TMI Blog2011 (1) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 - - - Dated:- 25-1-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. For Appellant Through: Ms. Rashmi Chopra . For Respondent Through: Mr. Ajay Vohra with Ms.Kavita A.K. SIKRI, J. (Oral) 1. One common issue arises in these appeals except in ITA No.363/2007. However, even in that appeal shadow of earlier appeals falls. Moreover, all these appeals except ITA No.363/2007 arise out of same judgment, though these appeals relate to different assessment years, i.e., assessment years 1996-97 to 1999-2000 (ITA No.363/2007 pertains to assessment year 2000-01). The issue relates to the Annual Letting Value (ALV), which is to be arrived at under Section 23 of the Income-Tax Act (hereinafter referred to as the Act ). The issue has arisen in the same factual backdrop casting its reflection on all these years. This would become amply clear when we take stock of the factual premise in which the issue has arisen. The assessee is the owner of 71-72, New Markers Chamber-IV, Nariman Point, Mumbai. He had let out these premises in the relevant assessment years to five tenants. Lease agreements were entered into in this behalf wherein rent to be received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, the Assessing Officer issued notice under Section 148 of the Act in respect of these assessment years thereby seeking to reopen the assessment on the ground that the ALV was wrongly fixed at a lesser rate as the rent payable was higher, which was, in fact, received by the assessee and therefore, the ALV should have been fixed at the contractual rent. The additions on this basis were made by the Assessing Officer after re-assessment relating to assessment years 1996-97 to 1999-2000. 5. When the matter was still at the stage of notice under Section 148 pertaining to the aforesaid assessment year, the assessee filed its return for the year 2000-2001. In this return, the assessee disclosed receiving of arrears of rent and appended a note stating that this amount was not taxable in this year. In the assessment order passed, the Assessing Office accepted this position and did not tax the said receipt pertaining to arrears of rent albeit on the ground that in respect of this receipt notice under Section 148 for the relevant years had already been issued. Coming back to the re-assessment qua assessment year 1996-97 to 1999-2000, the assessee challenged the order of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived under the head Income from other sources, as arrears of rent was not chargeable under Sections 22 and 23 in the year of receipt. The question was as to whether this receipt could be taxed under the head Income from other sources. The Court answered the question in the negative. Though that was not the issue before it, the High Court specifically spelled out that the Tribunal proceeded on the implicit premise that the arrears of rent could not be roped in by the provisions of Sections 22 and 23 and the Revenue had also not filed any cross-objections on this particular issue as to whether the arrears of rent relating to past years received in a later year of account could be part of actual rent for such later previous year in terms of Explanation I below Section 23 of the Act, which defines annual rent. However, the Court was of the opinion that this particular issue was an inherent aspect of the question falling for determination and therefore, addressed the same as well. It is for this reason that this judgment of the Calcutta High Court becomes relevant for our purposes. The Court answered the aforesaid aspect as under:- The question is whether the arrears of rent relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) expresses exactly the same conclusion (per Malins V.C., West v. Miller [1986] Lr. 6 Eq. 59): See further Watson Eq. (2nd Ed.) 1228. (2) Receivable may be construed as received (Wms. Exs. (12th ed.), 689, citing Re Dodgson, I Drew. 440). In that case there was a gift over if any member of a class died before receiving his share ; held, that that phrase meant before being entitled to receive . (3) Under section 5 of the Income-tax Act, 1918 (c. 40) : see IRC v. Pakenham, 96 LJKB 882 (CA), affirmed (1928) AC 252 (HL); Leigh v. IRC, 43 TLR 528. The apex court in E.D. Sassoon and Co. Ltd. v. CIT [1954] 26 ITR 27, had the occasion to consider the meaning of the words, accrue, arises, and is received‖ in the context of the definition of income. The apex court held (page 50) : Now what is income? The term is nowhere defined in the Act In the absence of a statutory definition we must take its ordinary dictionary meaning that which comes in as the periodical produce of one s work, business, lands or investments (considered in reference to its amount and commonly expressed in terms of money) ; annual or periodical receipts accruing to a person or corporation (Oxford Dictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards the actual quantum of rent payable to the assessee by its tenants and, thus, the actual amount was not ascertainable. Fair rent, keeping in view the provisions of the West Bengal Premises Tenancy Act, has to be determined and till such fair rent is determined, actual rent has to be paid by the tenants. Although the said provisions have no application in case the Government is the tenant the rent has to be paid on the basis of the agreement entered into by the parties. A claim made by a landlord for enhancement of rent cannot, thus, be said to be an amount receivable within the meaning of section 23(1) of the Act. A claim or a demand by itself does not come within the purview of the word income received or receivable‖ and keeping in view the provisions of section 5 of the Income-tax Act there cannot be any doubt whatsoever such income either received or deemed to be received, accrued or arose or is deemed to accrue or arise to him or accrues or arises in India or accrues or arises outside India during the previous year. An agreement entered into between the parties in terms whereof the quantum of rent is determined with retrospective effect, in our considered view, do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in that year. For this reason, as far as these assessment years are concerned, the Tribunal was right in holding that the arrears of rent received in the assessment year 2000-01 could not be spread over the previous years, i.e., 1996-97 to 1999-2000. The question of law, thus, framed is answered in favour of the assessee and against the Revenue. 14. In view of the aforesaid and having regard to the provisions of Section 25B of the Act, the amount received as arrears of rent could be taxed at the hands of the assessee in the assessment year 2000-01. However, the Assessing Officer chose not to include the said arrears in the income of the assessee in the said assessment year. Therefore, in this year this question has not even fallen for consideration. Had the issue been alive for this assessment year, we could have given the directions that the amount received should be exigible to tax in this year. In the absence of any such issue, we cannot pass any directions. 15. In so far as other issue, which arises in these appeals is concerned, that relates to the maintenance and other charges paid by the assessee while computing the ALV of the property. Since this amount was paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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