At, Income Tax Appellate Tribunal ITAT Madras
By, C. KOCHUNNI NAIR & C R NAIR
G.Seetharaman : S Ranganathan
The Judgment was delivered by C.KOCHUNNI NAIR , J. :
C.KOCHUNNI NAIR , J.M
The assessee appeals for both asst yrs. 1974-75 & 1975-76. For these two years the CIT acting u/s 263, set aside the assessments for being re-done according to law. The question relates to income from house property. The rent received is less than the annual value estimated by the municipal corporation authorities. The ITO computed the annual value on the basis or rent received . That was in 1977. Even in that computation there were some disputes about the taxes deductible . So, in appeal the AAC set aside the assessments for being re-done. Even, thereafter, the assessments were completed in 1979 on the basis of only rent received. The CIT set aside the assessments on the reasoning that the income from house property should have been computed with reference to the annual value fixed by the municipal corporation which happens to be higher than the actual rent. He also stated that the particulars of tenancy, rents etc. available in the records are not sufficient to enable one to decided whether the said pre ises were covered by the Tamil Nadu Building (Lease and Rent Control )Act or not and that unless it is conclusively proved that the tenants are protected by the provisions of the Tamil Nadu Building (Lease and Rent Control )Act the claim for computation of the income from property on the basis of the actual rent could not be accepted.
2. We decline to interfere. The reasons given by the CIT are sufficient to show that assessments were prejudicial to the interest of revenue . It may also be necessary for the ITO to examine whether the tenants are protected by the provisions of the Tamil Nadu Building (Lease and Rent Control )Act or not. That may of course not be conclusive but it may be relevant. Such things having not been done the assessments are prejudicial to the interest of revenue.
3. It may be stated that the Tribunal has in many cases, always preferred the rent received rather than the estimated figure of annual value arrived at by the Corporation Authorities as evidence of the sum for which the property might reasonably be expected to let from year to year. In a case decided by both of us to day in ITA No. 231 (Mds)/82 (asst. yr 1978-79) in the case of the ITO Co, Cir-I (2) Madras v Sri M Sardarmal Chordia, Madras, we have held as follow:
"This is a departmental appeal for asst. yr. 1978-79. The rent received from the house property was less than the annual letteing value determined by the Madras Corporation . So the ITO took the corporation figures as the annual value. But the AAC held that rent received should be the basis . Hence the departmental appeal.
2. We find no reason to interfer. The rent received reflects the annual value . The ITO has no case as seen from the assessment order on the grounds of appeal that the rent received is at concessional rate or influenced by extra commercial consideration or anything like or similar to it . So, the rent received is the sum for which the property might reasonably be expected to let from year to year. The data of corportion value in our view does not reflect the sum for which the property might reasonable be expected to let from year to year. In any event, the better and more reliable data is the actual rent received rather than the estimated figure arrived at by the Corporation .
3. Departmental appeal dismissed."
4. So the ITO before accepting the corporation figure, and rejecting the rent received, will have to establish that the rent received is always reflective of the annual value. However, it is only proper that the ITO is given an opportunity to go into all these questions we may also say that there is no compulsion like the one seen indicated in the commr's order. That in case where municipal valuation is higher than the rent received, the annual value should be only on the assessment basis of municipal valuation.
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5. There is no substance of limitation raised by the assessee because what is not the order of 1977 but the order of 1979 passed in consequence of the appellate order. Both are orders prejudicial to the interest of revenue because both are on the basis of rent received. But what is revised is ought to be revised are the order of 1979. So there is no limitation in these matters. 6. So both appeals of the assessee are dismissed.