TMI Blog1997 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... the house property at No. 38-C, Mount Road, Madras, at Rs. 1,22,850 on the basis of the municipal valuation, as against Rs. 1,18,582, returned by the assessee as the actual rent received by him. The Appellate Assistant Commissioner allowed the appeal by the assessee holding the abovesaid Rs. 1,18,582 as the said annual value under section 23 of the Act. The appeal by the Revenue to the Tribunal was dismissed and hence this tax case reference. In this tax case reference, the respondent-assessee remains ex parte. However, learned counsel for the Revenue fairly brought to our notice the unreported judgment dated August 22, 1996 of this court in CIT v. M. Ratanchand Chordia [1997] 228 ITR 626 (T. C. No. 1120 of 1984), which is in favour of the respondent. The material facts therein are also similar to the present one and it also related to the assessment year 1977-78. The municipal valuation for the house property in question therein was Rs. 68,578, though the actual rental received by the assessee therein was Rs. 51,150. There too, the Tribunal adopted the actual rent received by the assessee as the abovesaid annual value under section 23 of the Act. The Division Bench, in which one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) alone will apply, the actual rent received by the assessee should be taken into consideration, in computing the reasonable rent spoken to in the abovesaid clause (a), that the Tribunal or the lower authorities have not bestowed their consideration in the above angle and that this court, while exercising its present advisory jurisdiction, should remand the matter back to the Tribunal for such consideration by it. Both counsel relied on several decisions, which would be adverted to in the course of our discussion below. We have considered, the rival submissions in the light of the abovesaid clauses (a) and (b) of section 23(1) and the relevant decisions. Section 23(1) of the Act, after the abovesaid amendment with effect from April 1, 1976, runs as follows : (The provisos and Explanations thereto are not extracted since they are not relevant for the purpose of this case.) "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 of thereof is in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be the abovesaid "reasonable rent", even though the said standard rent has not been determined. The relevant observations of the Supreme Court in Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 are as follows : "Now this Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC), was a decision given on the interpretation of the definition of 'annual value' in the Delhi Municipal Corporation Act, 1957, and the Punjab Municipal Act, 1911, for the purpose of levy of house tax, but it would be equally applicable in interpreting the definition of 'annual value' in sub-section (1) of section 23 of the Income-tax Act, 1961, because these definitions are in identical terms and it was impossible to distinguish the definition of 'annual value' in sub-section (1) of section 23 of the Income-tax Act, 1961, from the definition of that term in the Delhi Municipal Corporation Act, 1957, and the Punjab Municipal Act, 1911. We must, therefore, hold, on an identical line of reasoning, that even if the standard rent of a building has not been fixed by the Controller under section 9 of the Rent Act (that is, the abovesaid Rent Control Law) and the period of limitation prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, and not the actual rent received by the assessee from the American Embassy should be taken to be the annual value of the warehouse within the meaning of sub-section (1) of section 23 of the Income-tax Act, 1961." (emphasis supplied). In the light of the abovesaid two decisions of the Supreme Court, Addl. CIT v. Mrs. Leela Govindan [1978] 113 ITR 136 of this court relied on by Mrs. Chitra Venkataraman, must be deemed to have been impliedly, overruled by the said Supreme Court decisions, since it viewed contra in relation to the abovesaid section 23(1) prior to the abovesaid amendment holding that where the lessee of a house property sub-lets it for a higher rent, than what he pays to the landlord, the annual value under section 23(1), for assessment of the landlord-assessee, should be based on actual rent received by him and not on municipal valuation. In this connection, the above referred to Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC), may also be seen in some further detail. The said decision, inter alia, considered the earlier Supreme Court decisions including Guntur Municipal Council v. Guntur Town Ratepayers' Association, AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1980] 122 ITR 700 (SC), reference to Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308 (corresponding to [1977] 1 SCR 1017) was made thus : "... we must refer to a recent decision of this court in Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308, which apparently seems to strike a different note.... Now, it would appear that the decision in Guntur Municipal Council's case [1971] 2 SCR 423, was clearly applicable on the facts of this case and in Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308; [1977] 1 SCR 1017 and following that decision the court ought to have held that the annual value of the building could not exceed the standard rent determinable under section 7 of the Act and the assessing authority should have arrived at its own estimate of the standard rent by applying the principles laid down in that section and determine the annual value on the basis of such standard rent. But the court in Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308; [1977] 1 SCR 1017, negatived the applicability of the decision in Guntur Municipal Council's case [1971] 2 SCR 423, and the earlier two cases by relying on the words 'notwithstanding anything con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh Municipal Corporation Act, 1956, dealt with in Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308. So it is clear that here also the decisions in Guntur Municipal Council v. Guntur Town Ratepayers' Association, AIR 1970 SC 353, Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC) and Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 (SC) would alone apply and what is stated in Municipal Corporation v. Smt. Ratnaprabha, AIR 1977 SC 308, need not be taken note of. We may also reiterate that the provisions of section 23(1)(a) apply to both owner-occupied property and property which is let out and that the measure of valuation to determine the said annual value must be the same for both the cases, viz., the standard or fair rent as mentioned above. Therefore, while in self occupied property---where the rent received and receivable is nil---the standard or fair rent shall be the annual value, under section 23(1)(a), it (the said annual value) cannot be the actual rent received or receivable in the case of a property let out and where the actual rent received or receivable is less than the said standard or fair rent; but it can be, in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in the order of the Tribunal therein that the actual rent received by the assessee therein should be adopted as the "annual value" spoken to in section 23(1) of the Act. We may also respectfully point out that even the passage extracted from Dewan Daulat Rai Kapoor v. New Delhi Municipal Committee [1980] 122 ITR 700 (SC) in the above referred to unreported judgment dated August 22, 1996 in CIT v. M. Ratanchand Chordia, (since reported in [1997] 228 ITR 626 (Mad)) runs as follows : "There would ordinarily be in a free market close approximation between the actual rent received by the landlord and the rent which he might reasonably expect to receive from a hypothetical tenant. But, where the rent of the building is subject to rent control legislation, this approximation may and often does get displaced. It is, therefore, necessary to consider the effect of rent control legislation on the determination of annual value." (emphasis supplied) Further, the said unreported (since reported in [1997] 228 ITR 626) decision makes the following observation : "There is also no evidence on record to show that the rent received by the assessee is low because of any extraneous consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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