Income Tax Appellate Tribunal - Mumbai
Smt. Ushadevi Agarwal vs Income-Tax Officer on 29 November, 1991
Equivalent citations: [1992]41ITD85(MUM)
ORDER
M. K. Chaturvedi, Judicial Member
1. These three appeals by the assesses are directed against the order of the CIT (Appeals), Central-I, Bombay and pertain to the assessment years 1981-82,1982-83 and 1983-84. All these appeals rotate round the common issue. For the sake of convenience, these are consolidated and disposed of by a common order.
2. The assessee is the owner of Flat Nos.112 & 122 in Block A-2 on the 11th and 12th floors of the building known as "Sarnath" situated at 59, Bhulabhai Desai Road, Bombay-26 with an approximate area of 2211 sq. ft. (hereinafter called the premises).
3. The assessee has given this premises to M/s. J. K. Synthetics Ltd., a company registered under the Companies Act, 1913 and having its registered office at Kamla Tower, Kanpur on licence to use and occupy the said premises, together with the fixtures and fittings, on the terms and conditions contained vide Lease and Licence Agreement executed by the parties. The agreed consideration for the user of premises with fixtures and fittings as per the Agreement is payable on monthly basis. Besides, the Agreement contains stipulation for advance deposit also.
4. The assessee filed one certificate from Shri R. J. Sethna, Engineer, Chartered Surveyor, Property Valuer & Consultant, dated 1st Sept., 1981 which reads as under:
TO WHOMSOEVER IT MAY CONCERN This is to certify that the standard rent of the premises in flat Nos. 1127 122 on 11th & 12th floors in the building known as "Sarnath A1-A2" situate at Sophia College Road, off Bhulabhai Desai Road, Bombay -400 026, will not be more than Rs. 2 per sq. foot of the carpet area. The property was constructed in the year 1969 and the flat is of duplex type. Since the carpet area is 2211 sq. feet, the rental will work out to be Rs. 4422 say, Rs. 4500 per month in round figures, excluding all permissible taxes.
5. The assessee returned the income in all the relevant assessment years under the head 'income from house property' reflecting the amount said to be "standard rent" as certified by Shri R. J. Sethna, Property Valuer. Accordingly, standard rent was taken at Rs. 54,000 for all the three years whereas the assessee was actually in receipt of Rs.1,72,458 for the assessment year 1981-82, Rs. 1,59,192 for the assessment year 1982-83 and Rs. 1,81,302 for the assessment year 1983-84. The Assessing Officer has taken into consideration the amounts actually received by the assessee and completed the assessments on that basis. The assessee calculated the income as per the prescription of Section 23(1)(a) on the basis of standard rent. The learned CIT (Appeals) was of the opinion that the licence to use and occupy the premises together with fixtures and fittings is nothing but letting out the property. Therefore, upheld the order of the assessing officer.
6. Shri Y.P. Trivedi, the learned counsel for the assessee, appeared before us. A copy of the Agreement and certificate from R..J, Sethna was also filed by the learned counsel. Shri Trivedi contended that the assessee did not receive rent within the meaning of Section 23(1)(b), therefore, actual compensation cannot be taxed. The income should have been estimated on the basis of Section 23(1)(a). As per the certificate filed, standard rent of the premises is Rs. 54,000only. In these circumstances, revenue authorities should have taken only standard rent into consideration. To support this proposition, Shri Trivedi, relied on the ratio laid down by the Apex court in the cases of Duane Adult Rai Kapok v. New Delhi Municipal Committee [1980] 122 ITR 700, Dr Blabber Singh v. CD [1985] 152 ITR 388 and the Tribunal decision in the case of B. Jamasji Misty (P.) Ltd. v. Third ITO [1985] 12 ID 546 (Bom.).
7. Shri Kazi, the learned Departmental Representative relied on the orders of the revenue authorities. Shri Kazi contended that precedents relied upon by Shri Trivedi, are not relevant in the facts and circumstances of the present case. There is no dispute that the assessee received compensation in respect of use of the premises along with fixtures and fittings. But this compensation endow all the characteristics of "rent". Therefore, the income cannot be estimated on the basis of fair market value. According to the learned Departmental Representative, the definition of the word 'rent' includes within its compass, the payment made by the licensee in respect of use and occupation of any land or building. The licence to use and occupy the premises together with the fixtures and fittings is nothing but letting out the property. The case of the assessee falls within the ambit of Section 23(1)(b).
8. We have heard the rival submissions in the light of material placed before us and precedents relied upon. The assessee at his own declared the income under the head "income from house property" and claimed that annual value is to be determined in accordance with the provisions of Section 23(1)(a) of the Act. It was argued that actual amount realised cannot be taken into consideration, as the property was not let out. Its possession was divested on the leave and licence basis. Besides, what assessee realised was not the rent but the compensation for the user of the premises.
9. Section 23(1)(a) provides that for the purposes of Section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to 'let' from year to year. The word 'let' appears in Section 23(1)(b) also. The word 'reasonably' in Section 23(1)(a)is very important. What the owner might reasonably be expected to get from a hypothetical tenant, if the premises were let from year to year, affords the statutory yardstick for determining the annual value. Though the word 'reasonably' is not capable of a precise definition, it signifies 'in accordance with reason'. In the ultimate analysis, what is reasonable is a question of fact and it would depend on the facts and circumstances of a given situation.
10. In the instant case we find that M/s. J.K. Synthetics Ltd., the licensee company is paying much higher consideration for the user of the premises than what is certified to be the standard rent vide Certificate dated 1-9-1981 by Shri R. J. Sethna, the Valuer. It is well known, that a tenant enjoys better rights than the Licensee. Tenant is protected by the Rent Control Legislation whereas Licensee is bereft of such right. Shri R. J. Sethna has not given any basis for determining the standard rent. The fact that Licensee, who in comparison to a tenant holds possessor rights of inferior degree is paying better consideration, was not taken into consideration while determining the standard rent.
11. The copy of Agreement produced before us is dated 22 July, 1969. The Licence, as per the said Agreement, was granted for a period of eleven months only. It was renewed, re-renewed and it goes on like that. And on renewing the Licence, assessee gets higher compensation for parting with the possessor rights in the premises. Ordinarily, a bargain between a willing lessor and a willing lessee influenced by any extraneous circumstances may afford a guiding test of reasonableness. Nothing was produced before us to show that the compensation given by the licensee company is influenced by the extraneous circumstances.
12. 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 this Act", that is, computed for the purpose of chargeability, under appropriate sections, from Sections 15 to 59. If particular receipt cannot be brought to tax under any of these sections, they will not be included in the "total income" as that word is understood in the Act for the purpose of chargeability. For instance, the main computing Section of "income from house property" is Section 22 which says that tax shall be payable on income under this head in respect of the "annual value" of the property. It is conceivable that income actually received from the property in a year may exceed the notional figure of "annual value" determined. The excess would certainly be liable to be included in "total income" Under Section 5. It, however, remained beyond the ambit of taxable income prior to 1975 amendment. Upto assessment year 1975-76, tax was payable on the annual value and not on actual receipts. It also could not be brought to tax as 'income from other source', because it was not such. Therefore, it was income beyond the ken of taxation, till the assessment year 1975-76. In order to fill up the lacuna and to tighten the loose ends, such income were brought in within the gamut of 'annual value' for and from assessment year 1976-77. In view of this, precedents relied upon by the learned counsel for the assessee are not relevant in the matter.
13. The present case is not the case of hyothetical tenant. Licensee company is paying the agreed amount on monthly basis. It is enjoying possessory rights in the premises. Simply because in the agreement as sessee used the word "compensation" instead of "rent", it cannot be said, that conditions precedent for resorting to Section 23(1)(b) are not satisfied. Nomenclature is not a decisive guide. We find that in the given circumstances, the amount received by the assessee as "compensation" endow all the characteristics of the word "rent". Similarly it is not correct to say that property was not 'let'. The word 'let' as per the Concise Oxford Dictionary connotes "Grant use of (rooms, land, etc.) for rent or hire". Admittedly the assessee has granted the user of the premises for the agreed amount payable on monthly basis.
14. Having regard to the facts and circumstances of the case and after carefully considering the case in its proper perspective, we are inclined to agree with the finding given by the learned CIT (Appeals) that the licence to use and occupy the premises with the fixtures and fittings is nothing but the "letting out" of the property. In this view of the matter we uphold the order of the learned Commissioner of Income-tax (Appeals).
In the result, all the appeals by the assessee stand dismissed.