S.B.Sinha, J. - (1.) This reference under Section 256(1) of the Income-tax Act, 1961, has been made by the Income-tax Tribunal, Bench-C, Calcutta, in respect of the following question ; "Whether, on the facts and in the circumstances of the case, and an interpretation of the documents in respect of rent at 2/3rds of the house property at 18, Rabindra Sarani, Calcutta, for the assessment year 1984-85 and Section 23(1) of the Income-tax Act, 1961, the Tribunal was justified in law in directing the Assessing Officer to recompute the income from the aforesaid house property on the basis of enhanced rent sanctioned and agreed after the close of the previous year to be paid by the various tenants and to determine the income under the head 'Income from house property' ?"
(2.) The assessment year involved in this reference is 1984-85. The facts leading to the said reference are as follows : The assessee maintains its books of account by adopting the mercantile system of accounting. A sum of Rs. 49,85,648 was shown towards rent received by it from the tenants of the house property known as "Poddar Court" situated at 18, Rabindra Sarani, Calcutta. The assessee is the owner of 2/3rds share in the said property. The final determination of annual valuation of the Calcutta Municipal Corporation was under revision. The Assessing Officer upon invoking the provisions of Section 23(1) of the Income-tax Act, took the view that the annual value of the property shall be deemed to be the sum for which the property might reasonably be expected to be let from year to year. However, the Assessing Officer was of the view that the fair market annual value of the property being much higher than the actual rent received which was not fair and reasonable in comparison to rent receivable in the locality for other premises similarly situated. He took the view that the assessee could reasonably expect to receive a higher rent than actually revised. The Assessing Officer further stated that in some cases the assessee received rent at the rate of Rs. 8.50 per sq. ft. per month and as per its own admission in Suit No. C-794 of 1987 filed in this court, wherein rent at the rate of Rs. 8.46 per sq. ft. was claimed as a fair and reasonable rent. Allegedly, one tenant, Overseas Communication Services have been paying rent at the rate of Rs. 8 per sq. ft. per month with effect from 1982 and the Post and Telegraph Department occupies some space situated in the same locality was paying the rent at the rate of Rs. 9 per sq. ft. with effect from 1982. The Assessing Officer, therefore, computed the fair rent to be Rs. 8.50 per sq. ft. and the fair market value thereof was assessed at Rs. 4,38,62,652 out of which the 2/3rds share of the assessee was determined at Rs. 2,92,41,768. To the said amount, a sum of Rs. 16,307 was added as rent for car parking and godown. The Commissioner of Income-tax (Appeals) however, assessed the annual value of the property at Rs. 49,35,648 including rent for car parking and godown in the basement. Up to the assessment year 1983-84 assessment was made on the basis of actual rent but the said authority found that the tenants have been occupying the premises for more than 15 years and the provision of the West Bengal Premises Tenancy Act being applicable and any upward revision of rent would not be permissible except with the mutual agreement between the parties. Efforts, however, have been made by the landlord and the Government Departments who occupied a portion of the premises for enhancement of rent. The Commissioner of Income-tax (Appeals), therefore, directed the Assessing Officer to recompute the income from the house property. The Department preferred an appeal thereagainst. The Appellate Tribunal held : "On a careful consideration of the facts of the case, we find that the order of the Commissioner of Income-tax (Appeals) cannot be upheld. The assessment made in respect of earlier years, cannot be taken as the basis in the present assessment year as there is no res judicata in income-tax proceedings. Each assessment year is independent of the other. Further, the annual letting value as assessed by the Calcutta Corporation was much lower than the actual rent received or receivable cannot be accepted as the basis to accept the actual rent received by the assessee in view of the fact that certain Central Government Departments who occupied a portion of the assessee's house property had only agreed to pay substantially higher rent from September, 1982. The argument that the tenants had been occupying the premises for more than 15 years and under the provision of the West Bengal Premises Act, any upward revision of the rent was not permissible except with the mutual agreement between the parties also cannot be fully accepted in view of the fact that the major tenants, i.e., the Central Government Departments, had duly agreed to pay the enhanced rent as stated above. The contention that the assessee made a claim which was not a legally enforceable right and it was merely an inchoate right is also not fully acceptable for the reasons stated above, i.e., the enhanced rent agreed to be paid by the tenants, namely, the Central Government departments. It may be that there are many tenants and only a few tenants agreed to pay enhanced rent but the fact remains that substantial increase in the rent was agreed to by the Income-tax Department, Central Excise and Accountant General office with effect from September, 1982, at various rates. From the letters of the above Departments copies of which were filed at pages 35 to 37 of the paper book it is clearly shown that although the enhanced rents were agreed to be paid in September, 1986, March, 1987 and April, 1987, the enhancement of the rent were effective from September 1, 1982 and September 27, 1982. The Accountant-General, West Bengal, as per letter dated September 2, 1986, had agreed to pay enhanced rent at Rs. 8.46 per sq. ft. with effect from September 1, 1982. The arrears of the rent from September 1, 1982 to August 31, 1985, was also paid on October 16, 1985, amounting to Rs. 1,37,43,243. The Income-tax Department as per letter dated April 1, 1987, had sanctioned the enhanced rent at the rate of Rs. 3.51 per sq. ft, per month from September 1, 1982 to December 31, 1983, and at the rate of Rs. 5.57 per sq. ft. from January 1, 1984, onwards as recommended by the Hiring Committee (C.P.W.D.). From the above, it is clear that the enhanced rent by the above three Departments particularly covered the previous year relevant to the present assessment year under consideration, i.e., 1984-85. It has, therefore, to be held that income from the aforesaid house property has to be assessed on actual rent received by the assessee. It may be also pointed out that the actual sum for which a property is being let may be taken into consideration as a piece of evidence in arriving at a reasonable rent, but it is not decisive or conclusive as there can be many factors affecting the fixation of the rent. For this proposition, reliance may be placed on the decision of the Calcutta High Court in the case of Babulal Raj Garhia, In re [1936] 4 ITR 148. It may also be stated that the total consideration paid by a tenant may not necessarily be the annual value in the year of account. For this proposition, reliance may be placed on the decision of the Calcutta High Court in the case of Krishanlal Seal and Golap Sundari Dassi [1932] 6 ITC 293, 297 ; [1933] ILR 60 Cal 357. It has also been held in the following cases that the annual municipal valuation may be taken as prima facie correct but it is not conclusive." The Tribunal below referred to the decisions in Jamnadas Prabhudas v. CIT [1951] 20 ITR 160 (Bom), CIT v. Dalmia (R.), CIT v. Dalmia (R.) [Appex. I], CIT v. Dalmia (R.) (Deed.) [Appex. II] and CIT v. Alagappan (M. R.), as also the decision of this court in Hamilton and Co. Pvt. Ltd. v. CIT and held that the claim of the assessee that the arrear rent received in the subsequent year was offered for taxation and in view of the said fact there was no justification not to accept the income from house property as shown by the assessee. The Income-tax Officer, therefore, was directed to recompute the income from house property on the basis of the enhanced rent sanctioned and agreed to be paid by the various tenants and to determine the income in accordance with law.
(3.) Mr. N.K. Poddar, learned counsel appearing on behalf of the petitioner, inter alia, submitted that enhancement of rent on a subsequent date with retrospective effect cannot be assessed for the year from which they had been determined. According to learned counsel, the decision of this court in Hamilton and Co. Pvt. Ltd, v. CIT [1992] 194 ITR 391, had wrongly been relied upon by the learned Tribunal inasmuch as the question involved in this reference did not strictly arise therein. Mr. Poddar would urge that keeping in view the amendments made in the provisions of Section 23 of the Income-tax Act, income which did not accrue or had been received or had been received or receivable in terms of the contract entered into by and between the landlord and the tenants cannot be said to be an income accrued in the particular year by reason of agreement entered into by and between the parties for the purpose of enhancement of rent with retrospective effect. In support of his aforementioned submission reliance had been placed on CIT v. Prabhabati Bansali, Madgul Udyog v. CIT, E. D, Sassoon and Co. Ltd. v. CIT, CIT v. Gajapathy Naidu (A.), CIT v. Hindustan Housing and Land Development Trust Ltd., Mariappa Gounder (P.) v. CIT, Ondal Investments Co. Ltd. v. CIT, CIT v. Simplex Concrete Piles (India) (Pvt.) Ltd. Amar Nath Khandelwal v. CIT [1980] 126 ITR 322 (Delhi), CIT v. Askohbhai Chimanbhai, CIT v. Chanchani Brothers (Contractors) Pvt Ltd. [1986] 161 ITR 418 (Patna), CIT v. Burlop Commercial Pvt. Ltd, and CIT v. Nadiad Electric Supply Co. Ltd. [1971] 80 ITR 650 (Bom).;