TMI Blog2011 (11) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty is let-out at a much higher rent. Thus, the AO in a given case can ignore the municipal valuation for determining annual letting value if he finds that the same is not based on relevant material for determining the 'fair rent' in the market and there is sufficient material on record for taking a different valuation." However court didnot gave any ruling on whether or not the rent received by A-One Travels and Tours Pvt. Ltd. can be taxed or not in hands of assessee OR if A-One Travels and Tours Pvt. Ltd. have been taxed, then the appellant cannot be taxed. - ITA Nos. 670/2005, 672/2005 and 944/2005 - - - Dated:- 15-11-2011 - Sanjiv Khanna, R.V. Easwar, JJ. Sanjeev Sabharwal, Sr. Standing counsel for the Appellant None for the Respondent JUDGEMENT Sanjiv Khanna: These three appeals are under Section 260A have been filed by the Revenue and relate to assessment years 1997-98, 1998-99 and 1999-2000 in the case of Sardar Exhibitors Pvt. Ltd., respondent herein. 2. The following identical substantial question of law arises for consideration and is being answered: "Whether the ITAT, in the facts and circumstances of the case, was rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it was not the case of the Assessing Officer that the lease between the respondent and A-One Travels and Tours Pvt. Ltd. was a device to avoid tax. A-One Travels and Tours Pvt. Ltd. was entitled to sub-let the premises and they had exercised said right. 7. We have heard the counsel for the appellant Mr. Sanjeev Sabharwal, Sr. Standing counsel and examined factual matrix as recorded by the tribunal and the legal issue raised in the present appeal. There is no appearance on behalf of the respondent assessee. 8. Section 23(1) of the Act, before the amendment with effect from 1st April, 2002, consisted of two clauses and was as under: "23. Annual value how determined.- (1) For the purposes of section 22, the annual value of any property shall be deemed to be- (a) the sum for which the property might reasonably be expected to let from year to year ; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable: Provided that where the property is in the occupation of a tenant, the taxes levied by any local authority in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing comprising one or more residential units, the erection of which is completed after the 31st day of March, 1982, but before the 1st day of April, 1992, for a period of five years from the date of completion of the building, be reduced by a sum equal to the aggregate of- (i) in respect of any residential unit whose annual value as so determined does not exceeds three thousand six hundred rupees, the amount of such annual value ; (ii) in respect of any residential unit whose annual value as so determined exceeds three thousand six hundred rupees, an amount of three thousand six hundred rupees, Explanation 1:- For the purposes of this sub-section, "annual rent" means- (a) in a case where the property is let throughout the previous year, the actual rent received or receivable by the owner in respect of such year ; and (b) in any other case, the amount which bears the same proportion to the amount of the actual rent received or receivable by the owner for the period for which the property is let, as the period of twelve months bears to such period. Explanation 2:- For the removal of doubts, it is hereby declared that where a deduction in respect of any taxes r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade under the Income Tax laws. If there is a change in circumstances because of passage of time, viz., the annual value was fixed by the Municipal Authorities much earlier in point of time on the basis of rent than received, this may not provide a safe yardstick if in the Assessment Year in question when assessment is to be made under Income Tax Act. The property is let-out at a much higher rent. Thus, the AO in a given case can ignore the municipal valuation for determining annual letting value if he finds that the same is not based on relevant material for determining the 'fair rent' in the market and there is sufficient material on record for taking a different valuation. We may profitably reproduce the following observations of the Supreme Court in the case of Corporation of Calcutta vs. Smt. Padma Debi, AIR 1962 SC 151: "A bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness." 12. We may also reproduce what has been held in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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