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Sunil Kumar Gupta Versus Assistant Commissioner of Income Tax, Circle-II, Amritsar

2016 (9) TMI 1198 - PUNJAB AND HARYANA HIGH COURT

Income from house property - annual value of the property computation - inclusion of maintenance charges as part of the rent - Held that:- The actual rent received would be much higher where the facilities are better. Section 23 provides that the annual value of the property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year or where the property is let, the actual rent received or receivable by the owner whichever is higher. In either case .....

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the licencee. In that event the same cannot be added to the rent agreed to be paid. However, if the maintenance charges etc. are stipulated to be payable by the licencee or the lessor it must form a part of the rent for the purpose of computing the annual value of the property. - A view to the contrary would enable a party to undervalue the annual value of the property for the purpose of section 23 by the simple expedient of providing for the payment of the maintenance charges etc. and the .....

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(a) of Section 24, a sum equal to thirty percent of the annual value is liable to be deducted. The assessee has, therefore, the benefit of deductions under section 24 as well as under the proviso to section 23 of the Act. - Decided against the assessee. - Income Tax Appeal No. 369 of 2015 - Dated:- 27-9-2016 - MR. S.J.VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Appellant : Mr. Avneesh Jhingan, Advocate For The Respondent : Mr. Denesh Goyal, Advocate S.J.VAZIFDAR, CHIEF JUSTICE This is an appeal a .....

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e interpretation given to Section 23 of Income Tax Act, 1961 is correct? iii) Whether in the facts and circumstances of the case the maintenance charges given by the sub sub licensees to builder can be included as part of rent? iv) Whether in the facts and circumstances of the case orders Annexures A-1 to A-3 are sustainable in law? 3. The appellant is a sub-licencee of an apartment admeasuring 367 sq. feet in a commercial building. The assessee entered into a sub-sublicence agreement dated 03.0 .....

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term of 2 (two) years commencing from the 1.5.2000 together with the right in the Sub-Sub-Licence and their employees and authorized agent/agents/visitors and staff to use in common with the other Sub-Sub-Licencee/occupants of the Building at all times during the terms of Sub-Sub- Licence Agreement hereby created for Office purpose connected with the Demised Premises, but not for any other purpose. (i) The main gate, doors, entrance hall, passages and the staircase and landings of and in the bui .....

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. (Super Area) total monthly rent is ₹ 14,680/- (Rupees Fourteen thousand six hundred eighty only) of the area comprised in the Demised Premises, the said rent be paid quarterly in advance. The first payment, however, will be for two months (May & June, 2000). (b) In addition to the monthly rent, monthly and proportionately for any part of the month, all maintenance charges payable to the Builders, M/s Bharat Hotels Limited, as per their current bills in respect of the Demised Premises .....

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clause (b) of Clause-1 of the Sub-Sub-Licence Agreement can be included as a part of the rent. Mr. Jhingan, learned counsel appearing on behalf of the appellant firstly contended that the maintenance charges are payable by the sub-sub-licencee directly to the builder and not to the sub-licencee i.e. the assessee. 5. This is contrary to the plain language of Clause-1. After subclause (ii) are the words and the Sub-Sub-Licencee paying and yielding thereto unto the Sub-Licencee during the said peri .....

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s (a) and (b). Sub-clause (a) would have been merged with these words and sub-clause (b) would have been an independent clause. The words in sub-clause (b) all maintenance charges payable to the builders identify the maintenance charges and not the payee. In other words sub-clause (b) requires the sub-sub-licencee to pay the assessee all the maintenance charges payable to the builder. It does not require the sub-sublicencee to pay the same to the builder. 6. Mr. Jhingan submitted that as a matte .....

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e included as a part of the rent. Sections 22 and 23 of the Income Tax Act, 1961 as they stood at the relevant time read as under:- Income from house property. 22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under .....

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re the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner .....

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a house which- (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil. (3) The provisions of sub-section (2) shall not apply if- (a) the house or part of the house is actuall .....

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all be determined under sub-section (1) as if such house or houses had been let. The amendment is not relevant for the purpose of this appeal. 9. The ambit of the term rent in these sections is wide. It includes any amount which is paid in consideration of the property being let. The maintenance charges must form a part of the rent. The proviso to subsection (2) of section 23 suggests that where the legislature intended deducting any amount in determining the annual value of the property it did .....

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are not included in the rent, it would enable an assessee to avoid paying tax on the true annual value of the property. Under section 23(1) for the purpose of section 22 the annual value of the property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. The amount of rent would also be dependent upon the common facilities of a building. The better the facilities, qualitatively and or quantitatively, the higher the rent. It can hardly be su .....

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