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.;