TMI Blog2002 (10) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... at the figure of Rs. 10,800. The Assessing Officer had fixed the annual letting out value at Rs. 54,000 basing his decision upon the municipal valuation of the property upon which municipal rates were to be calculated at a specified fraction or percentage. The assessment years involved in this case are 1983-84 to 1986-87. The assessee's case on the facts was that from as early as 1962, the annual letting value of the property was Rs. 10,800 only. That was because of a duly registered lease for 30 years which had been executed in that year in respect of the property. No doubt it is an admitted position that the lease was executed in favour of the wife of a director of the assessee-company. We shall have something to say about the low nature, even or the extremely low nature, of this rental at a later portion of the judgment, but we have to decide the principal question of law on which the reference was entertained. Section 23 as it stood at the material time, and in so far as it concerns our case is set out below: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which resided there, there was no finding that the deed of 1962 was a sham deed, brought about for the purpose of showing to the Revenue authorities the property as a tenanted one, although in reality, it was a vacant property. The Tribunal has also accepted the deed of 1962 as a genuine deed. We proceed to answer the second question as formulated above, therefore, on the basis that the annual rental is the rental received by the assessee from 1962 onwards, and also during the assessment years in question, as the genuine return on the assessee's property, as a genuine deed of lease entered into by the parties at arms length. Were the factual situation, as per the finding of the departmental decisions, otherwise, were the deed a sham one, or a mere eyewash, the property would have to be treated as vacant property for tax purposes, and the decisions in that regard are all unanimous. It is unnecessary for us to refer to the decisions which deal with such deeds, which are not genuine or are fraudulent. But even in the case of genuine lettings out, is the assessee's property to be valued at the actual rental received, or at the higher potential annual value (if the property we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi Rent Control Act, 1958. Although the standard rent had not been fixed, and the time for fixation of the standard rent by way of an application from the tenant had expired permanently, even then, the Supreme Court opined, that for the purposes of section 23(1), the standard rent as determinable under the Rent Control Act would provide the basis of valuation for income-tax purposes, and not the actual rent received by the landlady from the tenant. Mr. Agarwalla cited several cases supporting the case of the Department before us. He gave us the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 (SC), submitting that if section 23 of the Income-tax Act is clear in its wording, then it must be followed, even if it causes hardship to the assessee. In the same line is the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC). No doubt an assessee, who has let out his property under a lease, can get only the rent for his property, but if the law requires the property to be valued notionally as a vacant one, then such law must be followed, even if the assessee would thereby have to pay tax on an income, which he has not earned, but is still taken as income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of the property for the purposes of section 23 of the Income-tax Act. We are of the opinion that in considering the annual value of the property for any assessment year, that assessment year, as far as practicable, should be taken in isolation, as if that assessment year stands by itself. The property which is already tenanted at the beginning of the assessment year, cannot be expected to let from year to year at any figure higher than the rent which is being produced actually by the property in question. Clause (a) of section 23(1), applies not only to property which is vacant and not under any lease deed, but is also applicable to property which is already tenanted and subject to a continuing fixed rental; but in the latter case, the property is to be treated as tenanted property; the word "vacant" is not to be read into the section, nor any notion of the property being treated as vacant. Clause (b) of section 23(1) refers to a situation where the rent received or receivable by the assessee is higher than the expected rental market value of the property itself. It would, today, cover a situation like the one in the case of Mrs. Sheila Kaushish [1981] 131 ITR 435 (SC), men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e very odd. A person usually pays a percentage of his income as income-tax. In this rather hypothetical situation, which we have avoided, the person would be paying, perhaps, many thousand per cent. above his income, derived from the old rents, as income-tax on such meagre income. On the above basis, the second question has to be answered in favour of the assessee and in the affirmative. Once the second question gets answered in the above manner, questions Nos. 3 and 4 follow suit. The letting value being the value for the purposes of section 23(1)(a), it is the correct yardstick (thus answering question No. 3) and the yardstick of municipal valuation is not the correct one (thus answering question No. 4). We now come to a very disturbing aspect of this case. A search has been mentioned in the order of the Assessing Officer. Mr. Agarwalla, appearing for the Department, told us that there has been a later search in 1991 also. The reports of that search are not in the papers before us but Mr. Agarwalla read out from it in open court for the benefit of all. He said that the report mentions that the inspecting officer went into the property in question at Ballygunge Park (which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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