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Commissioner of Income-tax Vs. M.R. Alagappan, - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTCP Nos. 339 to 341 of 1982
Judge
Reported in[1987]164ITR690(Mad)
ActsIncome Tax Act, 1961 - Sections 23
AppellantCommissioner of Income-tax
RespondentM.R. Alagappan, ;m.A. Arunachalam and ;m.A. Murugappan
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateR. Janakiraman, Adv.
Excerpt:
- .....support the annual letting value of rs. 12,000 adopted by him by referring to the annual letting value fixed by the corporation of madras for the same building at rs. 9,828. the income-tax officer, however, found that the property has been improved at a cost of rs. 5,58,798 and working out the return on such investment at 6%, fixed the annual letting value of the entire building at rs. 36,000 and determined the assessee's share of the annual letting value at rs. 12,000 as against rs. 4,000 given by the assessee in his return. 3. the assessee went in appeal to the appellate assistant commissioner against the determination of the annual letting value by the income-tax officer at rs. 36,000 as against rs. 12,000 fixed for the whole building. before the appellate assistant commissioner,.....
Judgment:

Ramanujam, J.

1. In these reference applications, the Revenue seeks a direction from this court to the Tribunal to refer the following question of law as arising out of the order of the Tribunal :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the annual value of the property No. 4, Chittaranjan Road, Madras-18, should be taken at Rs. 12,000 against Rs. 36,000 adopted by the Income-tax Officer ?'

2. The assessee in this case along with two others owns a property known as 'Laurels' in Chittaranjan Road, Madras. For the assessment year 1976-77, the assessee, while computing his property income, had adopted his share of annual letting value of the building at Rs. 4,000, being the 1/3rd share of the total annual letting value of Rs. 12,000, adopted for the whole building. The assessee sought to support the annual letting value of Rs. 12,000 adopted by him by referring to the annual letting value fixed by the Corporation of Madras for the same building at Rs. 9,828. The Income-tax Officer, however, found that the property has been improved at a cost of Rs. 5,58,798 and working out the return on such investment at 6%, fixed the annual letting value of the entire building at Rs. 36,000 and determined the assessee's share of the annual letting value at Rs. 12,000 as against Rs. 4,000 given by the assessee in his return.

3. The assessee went in appeal to the Appellate Assistant Commissioner against the determination of the annual letting value by the Income-tax Officer at Rs. 36,000 as against Rs. 12,000 fixed for the whole building. Before the Appellate Assistant Commissioner, the assessee contended that that the annual letting value of Rs. 12,000 for the entire building was reasonable when compared to the municipal value of Rs. 9,828 and, therefore, the Income-tax Officer was not correct in rejecting it and fixing a higher value.

4. The Appellate Assistant Commissioner, however, did not accept the contention of the assessee as he found that on the basis of large investment made on the property, the annual letting value adopted by the assessee should be taken to be too low. In this view, the Appellate Assistant Commissioner upheld the determination of the annual letting value by the Income-tax Officer.

5. Aggrieved by the order of the Appellate Assistant Commissioner, the assessee preferred an appeal to the Income-tax Appellate Tribunal. Before the Tribunal, the assessee contended that there was no justification in taking investments as a factor in determining the bona fide annual letting value and as the property was constructed for personal occupation of the assessee, the possible yield from the property was not material, nor the manner in which the building was constructed nor did the material used for construction have any relevance in fixing the annual letting value and that what was material was the rent the building would fetch if it were to be let out and as the municipal authorities had fixed the annual letting value at Rs. 9,828 after visiting the property, the value adopted by the assessee should be taken to be correct and reasonable.

6. The Revenue, however, contended before the Tribunal that the annual letting value fixed by the Income-tax Officer was a reasonable one having regard to the fact that considerable improvement has been made to the building and that it is not possible to ignore the improvements to the building in the determination of the annual letting value.

7. The Tribunal, after considering the rival contentions, held that the annual letting value fixed by the municipal authorities was to be the basis for fixing the bona fide annual letting value and that the adoption of Rs. 12,000 as the annual letting value for the entire property should be taken as reasonable. In this view, the Tribunal allowed the assessee's appeal and directed the Income-tax Officer to recompute the income from the house property on the basis of the bona fide letting value adopted by the assessee.

8. Aggrieved by the order of the Tribunal, the Revenue now seeks a reference on the question set out above.

9. It is not in dispute in this case that the annual letting value fixed by the municipal authorities for the building was Rs. 9,828. According to learned counsel for the Revenue, the said value was fixed long before the improvement of the property and that value does not take into account the improvements made to the house. But on the material on record it is not possible to say that the annual letting value fixed by the municipal authorities was without reference to the improvements. It cannot also be said that the annual letting value fixed by the municipal authorities cannot be taken to be a relevant consideration for the determination of the annual letting value of the property. In this case, the Income-tax Officer ignored the annual letting value fixed by the municipal authorities, but proceeded to take into account the improvements made to the building at a cost of Rs. 5,58,798 and working out the yield or return on such investment at 6% fixed the annual letting value of the entire building at Rs. 36,000. Therefore, the Income-tax Officer has not gone into the question as to whether the annual letting value fixed by the municipal authorities was before or after the improvement. Admittedly, in this case, the house has not actually been let out, but it is used for the owner's residence. Perhaps taking into account this circumstance, the municipal authorities had fixed the annual letting value at Rs. 9,828. Since there is no material to indicate that the said annual letting value was fixed long before the improvements were made to the house, the Tribunal has rightly assumed that the municipal authorities while fixing the annual letting value for the building in the year in question should have taken into consideration the improvements also. Since it is not possible to say that the annual letting value fixed by the municipal authorities is not relevant for the purpose of determining the annual letting value under section 23 of the Income-tax Act, we are not in a position to say that the Tribunal went wrong in accepting the municipal valuation. Therefore, no question of law arises out of the order of the Tribunal. These petitions are, therefore, dismissed.


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