COMMISSIONER OF INCOME-TAX VS JOHNY JOSEPH
2002 P T D 1049
[241 I T R 423]
[Kerala High Court (India)]
Before Arijit Pasayat, C. J. and K. S. Radhakrishnan, JJ
COMMISSIONER OF INCOME‑TAX
Versus
JOHNY JOSEPH
Income‑tax References Nos.246 and 247 of 1997, decided on /01/.
th
October, 1999. Income‑tax‑‑
‑‑‑‑Property‑‑‑Annual letting value‑‑‑Basis for determination‑‑‑Law applicable‑‑‑Effect of amendment of S.23 in 1975‑‑‑Actual rent will be deemed to be annual value if it is in excess of sum for which property might reasonably be expected‑ to be let‑‑Indian Income Tax Act, 1961, Ss.2 & 23.
A bare reading of section 23 of the Income Tax Act, 1961, shows that 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 be let from year to year; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the aunt so received or receivable. Obviously, if the amount received or receivable is in excess of the sum for which the property night reasonably be expected to be let from year to year, the amount actually received or receivable shall be the annual value of the property for the purpose of section 22. It is to be noted that section 22 deals with income from house property. Prior to the 1975 amendment, i.e., up to assessment year 1975‑76, the actual rent receivers or receivable was not decisive in the determination of the annual value of the property, although it was an important piece of evidence therefor. After the amendment in 1975, if the actual annual rent received or receivable is in excess of the notional annual value, the actual annual rent shall be deemed under section 230)(b) to be the annual value for and from the assessment year 1976‑77:
CIT v. C. Ramesan (2000) 241 ITR 426 (Ker.) (Appex.) (infra) fol.
P.K.R. Menon and George K. George for the Commissioner.
C. Kochunni Nair, S. Vinod Kumar and Dale P. Kurian for the Assessee.
JUDGMENT
ARIJIT PASAYAT, C.J.‑‑‑On the basis of applications under section 256(1) of the Income Tax Act, 1961 (in short "the Act"), the following questions have been referred for opinion‑of this Court by the Income‑tax Appellate Tribunal, Cochin Bench (in short "the Tribunal"):
"Questions in I.T.A. No. 810/Coch of 1992:
(1)Whether, on the facts and in the circumstances of the case and also in view of the fact that the actual rent received for the assessment year 1983‑84 being Rs. 46,441 the Tribunal is right in law and fact in upholding the order of the Commissioner of Income‑tax (Appeals) who adopted the annual letting value under section 23 of the Income‑tax Act at Rs. 27,780?
(2)Whether, on the facts and in the circumstances of the case and on an interpretation of section 23(1) of the Income Tax Act, 1961, the, Tribunal is right in law and fact in holding that the amount estimated by the Assessing Officer cannot be the rent received or receivable, as per the provisions of section 23(1) of the Income Tax Act, 1961?
Question in C.O. No.4/Coch of 1993:
Whether, on the facts and in the circumstances of the case, the Tribunal is right in accepting the assessee's alternative contention and in directing the Assessing Officer to adopt the annual letting algae on the basis of the return receivable at Rs.22,680?"
The factual position, as set out in the statement of the case, is as follows: The assessee is an individual, deriving income from house property. The Assessing Officer fixed the annual value of the property at Rs.46,441 on the basis of the actual rent received for the assessment year 1983‑84, as against Rs.27,780 claimed by the assessee. The determination was challenged in appeal before the Deputy Commissioner of Income‑tax (Appeals) (in short the "Deputy CIT(A)"). The Appellate Authority accepted the assessee's claim and directed the Assessing Officer to estimate the annual letting value at the figures disclosed by the assessee. The Revenue preferred second appeal before the Tribunal. With reference to section 23(1)(a) dealing with annual value, the Tribunal upheld the order of the Deputy Commissioner of Income -tax (Appeals). It was observed that the annual value as mentioned in the provision was the same for which the property might reasonably be let from year to year and the rent receivable had been rightly adopted by the first appellate authority. In the cross‑objection filed by the assessee, the Tribunal held that the rent receivable amounting to Rs.22,680 should be taken for the purpose of assessment instead of Rs.27,780.
The Revenue's stand is that where the assessee's property is let out, the amount actually received has to be taken note of. According to learned counsel for the assessee, the provisions of section 23(1)(a) clearly set out the limits for fixing annual value and even if a higher rent was received than the annual value computed on the basis of section 23(1)(a), the latter has, to be adopted.
Section 23(1)(a) read as follows:
"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 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 thereof is in excess of the sum referred to in clause (a), the amount so received or receivable;"
A bare reading of the provision shows that for the purpose of section 22, the annual value of any property shall he deemed to be (a) the sum for which the property might reasonably be expected to be let from year to year; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable. Obviously, if the amount received or receivable is in excess of the sum for which the property might reasonably be expected to be let from year to year, the amount actually received or receivable shall be the annual value of the property for the purpose of section 22. It is to be noted that section 22 deals with income from house property. Prior to the 1975 amendment, i.e., up to assessment year 1975‑76, the actual rent received or receivable was not decisive in the determination of the annual value of the property, although it was an important piece of evidence therefore. After 1975 amendment, if the actual annual rent received or receivable is in excess of the notional annual value, the actual annual rent shall be deemed under section 23(1)(b), to be the annual value, for and from the assessment year 1976‑77. The expression "total income" in section 4 has to be understood as it is defined in section 2(45). Under that definition total income means "the total amount of income referred to in section 5, computed in the manner laid down in the Act", that is, computed for the purpose of chargeability, under the sections, from sections 15 to 59. After amendment in 1975, the above position is applicable. That being the position, the approach and conclusions of the first Appellate Authority and the Tribunal were not justified. Additionally, we find that a Division Bench of this Court in CIT v. G. Ramesan (2000) 241 ITR 426 (Appex.) (infra), expressed a similar view.
Our answer to the questions is in the negative, i.e., in favour of the Revenue and against the assessee.
The references are disposed of accordingly.
M.B.A./600/FC Order accordingly.