9911796707
TMI Blog1976 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... "Wether, in the facts and circumstances of the case, the assessee is entitled for each of the years under consideration to the exclusion from the income under the head 'property' of an amount equal to the irrecoverable rent of the Grand Hotel property for one year which has not been so excluded in the preceding assessments ?" The matter relates to the assessment years 1957-58, 1958-59 and 1959-60. The assessee is the owner of a building known as Grand Hotel in Civil Lines, Delhi. The income from this building was assessed from year to year under section 9 of the Act as income from property. Subsequently, there was a dispute between the assessee and her tenant. Protracted litigation followed and ultimately a compromise was reached betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected the Income-tax Officer to compute the total rent which had become irrecoverable in respect of Grand Hotel property. The Tribunal further directed that to the extent the irrecoverable rent had not been exempted in the previous assessment for 1956-57 should be exempted during the years under appeal in so far as income from property was concerned. On application filed by the Commissioner of Income-tax the question reproduced above was referred to the High Court. The High Court, as stated above, answered the question in the affirmative and in favour of the assessee. In appeal before us Mr. Sharma, on behalf of the appellant, has assailed the judgment of the High Court. As against that, Mr. Manchanda on behalf of the assessee-respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whole or any part of the income of any class of persons. In exercise of the powers conferred by the above section, the Central Government issued notification No. 878F dated March 21, 1922. Item 38 of that notification reads as under : "The following classes of income shall be exempt from the tax payable under the said Act... (38) Such part of income in respect of which the said tax is payable under the head 'property' as is equal to the amount of rent payable for a year but not paid by a tenant of the assessee and so proved to be lost and irrecoverable, where-- (a) the tenancy is bona fide ; (b) the defaulting tenant has vacated or steps have been taken to compel him to vacate the property ; (c) the defaulting tenant is not in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act deal with rent due from a tenant which remains irrecoverable. It was to meet such an eventuality that exemption was granted as per item No. 38 in Notification No. 878F dated March 21, 1922. Item 38 exempts from payment of tax such part of the income in respect of which tax is payable under the head "Property" as is equal to the amount of rent payable for a year but not paid by a tenant of the assessee and so proved to be lost and irrecoverable. In order to claim the benefit of the above exemption, the assessee has also to show that the requirements of clauses (a) to (e) of item 38 have been satisfied. It was not disputed before the High Court that conditions mentioned in clauses (a) to (e) of item No. 38 had been fulfilled in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for a year, the right of the assessee to claim the benefit of the above exemption does not, in our opinion, get exhausted by his having claimed exemption in one year. We find no cogent reason as to why the assessee should become disentitled to claim the benefit of the above exemption in respect of the balance of the irrecoverable rent in subsequent years subject to the condition that in no year the deduction would exceed the amount of rent payable for a year. The assessee, it has to be borne in mind, seeks exemption in respect of the notional rental income which he, in fact, never received but on which he had in terms of section 9 of the Act to pay tax. The underlying object of the exemption granted by item 38 is that the assessee shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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