JUDGMENT R.K. Agrawal, J.
1. The Tribunal, Allahabad, has referred the following question of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), for opinion to this Court :
"Whether, in the facts and in the circumstances of the case, the Tribunal was entitled to and justified in fixing the annual letting value of the property at Rs. 1,20,000?"
2. Briefly stated, the facts giving rise to the present reference are as follows :
The applicant is a HUF which, along with the legal heirs of late Lalloomal, was the half owner of the property known as Hind Cinema. This property was leased under a lease deed dt. 11th Dec., 1947, to Shri Sukh Nandan Prasad Varma w.e.f. 1st Jan., 1948, on a lease rent of Rs. 3,000 per month for a period of five years, i.e., upto 31st Dec., 1952. However, before the expiry of the lease, there was a further agreement in November, 1952, whereby the tenancy of the property was to be continued with the change, among others, that the rent was reduced to Rs. 2,500 p.m. and the tenancy was from month to month. It appears that there were some differences between the tenants, i.e., the legal heirs of Shri Sukh Nandan Prasad Varma and the landlord on account of which a suit for ejectment was filed (Suit No. 70 of 1958) and, according to the suit, the landlord claimed vacant possession and also the rent @ Rs. 2,500 p.m. till the property became vacant under the orders of the Court. There was, however, a compromise decree in the suit and according to the terms of the compromise decree, the tenant agreed to pay damages @ Rs. 3,000 p.m. and to give vacant possession of the property by 31st Dec., 1973, failing which the landlord was entitled to damages w.e.f. 1st Jan., 1973, (c) Rs. 500 per day. This compromise decree was, however, repudiated by the tenant, i.e., the legal representatives of Shri Sukh Nandan Prasad Varma on the ground that the compromise decree was obtained under coercion and was to the prejudice of the legal representatives of Shri Sukh Nandan Prasad Varma which included a minor. The applicant who was one of the landlords, was apprehensive that due to a minor being involved in the matter, it was very likely that the Court will take a view to safeguard the interest of the minor and, therefore, it was advisable to arrive at a compromise. The applicant, therefore, made an application for compromise whereby the rent of the property was increased to Rs. 6,000 p.m. instead of Rs. 500 per day till 31st Jan., 1975, i.e., the date of the filing of the compromise and the delivery of possession. However, even this compromise between the applicant and the legal representatives of Shri Sukh Nandan Prasad Varma was repudiated by the other co-owner of the property Shri Lalloomal. It appears that there were applications for execution of the decree and the Lucknow Bench of this Court by order dt. 25th Sept., 1975, directed that till the disposal of the writ petition, Rs. 10,000 p.m. should be deposited in Court for use and occupation of the premises with a view to safeguard the interest of the landlord. It appears that in the meantime the licence of the tenant to exhibit films in the cinema hall was cancelled by the District Magistrate vide order dt. 31st March, 1.975, and the applicant on being unsuccessful in appeal to the Government of Uttar Pradesh against the order of the District Magistrate, came up in the writ petition before this Hon'ble Court and this Court, vide order dt. 5th Sept., 1975, stayed the operation of the order of the District Magistrate and permitted the tenant to continue exhibiting films till the final disposal of the wrrt petition. There had been numerous cases in various Courts with the result that the position at present was that Rs. 10,000 p.m. was being deposited in the Court in terms of the order of this Court. On these facts, it was claimed before the ITO that the rent which was receivable in respect of this property, was Rs. 3,000 p.m. and, therefore, the bona fide annual value of the property will be Rs. 36,000 only. The ITO, however, held that since, according to the terms of the compromise in the ejectment Suit No. 70 of 1958, the applicant along with the other co-owners, i.e., the legal heirs of late Lalloomal, was entitled to Rs. 500 per day w.e.f. 1st Jan., 1973, the rent receivable in respect of the property for this year amount to Rs. 15,000 p.m. or Rs. 1,80,000. The ITO, therefore, took the bona fide annual value of this property at Rs. 1,80,000 and on this basis worked out the income from this property and consequently the applicant's half share.
When the matter went up in appeal, the AAC held that the amount of Rs. 10,000 p.m. fixed by the Lucknow Bench of this Court for being deposited every month till the disposal of the writ petition, was in connection with the fixation of rent and the amount was fixed by this Court only with a view to safeguard the interest of the landlord and this amount cannot, therefore, be said to be reasonable rent which the property is expected to fetch from year to year or for which the property might reasonably be expected to let from year to year. The AAC further held that the damages of Rs. 500 per day fixed under the compromise in the ejectment suit, was only to serve as a deterrent in case of failure to vacate the cinema building and not giving vacant possession by 31st Dec., 1972, and this amount cannot again be said to be for which the property can reasonably be expected to let from year to year. According to the AAC, a fair indication of the annual letting value of the property is the compromise decree between the applicant and the legal representative of the tenant arrived at on 31st Jan., 1976, whereby the rent of the property was fixed at Rs. 6,000 p.m. The AAC, therefore, determined the annual letting value of the property at Rs. 72,000 and directed the ITO to work out the income from the property and consequently the applicant's half share accordingly.
Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. A cross-objection had also been filed by the applicant wherein it was pleaded that the annual letting value should be worked out at Rs. 36,000. After considering the rival submissions, the Tribunal held that the annual letting value should be determined at Rs. 1,20,000.
3. We have heard Sri Vikram Gulati, the learned counsel for the applicant, and Sri Govind Krishna, the learned standing counsel for the Revenue.
4. The learned counsel for the applicant submitted that the amount of Rs. 10,000 p.m. fixed by the Lucknow Bench of this Court for being deposited every month till the disposal of the writ petition, was in connection with the cancellation of the licence and not in connection with the fixation of the rent. According to him, the rent was fixed by this Court only with a view to safeguard the interest of the landlord and this amount cannot, therefore, be said to be reasonable rent which the property is expected to fetch from year to year or for which the property might reasonably be expected to let from year to year. He relied upon a decision in the case of Addl CIT v. Mrs. Leela Govindan (1978) 113 ITR 136 (Mad).
5. The learned counsel for the Revenue, however, submitted that it is not correct to say that the amount of Rs. 10,000 which the tenant was required to deposit every month under the order of this Court, was in respect of the cancellation of the licence. Instead it was in respect of the ejectment of the tenant and, therefore, the Tribunal had rightly taken the annual letting value of the property in question at Rs. 1,20,000.
6. The Lucknow Bench of this Court, vide order dt. 25th Sept., 1975, passed in Civil Misc. Appln. No. 4991 of 1978 filed in Civil Misc. Writ Petn. No. 1539 of 1975, had directed the petitioners, i.e., the tenants to deposit a sum of Rs. 10,000 for use and occupation of the premises with respect to which an interim order had been granted in favour of the petitioners. This order was passed in order to safeguard the interest of the applicant, i.e., the owner of the property in question. Thus, from a plain reading of the aforesaid order, it is clear that a sum of Rs. 10,000 p.m. directed by this Court was towards the use and occupation of the premises. It had nothing to do with the cancellation of the licence.
7. Under Section 22 of the Act the annual value of the property is chargeable to income-tax under the head income from house property. It reads as follows :
"22. Income from house property.--The annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property"."
The annual value is to be determined in accordance with Section 23 of the Act. Sub-section (1) which is relevant for the purpose of the present case, is reproduced below :
"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."
8. From a reading of the aforesaid provision, it will be seen that the annual rent received or receivable by the owner in respect of the property, if it is in excess of the sum for which the property might reasonably be expected to let out, shall be the annual value. In the present case, the Lucknow Bench of this Court had directed the tenants to deposit a sum of Rs. 10,000 p.m. towards the use and occupation of the property in question. Thus, it can safely be held that the property has been let out for a sum of Rs. 10,000 p.m. and, therefore, the annual letting value fixed by the Tribunal at Rs. 1,20,000 is justified,
9. Reliance placed by the learned counsel for the applicant on the decision of the Madras High Court in the case of Mrs. Leela Govindan (supra) is misplaced as it related to the asst. yr. 1969-70. During that period, the provisions under Section 23 of the Act were materially different than what it stood during the relevant assessment year. Prior to the substitution of Sub-section (1) of Section 23 by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976, the determination of annual value of any property was taken to be the same for which the property might reasonably be expected to let from year to year. The actual amount of rent which was being received, was not to be taken into consideration at all. The Delhi High Court in the case of CIT v. HP. Sharma (1980) 122 ITR 675 (Del), has held that after the 1975 amendment, if the actual annual rent received or receivable is in excess of the annual value, the actual rent shall be taken under Section 23(1)(b) to be the annual value from the asst. yr. 1976-77. In view of the aforesaid discussion, we are of the considered opinion that after the amendment made in Section 23(1) of the Act by the Taxation Laws (Amendment) Act, 1975, the actual rent received by the applicant, i.e., the amount which has been fixed by the Lucknow Bench of this Court, has rightly been treated for determining the annual value.
In this view of the matter, we answer the question of law referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.