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Mridu Hari Dalmia Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1984)7ITD761(Delhi)
AppellantMridu Hari Dalmia
Respondentincome-tax Officer
Excerpt:
1. the main contention raised by the assessee in this appeal is that the 'fair rental value' of the rent-free accommodation at 1-tis january marg, new delhi, provided to him by his employer cannot exceed its standard rent as fixed by the additional rent controller at rs. 27,500 per annum and, consequently, its value determined by the authorities below at rs. 1,10,000 is not sustainable.2. the assessee, shri mridu hari dalmia, is the executive director of orissa cement ltd., rajgangpur. orissa cement ltd. had taken on lease one of the three flats at 1-tis january marg, new delhi, from its owner hari bros. (p.) ltd. at a rent of rs. 2,250 per month. when the assessee came on transfer from orissa to delhi on 1-5-1973, he was provided by his employer the said flat free of rent. the assessee.....
Judgment:
1. The main contention raised by the assessee in this appeal is that the 'fair rental value' of the rent-free accommodation at 1-Tis January Marg, New Delhi, provided to him by his employer cannot exceed its standard rent as fixed by the Additional Rent Controller at Rs. 27,500 per annum and, consequently, its value determined by the authorities below at Rs. 1,10,000 is not sustainable.

2. The assessee, Shri Mridu Hari Dalmia, is the executive director of Orissa Cement Ltd., Rajgangpur. Orissa Cement Ltd. had taken on lease one of the three flats at 1-Tis January Marg, New Delhi, from its owner Hari Bros. (P.) Ltd. at a rent of Rs. 2,250 per month. When the assessee came on transfer from Orissa to Delhi on 1-5-1973, he was provided by his employer the said flat free of rent. The assessee was, thus, in occupation of the flat for 11 months in the relevant accounting year ended on 31-3-1974. The assessee, however, declared its perquisite value at Rs. 9,375 only, at the rate of 12 per cent of his salary (12.2 per cent of Rs. 75,000), it being a furnished accommodation. It was submitted by the assessee before the ITO that the Additional Rent Controller had, by his order dated 12-2-1970, fixed the standard rent of the entire 1-Tis January Marg, New Delhi, at Rs. 40,320 per annum for a period of five years up to 15-7-1974 and that the writ petitions filed by the New Delhi Municipal Committee (NDMC) before the High Court against the said order of the Additional Rent Controller had been dismissed. It was further pointed out that in the assessee's appeal against the determination by the NDMC of the rateable value at a higher figure for the financial year 1972-73, the rateable value of the whole property had been reduced by the Additional District Magistrate to Rs. 40,320. It was added that the Rent Controller had, by his subsequent order determined the cost of construction of the entire property at Rs. 10,00,000 and on that basis the rateable value of the entire building could not exceed Rs. 82,500 per annum. On the basis of these submissions, it was urged before the ITO that the proposal to take the rateable value of the building at Rs. 3,30,000 was patently wrong and illegal. The ITO was also apprised of the subsequent events in the matter that the rateable value of the property was determined by the NDMC at Rs. 82,500 for all the years commencing from 1973-74.

However, the ITO rejected these contentions and determined the 'fair rental value' of the entire building at 1-Tis January Marg, New Delhi, at Rs. 3,30,000. On that basis the perquisite value of the assessee's one-third portion was determined at Rs. 1,10,000 adding thereto a sum of Rs. 3,047 being 10 per cent of the cost of furniture and fixtures.

The ITO computed perquisite value of the rent-free accommodation at Rs. 77,845 in addition to the sum of Rs. 9,375 shown by the assessee as under : The above conclusion of the ITO was based on the reasoning that the rents, in and around where the flat occupied by the assessee was situated, were very high due to its unique location and nearness to official and commercial establishments. He observed that almost the entire area adjacent to this place was occupied by the embassies and top industrialists. He gave the following four instances of house properties which, in his view, could be treated as comparable properties :Property & location Built-up Rental value area sq.

He pointed out that the built-up area of 1-Tis January Marg, New Delhi, was 26,222 sq. ft., the assessee's one-third portion being 8,740 sq.

ft. and, therefore, the rental value shown by the assessee was ridiculously low. The ITO doubted the bona fides of the parties in entering into the agreement of lease and felt that it was done only to evade tax. He took the view that it was in furtherance of the said object that Orissa Cement Ltd. filed a suit for the fixation of standard rent which was defended only as an outward show. He then referred to the assessment of the owner company, Hari Bros. (P.) Ltd. and noted that on an identical point involved with regard to the reasonableness of the rental value of the entire house property, he had taken the view that fixation of standard rent was not bona fide but a collusive one.

3. The assessee preferred an appeal to the Commissioner (Appeals). The Commissioner (Appeals) dealt with this point briefly. He stated that in disposing of the appeal of the owner company, Hari Bros. (P.) Ltd., he had held that the reasonable estimated annual value of the three flats at 1-Tis January Marg, New Delhi, was Rs. 3,30,000. With that observation he upheld the estimate of the ITO of the fair rental value of the flat in occupation of the assessee at Rs. 1,10,000 and confirmed the resultant addition of Rs. 77,845. The assessee, being aggrieved, is in further appeal to the Tribunal.

4. Shri G.C. Sharma, the learned counsel for the assessee, submitted before us that the standard rent of the three flats at 1-Tis January Marg had been determined under the Delhi Rent Control Act, 1958, at Rs. 82,500 per annum. It was pointed out that the application for fixation of standard rent was made to the Rent Controller by the assessee's employer, who was a tenant of Hari Bros. (P.) Ltd. and the Controller fixed the rent at Rs. 1,547 per month vide order dated 5-6-1974. The landlord's appeal against the said order of the Rent Controller was dismissed by the Rent Control Tribunal vide order dated 20-3-1975. Shri Sharma then took us through the judgment of the Sub-Judge-1 Class, Delhi, in the civil suit filed by the assessee's employer, Orissa Cement Ltd., against the owner company Hari Bros. (P.) Ltd. [Civil Suit No. 25 of 1973, dated 17-2-1978] and invited our attention to para 16 according to which, the standard rent of the premises had been fixed at Rs. 82,500 by the Court of Shri Mohd. Shamim, Additional Rent Controller, with effect from 11-3-1974. It was further submitted that on the basis of the order of the Additional Rent Controller, the NDMC had also fixed the rateable value of these premises at Rs. 82,500 for the years 1973-74 and 1974-75. Our attention was also invited to the order of the Appellate Authority against the initial determination of rateable value by the NDMC, which was revised by him in accordance with the standard rent fixed by the Additional Rent Controller. It was added that even the NDMC later on accepted this position and adopted the rateable value of the entire house property aforesaid at Rs. 82,500 vide Resolution No. 190, dated 28-12-1977. On the basis of these facts it was submitted by Shri Sharma that the fair rental value of the flat in occupation of the assessee could not exceed one-third of the total value, i.e., Rs. 27,500 and Rs. 24,000 for 11 months under Section 17(3) of the Income-tax Act, 1961 ('the Act') read with Rule 3 of the Income-tax Rules, 1962. The point made out by Shri Sharma was that the 'fair rental value' for determining the perquisite value of the rent-free accommodation under Rule 3 could not exceed the standard rent, of the property in view of the decision of the Supreme Court in Dewan Daulat Rai Kapoor v. NDMC [1980] 122 ITR 700. Shri Sharma extensively read from the judgment of the Supreme Court to emphasise his point that the 'fair rental value' was the same as the standard rent and in determining the same, the ITO could not disregard the law of the land. It was also argued by Shri Sharma that the rent paid by the assessee's employer, Orissa Cement Ltd., who is the tenant of this building, should be taken as the measure of the perquisite value thereof in the hands of the assessee, as it was equivalent to the loss incurred by the employer in providing it rent-free to the assessee. It was then submitted, it was not necessary that there should be a relationship of landlord and tenant between the assessee and his employer in order to apply the ratio of the Supreme Court decision in Dewan Daulat Rai Kapoor's case (supra). Shri Sharma then took us through the order of the Tribunal in the owner company's case, Hari Bros. (P.) Ltd. v. ITO [IT Appeal No. 3388 (Delhi) of 1978-79, dated 27-1-1980], on which reliance was being placed by the department. He submitted that the Bench in that case admitted that Section 3(1)(b) of the Punjab Municipal Act, 1911 and Section 23(1) of the Act were in pari materia, but held that the word 'reasonably' was ambiguous. Shri Sharma urged that after the interpretation of the word 'reasonably' by the Supreme Court in Dewan Daulat Rai Kapur's case (supra) and other cases cited therein, that interpretation must prevail. Shri Sharma also argued that the theory of illegal income adverted to by the Tribunal, in that case, would not extend to notional income to be determined under Section 23. Shri Sharma also pointed out that the other two flats at 1-Tis January Marg, New Delhi, are occupied by the two brothers of the assessee and in their assessments, the ITO has accepted the rent as fixed by the NDMC, namely, Rs. 27,500 per annum.

5. In reply Shri R.S. Sawhney, the learned departmental representative, relied on the order of the ITO and emphasised the location of the property and the huge built-up area. He submitted that its perquisite value is required to be determined with reference to Rule 3 keeping in view the rental value of similar properties in the same vicinity. He emphasised that the rent that it 'would realise' would be the market rent paid by the tenants of similar properties. He also submitted that the contractual rent would be standard rent for the first five years.

Our attention was invited to the four instances of comparable properties given by the ITO and it was submitted that in the light thereof the fair rental value was rightly determined at Rs. 1,10,000 of the flat in occupation of the assessee. Another point made out by Shri Sawhney was that there being no relatibnship of landlord and tenant between the assessee and his employer, the standard rent theory would not apply in valuing the perquisite under Rule 3. He also submitted that the Act and the Punjab Municipal Act were different Acts and the ratio of the decision of the Supreme Court in Dewan Daulat Rai Kapoor's case (supra) would not apply as far as the Act is concerned. He relied on the judgment of the Delhi Bench in the case of Hari Bros. (P.) Ltd. (supra). In regard to the acceptance of the assessee's contention in the cases of the brothers of the assessee by the department, it was submitted that there was a mistake, but the circumstances would not work as an estoppel in this case.

6. We have given our careful thought to the rival contentions of the parties and gone through the record. The question for consideration is as to what is the 'fair rental value' of the rent-free accommodation provided to the assessee by his employer. The value of the perquisite in the shape of rent-free accommodation is assessable in the hands of an employee as 'salary' computed in the manner provided in Sections 15, 16 and 17 of the Act. Section 15 mentions the income chargeable to income-tax under the head 'Salaries'. Section 16 allows certain deductions in computing the income from salaries. Section 17(2)(i) provides that for the purposes of SECTIONS 15 and 16, 'perquisite' includes, inter alia, the value of rent-free accommodation provided to the assessee by his employer. The valuation of perquisites by way of rent-free accommodation is required to be determined in accordance with the provisions of Rule 3, which reads as follows : For the purpose of computing the income chargeable under the head 'Salaries', the value of the perquisites (not provided for by way of monetary payment to the assessee) mentioned below shall be determined in accordance with the following clauses, namely :- (a) The value of rent-free residential accommodation shall be determined on the basis provided hereunder, namely :-(i) and (ii) ** ** ** (A) the value of rent-free residential accommodation which is not furnished shall ordinarily be a sum equal to 10 per cent of the salary due to the assessee in respect of the period during which the said accommodation was occupied by him during the previous year : Provided that- (1) where the fair rental value of the accommodation is in excess of 20 per cent of the assessee's salary, the value of the perquisite shall be taken to be 10 per cent of the salary increased by a sum equal to the amount by which the fair rental value exceeds 20 per cent of the salary ; so, however, that the Income-tax Officer may, having regard to the nature of the accommodation, determine the sum by which 10 per cent of the salary is to be increased, as a percentage (not exceeding 100 per cent) of the amount by which the fair rental value exceeds 20 per cent of the salary ; (2) where the assessee claims and the Income-tax Officer is satisfied that the sum arrived at on the basis provided above exceeds the fair rental value of the accommodation, the value of the perquisite to the assessee shall be limited to such fair rental value ; (B) where the accommodation is furnished, the value of rent-free residential accommodation shall be the aggregate of the following sums, namely :- (1) the fair rental value of the accommodation arrived at in accordance with the provisions of Sub-clause (iii)(A) as if the accommodation were not furnished ; and (2) the fair rent for the furniture (including television sets, radio sets, refrigerators, other household appliances and air-conditioning plant or equipment) calculated at 15 per cent per annum, of the original cost of such furniture or if such furniture is hired from a third party, the actual hire charges payable therefor.

Explanation 1 : 'Salary' includes the pay, allowances, bonus or commission payable monthly or otherwise, but does not include the following, namely :- (i) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the assessee concerned ; (ii) employer's contributions to the provident fund account of the assessee ; (iv) any allowance in the nature of an entertainment allowance, to the extent such allowance is deductible under Clause (ii) of Section Explanation 2 : For the purposes of Sub-clause (iii), the fair rental value of accommodation which is not furnished shall be the rent which a similar accommodation would realise in the same locality or the municipal valuation in respect of the accommodation, whichever is higher.

(b) The value of residential accommodation provided at a concessional rent shall be determined as the sum by which the value computed in accordance with Clause (a), as if the accommodation were provided free of rent, exceeds the rent actually payable by the assessee for the period of his occupation during the relevant previous year.

The assessee being an employee in the private sector his case falls under Sub-clause (iii) above. An analysis of the provisions of this Sub-clause would show that the perquisite value of rent-free furnished accommodation will ordinarily be taken at 12 per cent of the salary of the employee in respect of the period during which he occupied the accommodation during the relevant previous year, which in this case is 11 months. If, however, the perquisite value of the accommodation computed on this basis exceeds the 'fair rental value' of the accommodation, the value of the perquisite will be limited to such fair rental value.

7. In the present case, although the rent-free accommodation in the occupation of the assessee is furnished, there is no dispute about the value of the furniture and fixtures, which has been taken by the ITO as shown by the assessee at Rs. 3,047. The dispute centres around the fair rental value of the flat which has been provided free of rent to the assessee by his employer.

8. According to Explanation 2 to Sub-clause (iii) of Rule 3 above, 'the fair rental value' of the accommodation shall be the rent which a similar accommodation would realise, in the same locality or the municipal valuation, whichever is higher. There was considerable argument on the interpretation of the said Explanation. The assessee's learned counsel, Shri Sharma, contended that the expression 'would realise' would mean what it would lawfully realise and in that view it would be fair rent or standard rent fixed by the Rent Controller. On the other hand, Shri Sawhney, the learned departmental representative, submitted that it would mean the actual rent received or receivable by a landlord uninhibited by the Rent Control Act. Shri Sawhney added that where the agreed rent is less than the rent it would fetch if let in the open market, as was the case here, in his submission, it would be open to the ITO to make a reasonable estimate of the fair rental value.

9. In our opinion, the expression 'fair rental value' occurring in Sub-clause (iii) of Rule 3 read with Explanation 2 thereto would evidently mean the fair rent of the premises. What is fair rent of a particular premises would depend on the facts and circumstances of each case. Under our laws the Rent Controller has the exclusive jurisdiction to determine the fair rent or standard rent. In Delhi the Delhi Rent Control Act, 1958, extends to the areas included within the limits of the NDMC and urban areas within the limits of the Municipal Corporation of Delhi. The Rent Controller or the Additional Rent Controller appointed under the said Act is required to fix the standard rent under Section 9 of the said Act having regard to the provisions of Sections 6 and 7 of the said Act and the circumstances of the case. Sub-section (4) of Section 9 provides, that where for any reason it is not possible to determine the standard rent under Section 6, the Rent Controller may fix such rent as would be reasonable having regard to the situation, locality and condition of the premises and the amenities provided therein and where there are similar or nearly similar premises in the locality, having regard to the standard rent payable in respect of such premises. It appears from the language of SECTIONS 6, 7 and 9 and the decided cases on the point that the test is as to what rent is reasonable in respect of a particular premises. The reasonable rent, it seems, would be the rent which can legally be demanded by a landlord and not what may be actually paid by the tenant if the let out property is in an area to which the Rent Control Act applies. In other words, in having a reasonable expectation, a prudent landlord cannot be expected to ignore the limitations placed by the Rent Control legislation which is the law of the land. The limitations on such an expectation are to be found in Sections 4, 5, 13 and 48 of the Delhi Rent Control Act.

Section 5 lays down that no person shall claim or receive any rent in excess of the standard rent, notwithstanding any agreement to the contrary. Section 4 provides that no tenant shall, notwithstanding any agreement to the contrary, be liable to pay to his landlord for the occupation of any premises any amount in excess of the standard rent of the premises. Section 13 enables a tenant to claim refund of any rent paid in excess of the standard rent. Section 48 prescribes penalties for contravention of the provisions of Section 5. The punishment prescribed is simple imprisonment which may extend to 3 months or fine which may extend to a sum which exceeds the unlawful charge claimed or received by Rs. 1,000 or both. A prudent landlord is surely not expected to ignore these limitations. Therefore, the expectations of a hypothetical landlord are circumscribed by the Rent Control legislation. In this connection the following pronouncement of the Supreme Court in Corporation of Calcutta v. Smt. Padma Debt [1962] 3 SCR 49 is illuminating : ...A bargain between a willing lessor and a willing lessee uninfluenced by any extraneous circumstances may afford a guiding test of reasonableness. An inflated or deflated rate of rent based upon fraud, emergency, relationship and such other considerations may take it out of the bounds of reasonableness. Equally it would be incongruous to consider fixation of rent beyond the limits fixed by penal legislation as reasonable. Under the Rent Control Act, the receipt of any rent higher than the standard rent fixed under the Act is made penal for the landlord. Section 3 of the said Act says that any amount in excess of the standard rent of any premises shall be irrecoverable notwithstanding any agreement to the contrary.

Section 33(a) thereof provides inter alia that 'whoever knowingly receives, whether directly or indirectly, any sum on account of the rent of any premises in excess of the standard rent' will be liable to certain penalties. 'Standard rent' has been defined in Section 2(10)(b) to mean that 'where the rent has been fixed under Section 9, the rent so fixed, or at which it would have been fixed if application were made under the said section'. A combined reading of the said provisions leaves no room for doubt that a contract for a rent at a rate higher than the standard rent is not only not enforceable but also that the landlord would be committing an offence if he collected a rent above the rate of the standard rent.

One may legitimately say under those circumstances that a landlord cannot reasonably be expected to let a building for a rent higher than the standard rent. A law of the land with its penal consequences cannot be ignored in ascertaining the reasonable expectations of a landlord in the matter of rent. In this view, the law of the land must necessarily be taken as one of the circumstances obtaining in the open market placing an upper limit on the rate of rent for which a building can reasonably be expected to let.(pp. 55-56) 10. In conclusion, the Supreme Court held in Smt. Padma Debi's case (supra) that it was not the rent received by the landlord, but the 'hypothetical rent which can be expected if the building is to be let' which has to be the yardstick of 'reasonable expectation' in an 'open market'. It was explained : "... an open market cannot include a 'black market', a term euphemistically used to commercial transactions entered into between parties in defiance of law".

11. The point again came up for consideration before the Supreme Court in NDMC v. M.N. Soi AIR 1977 SC 302. It was held that : if a rent which is higher than that which can be legally demanded by the landlord and actually paid by a tenant, despite the fact that such violation of the restriction on rent chargeable by law is visited by penal consequences, the Municipal authorities cannot take advantage of this defiance of the law by the landlord. Rating cannot operate as a mode of sharing the benefits of illegal rack-renting indulged in by rapacious landlords for whose activities the law prescribes condign punishment.(pp. 306-307) 12. After referring to the above-mentioned judgments, the Supreme Court, in their latest pronouncement, in Dewan Daulat Rai Kapoor's case (supra), has held as follows : ...when the Rent Control legislation provides for fixation of standard rent, which alone and nothing more than which the tenant shall be liable to pay to the landlord, it does so because it considers the measure of the standard rent prescribed by it to be reasonable. It lays down the norm of reasonableness in regard to the rent payable by the tenant to the landlord. Any rent which exceeds this norm of reasonableness is regarded by the Legislature as unreasonable or excessive. When the Legislature has laid down this standard of reasonableness, would it be right for the Court to say that the landlord may reasonably expect to receive rent exceeding the measure provided by this standard Would it be reasonable on the part of the landlord to expect to receive any rent in excess of the standard or norm of reasonableness laid down by the Legislature and would such expectation be countenanced by the Court as reasonable The Legislature obviously regards recovery of rent in excess of the standard rent as exploitative of the tenant and would it be proper for the Court to say that it would be reasonable on the part of the landlord to expect to recover such exploitative rent from the tenant? We are, therefore, of the view that, even if the standard rent has not been fixed by the Controller, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent de-terminable under the Act and this would be so equally whether the building has been let out to a tenant who has lost his right to apply for fixation of the standard rent or the building is self-occupied by the owner. The assessing authority would, in either case, have to arrive at its own figure of the standard rent by applying principles laid down in the Delhi Rent Control Act, 1958, for determination of standard rent and determine the annual value of the building on the basis of such figure of standard rent.

It is, therefore, clear that in each of the present cases, the annual value of the building must be held to be limited by the measure of the standard rent determinable on the principles laid down in the Delhi Rent Control Act, 1958 and it cannot exceed such measure of standard rent.... (pp. 716-717) Even in respect of the self-occupied property, the Supreme Court reversed the view taken by the Full Bench of the Delhi High Court in Dewan Daulat Ram Kapur v. NDMC [1973] ILR 1 Delhi 363 holding as follows : When the rent control legislation provides for fixation of standard rent, which alone and nothing more than which the tenant shall be liable to pay to the landlord, it does so because it considers the measure of the standard rent prescribed by it to be reasonable. It lays down the norm of reasonableness in regard to the rent payable by the tenant to the landlord. Any rent which exceeds this norm of reasonableness is regarded by the Legislature as unreasonable or excessive. The Legislature obviously regards recovery of rent in excess of the standard rent as exploitative of the tenant and would it be proper for the Court to say that it would be reasonable on the part of the landlord to expect to recover such exploitative rent from the tenant ?(p. 701) 13. It is true that the above cases were decided by the Supreme Court with reference to the language of Section 127 of the Calcutta Municipal Corporation Act, 1923, Section 3(1)(b) of the Punjab Municipal Act, 1911, as extended to the NDMC and under Section 116 of the Delhi Municipal Corporation Act, 1957, but the language of these provisions of the Municipal Acts is admittedly in pari materia with the language of Section 23(1) of the Act. It is a well settled rule of interpretation of statutes that 'where an Act of the Parliament has received a judicial construction putting a certain meaning on its words and the Legislature in a subsequent Act in pari materia uses the same words, there is a presumption that the Legislature uses these words intending to express the meaning which has been put upon the same words before and unless there is something to rebut that presumption, the Act should be so construed, even if the words were such that might originally have been construed otherwise'. (See Jones v. Mersey Dock & Harbour Board [1865] 11 HL Cas 443, per Blackburn J.). It is, thus, an established rule that all Acts in pari materia are to be taken together as if they were one law ; and they are directed to be compared in the construction of statutes because they are considered as framed upon one system and having one object in view (D. Waris on Statutes, Potter, p.

189-p. 141 Craies on Statutes Law, 7th Edition). Therefore, the rule laid down on the concept of 'reasonableness' of the rental value in the decisions of the Supreme Court cited above clearly applies to the determination of 'fair rental value' of the rent-free accommodation in this case.

14. An attempt was made by the learned departmental representative to distinguish these decisions of the Supreme Court by contending that tax under the Act is on income, while the tax under the Municipal laws is on property. In support of this submission, reliance was placed on the decision of the Delhi Bench 'A' in Hari Bros. (P.) Ltd.'s case (supra).

We have perused the Bench order in the said case and given our anxious consideration to the discussion therein in this behalf. With respect, we are unable to subscribe to the view canvassed before us by the department. In our opinion, even though the Act and the Municipal Act are two different statutes, the provisions relating to 'annual value' of property in both the Acts are identical. The language used on the point at issue in these two statutes is also identical. Therefore, these Acts are in pari materia and, consequently, the pronouncements of the Supreme Court on the identical language in the Municipal Acts would govern the interpretation of Section 23(1)(a) which uses identical language.

15. Another argument put forward on behalf of the revenue that the word 'reasonably' occurring in Section 23(1) is ambiguous and, therefore, the subsequent legislation in the form of Clause (b) of Section 23(1) substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976 making 'the rent received or receivable' as the annual value should be taken as clarificatory, is also not, in our opinion, well-founded. That amendment would operate in determining the 'annual value' only from 1-4-1976. For periods prior to that date, the expression 'annual value' has to be understood in the sense in which the Supreme Court has interpreted it. The word 'reasonably' having been judicially interpreted in a series of decisions of the Supreme Court, can no more be regarded as ambiguous. On the other hand, the meaning attributed to the word 'reasonably' in one pari materia statute is to be taken as the meaning thereof in the other such statute. On this point, we have the classic authority of Lord Mansfield, who in R.V.Loxdale [1758] 1 Bun 445, thus, lays down the rule : Where there are different statutes in pari materia though made at different times, or even expired and not referring to each other, they shall be taken and construed together as one system and explanatory of each other.State of Madras v. Vaidyanath Iyer [1958] SCR 581. In that case it was held that the words defined in a statute should have the same meaning in another statute which is in pari materia. The Supreme Court considered the phrase 'shall presume' as defined in the Indian Evidence Act, 1872, while construing the provisions of Section 4 of the Prevention of Corruption Act, 1947 and held that it should have the same meaning in the latter Act because it dealt with the same branch of law, e.g., presumptions. Similarly, in Vidya-charan Shukla v. Khubchand Baghel AIR 1964 SC 1099, the Supreme Court held that the Limitation Act, 1908 and the Code of Civil Procedure, 1908, are statutes in pari materia and should be read together as one system and explanatory of each other. We are, therefore, of the opinion that the word 'reasonably' used in Section 23(1)(a) of the Act should have the same meaning as has been attributed to it in the decision of the Supreme Court under Section 3(1)(b) of the Municipal Act and Section 116 of the Delhi Municipal Corporation Act, which are statutes in pari materia on this point.

16. On facts, it is common ground that the standard rent of the entire house property at 1-Tis January Marg, New Delhi, as fixed by the Additional Rent Controller under the Delhi Rent Control Act is Rs. 82,500 and on that basis the one-third value of the flat in occupation of the assessee comes to Rs. 27,500 per annum. The basis for fixation of standard rent is the estimate of cost of construction of the said property at Rs. 10,00,000 and taking 8-1/4 per cent as its standard rent which works out to Rs. 82,500. It is significant to find that on this basis the NDMC also revised the rateable value of this property to Rs. 82,500 vide Resolution No. 190, dated 22-12-1977.

17. It was contended before us for the revenue that the fixation of standard rent was the result of collusion between the parties concerned and it was a device to evade taxes. The learned departmental representative highlighted the fact that the landlord of the building is a concern of Dalmia group of which the assessee is a member and the petition to the Rent Controller for fixing the standard rent was a part of the scheme to avoid taxes. The learned departmental representative sought to derive support for this view from the Delhi Bench 'A' decision in the case of Hari Bros. (P.) Ltd. (supra).

18. We, however, find that facts and circumstances on the record do not warrant any such conclusion. The petition for fixation of standard rent in this case was filed before the Rent Controller by the tenants, Orissa Cement Ltd., against Hari Bros. (P.) Ltd. who are the landlords.

The agreed rent was Rs. 2,250 per month. The parties led evidence under Section 6 of the Delhi Rent Control Act. A report from architect and approved valuer, Shri H.S. Chandha, was filed. He was examined on oath by the Rent Controller. The petitioner also produced another witness, Shri P.T. Hunduja, who corroborated Shri H.S. Chandha. The respondent landlord produced their architect, Shri Om Parkash Goel and filed his report. Shri H.S. Chandha had estimated the cost of construction of the entire building at Rs. 6,73,561, while Shri Om Parkash estimated it at Rs. 10,28,001. The Rent Controller considered these reports and also looked into the annual report of the respondent company, wherein the land had been valued at Rs. 3,73,174 and the cost of construction was shown at Rs. 6,21,768 aggregating Rs. 9,94,942. The Rent Controller on a consideration of the said evidence fixed the standard rent of one-third of the building at Rs. 1,547 with effect from March 1974 vide order dated 5-6-1974. The landlords filed an appeal before the Rent Control Tribunal, but the appeal was dismissed on merits vide order dated 20-3-1975. It appears that the Rent Controller fixed the standard rent at Rs. 82,500 with effect from 11-3-1974 as stated in para 16 of judgment dated 17-2-1978 of the Sub-Judge-1 Class, Delhi, in Hari Bros (P.) Ltd. v. NDMC [Civil Suit No. 117 of 1976 NDMC] also passed Resolution No. 190 adopting the rateable value of this building at Rs. 82,500 in the meeting held on 20-12-1977. We do not think that on the face of the above evidence, it can be said that the standard rent was got fixed by collusion between the parties. Merely because these companies are controlled by the Dalmia Group, it does not follow that the Rent Controller, the Rent Control Tribunal and the NDMC were victims of collusion between the Dalmia Group and their judgments aforesaid were not independently given on merits, as they purport to be from a perusal thereof. In our opinion, there is no material on the record indicating any collusion and the ITO's conclusion to the contrary is based on mere suspicion.

19. However, we are unable to accept the argument of Shri Sharma that since the employers, Orissa Cements Ltd., were liable to pay only the standard rent, the perquisite value of the premises in the hands of the employee could not exceed the loss incurred by the employers in parting with it. We do not think that it is a correct approach for the decision of the point at issue as to. what is the 'fair rental value' of these premises. The fair rental value cannot, in our opinion, be determined on the basis of the loss incurred by the employer in parting with it in favour of the employee for the simple reason that it is not a consideration in determining the fair rent or standard rent under the Rent Control Act or the perquisite value under Rule 3. We have, therefore, to reject this argument of the learned counsel.

20. Similarly the argument of the learned departmental representative that, since there is no relationship of landlord and tenant between the employer and the employee, the standard rent fixed under the Rent Control Act cannot be taken into consideration in determining the perquisite value is not, in our opinion, well founded. In determining the perquisite value of rent-free accommodation, the ITO is not required to determine the standard rent. The requirement of law is to determine the fair rental value, which can be determined only by assuming that there is a hypothetical landlord and hypothetical tenant.

The actual relationship is not, therefore, relevant. The reliance by the department on the judgment of the Delhi High Court in Murlidhar Dalmia v. CIT [IT Reference Nos. 72 to 76 of 1976, dated 13-1-1981] appears to us to be misplaced. In that case it was admitted on facts that the premises were given by the employer to the employee at a concessional rent of Rs. 25 per month only. The house consisted of 16 rooms fitted with air-conditioners and refrigerators and other costly furniture. The employee was using electricity and water free of charge.

In addition, he had a garden attached to the house where he was having the services of a gardener at his disposal free of cost. These facts were admitted by the assessee. On these admitted facts, the perquisite value could not reasonably be taken at Rs. 25 per month. No wonder, therefore, that the Tribunal detepmined it at 10 per cent of the salary. The facts in the present case are entirely different.

21. Likewise, the decision in CIT v. H.P. Sharma [1980] 122 ITR 675 (Delhi) relied on for the department is distinguishable. The point decided in that case was that, where standard rent had not been fixed under the Rent Control Act, the actual rent, in the absence of any other evidence, would represent the annual value within the meaning of Section 23(1)(a). Reliance was placed on the Full Bench decision of the Delhi High Court in Dewan Daulat Ram Kapur's case (supra), which has since been reversed by the Supreme Court in Dewan Daulat Rai Kapoor's case (supra). We do not quite see how any assistance can be derived by the department from a decision which stands overruled by the Supreme Court.

(1) that Section 3(1)(b) of the Punjab Municipal Act, 1911, as extended to NDMC and Section 116 of the Delhi Municipal Act, 1957, are in part materia with Section 23(1)(a) of the Act; (2) that, consequently, for the assessment years up to 1976-77, the ratio of the Supreme Court decision in Dewan Daulat Rai Kapur's case (supra) applies to the determination of the annual value of a property for purposes of Section 23(1), irrespective of the fact whether it is let out or is self-occupied ; (3) that the perquisite value of the rent-free accommodation provided by an employer to his employee, which is 'fair rental value' of such accommodation is to be determined under Rule 3(1)(a) (iii), in accordance with the decision of the Supreme Court in Dewan Daulat Rai Kapoor's case (supra) for the assessment years up to 1976-77 ; and (4) that in either case standard rent or fair rent is the measure for determining the annual value or the fair rental value, as the case may be, till 31-3-1976.

In this view of the matter, we direct the ITO to take the fair rental value of the rent-free accommodation provided to the assessee by his employer at 1-Tis January Marg, New Delhi, in this case, at Rs. 24,000 for 11 months of the relevant previous year in accordance with the standard rent fixed by the Additional Rent Controller of this property.

This will, of course, be in addition to the value of the furniture and fixtures taken by the ITO at Rs, 3,047.

22 to 32. [These paras are not reproduced here as they involve minor issues.]


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