annual value determined under the Municipal Act. If the property is let out to a tenant who sub-lets it and gets a higher 14 rent the same cannot be a determining factor for assessing annual value under section 23(1) at the hands of the lessor where the creation of the tenancy or the lease is found to be genuine. Such a valuation has since been consistently accepted by the Department. There seems to be no reason for deviation from the consistent view taken by the learned Tribunal on the alleged ground that the lessee received a higher amount of rent. The interpretation has to be made on the reasoning that even if a person does not earn any income on account of the house not being let out he is still liable to pay income-tax on the notional value under clause (a). Inasmuch as if it is let out then it would not be the actual rent received but would be a notional rent. The word "actual rent received" would be the rent received by....
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....ue is determined under section 23(1)(a) with reference to the fair rent then no further addition can be made to such value. The fair rent, takes into consideration everything. The notional interest on the deposit is not the actual rent received or receivable. Under section 23(1)(b) only the actual rent received or receivable can be taken into consideration and not any notional advantage. The rent is an actual sum of money payable by the tenant for use of the premises to the landlord. Specific provisions have been made in the Act for including perquisite or benefit sought to be treated as income in the definition of the income under section 2(24) of the Act. Specific provisions have also been made under different heads for adding such benefits or perquisites as income while computing income under those heads, e.g., salary, business. The computation of the income under the head "House property" is on a deemed basis. The tax has to be paid by reason of the ownership of the property. Even if one does not incur any sum on account of repairs, a statutory deduction therefor is allowed and where on repairs expenses are incurred in excess of such statutory limit, no deduction for such exces....
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....s the interest actually paid;" There is no such corresponding provision in section 23(1). In the absence of any such corresponding provision in section 23(1), the notional interest on the interest free advance cannot be included within the component of income from house property. Inasmuch as the court cannot read something in the statute when there is none. Having regard to the principles enunciated by us as discussed above the reasoning given in the decision in Satya Co. Ltd. [1994] 75 Taxman 193 (Cal) appears to be correct and justified and we are inclined to follow the same. The notional interest on interest-free loan would neither be a determining factor nor a component to be taken into consideration for determining the annual value for assessing the income from the house property in terms of section 23(1) of the Income-tax Act, 1961. Conclusion: In order to determine the annual value of the house property for the purpose of assessing the income from house property under section 23(1)(a) where the house is not let out, the standard rent determined under the Rent Act or the annual value determined under the Calcutta Municipal Corporation Act shall be the basis. But where th....