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TMI Blog1975 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and, after considering the area of the building and the possible rent at which it could be let out, took the annual value at Rs. 18,000 and after deducting the municipal taxes and one-sixth for repairs and deduction under section 23(2) at Rs. 1,800, calculated the net annual value of the building in question at Rs. 11,950. Restricting it within 10% of the total income as provided under proviso (2) to section 23(2) of the Act, he took Rs. 8,553 as income from the res idential house. The stand taken by the assessee was that the building was situated, within Patna Municipal Corporation area where the Rent Control Act, namely, the Bihar Buildings (Lease, Rent and Eviction) Control. Act, 1947, was in force. The fair rent of the building had been fixed by the Rent. Controller at Rs. 480 per month. The annual letting value, in any event, therefore, could not exceed the rate of rent which was fixed by the Rent Controller under the provisions of the Rent Control Act. This argument was rejected by the Income-tax Officer. The assessee having appealed to the Appellate Assistant Commissioner, the argument regarding the acceptability of the fair rent as fixed by the Rent Controller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, no rent higher than the rate fixed by the Rent Controller was capable of being charged. As such, it could not be said that the inherent capacity of the hereditament to fetch profits was in any way and to any extent greater than that fixed by the Rent Controller. Before considering the validity of this submission, I think it worth while to notice here the principles underlying the fixation of annual letting value for the purposes of section 23 of the Act. Though the tax under the the head, " income from building " is a tax on income, it is well-settled that it is not a tax upon rents but upon the inherent capacity of the hereditament to yield profit. The standard selected as a measure of the amount of the income to be taxed in respect of the building capable of occupation is the annual value. If the owner of such properties should be himself in occupation of them, it by no means follows that he will, in fact, derive from them an income equal to this annual value, but as he has the use and enjoyment of the properties, it is, for the purposes of the statute, presumed that he does derive from them an income equal in amount to this annual value and the tax is assessed upon su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Lahore High Court in the case of Lalla Mal Sangham Lal v. Commissioner of Income-tax has held that in estimating the sum for which a property might reasonably be expected to let from year to year, for the purpose of assessing the owner of such property to income-tax under section 9 of the Indian Income-tax Act, 1922, the amount paid by the tenant on account of municipal house tax should be included, that is, should be treated as part of the rent payable by the tenant to the landlord. The term " annual value " does not necessarily mean the annual money benefit derivable from the property by the landlord. The amount of rent payable by the tenant to the landlord is, however, only prima facie evidence of annual value and a consideration of the rents paid for similar and similarly situated properties in the locality may show the of " annual value " in any particular instance to be less or more than the rent actually paid. These were the principles so well-established that never could any such controversy with regard to the measure of valuation for the purposes of section 23 have arisen before the various Rent Control Acts came into force in the various States of this country. Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t so long as the building is tenented its inherent capacity to fetch profits is less than when the building comes into use and occupation of the landlord for his residential purposes. Learned counsel for the assessee placed reliance on two decisions of the Supreme Court in the case of the Corporation of Calcutta v. Padma Debi and the case of Guntur Municipal Council v. Guntur Town Rate Payers' Associations. In the case of Corporation of Calcutta, Subba Rao J. (as he then was), speaking for the court, while dealing with section 127(a) of the Culcutta Municipal Act, 1923, held as follows : " It is said that section 127(a) does not contemplate the actual rent received by a landlord but a hypothetical rent which he can reasonably be expected to receive if the building is let. So stated the proposition is unexceptionable. Hypothetical rent may be described as a rent which a landlord may reasonably be expected to get in the open market. But an open market cannot include a' black market', a term euphemistically used to commercial transactions entered into between parties in defiance of law. In that situation, a statutory limitation of rent circumscribes the scope of the bargain in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which could be rebutted and either reduced or enhanced only on the basis of other materials on record for the purpose of such rebuttal. In the instant case the Rent Controller has fixed the rate of rent on the basis of municipal valuation as : in law he was bound to do. A presumption with regard to such a valuation as being reasonable annual letting value for the purposes of section 23 certainly attached to it and in the absence of any other material on record, it was the only safe guide on the basis of which the annual letting value for the purposes of section 23 could be fixed. Thus, taking into consideration the question in all its ramifications, I am constrained to hold that, on the facts and in the circumstances of the case, for determination of the annual value under section 23, the rent fixed by the Rent Control Act [Bihar Buildings (Lease, Rent and Eviction) Control Act, 1947] could be taken into consideration. I, accordingly, answer the question in the affirmative, in favour of the assessee and against the department. But, in the circumstances of the case, there shall be no order as to costs. S. N. P. SINGH C.J.--I agree. Question answered its the affirmative. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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