LIQUIDATOR OF MAHAMUDABAD PROPERTIES (P) LTD. versus COMMISSIONER OF INCOME TAX, WEST BENGAL II, CALCUTTA

Citation: [1980] 3 S.C.R. 428 · Decided: 09-04-1980 · Supreme Court of India · Bench: N.L. UNTWALIA, R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

428 
• 
A 
LIQUIDATOR OF MAHAMUDABAD PROPERTIES (P) LTD. 
B 
c 
v. 
COMMISSIONER OF INCOME TAX, WEST BENGAL II, 
CALCUTTA 
April 9, 1980 
[N. L. UNTWALIA AND R. S. PATHAK, JJ.] 
Income Tax Act, 1961, Sections 22 and 23-Computation of Income frotn 
house property-Building not in a habita/Jle condition after it was released by 
Gol·crnment consequent to derequisitioning-Assessee claiming remission 
in· 
the computation of income of the entire annual value and also deductions on 
account of insurance premium and municipal taxes relating to the property-
Permissibility of re1nission and deductions claimed-Competency of the High 
Court to give a direction to tile Appellate Tribunal, enabling the Revenue to 
tax income from the property, when the Revenue jailed to ask for a refertnce· 
against Appellate Tribunal's decision-Nature of High Court's polver in 
a reference case. 
The appellant-assessee, in his income tax return for the assesssment year 
1962-63 (for which the previous year was the calendar year 1961) r'cited 
D 
that the annual value of the building derequisitioned by the Govt. on 26-12-1960· 
was Rs. 1,23,672/-. However on the ground that the building had remained: 
vacant throughout the previous year, the assessee claimed a remission in the 
computation of the income of the entire annual value. The assessee als0t 
cJairned a deduction on account of insurance premium and municipal taxes 
relating to the property. 
E 
F 
G 
The lncame Tax Officer took the view that ~e property 
was not in a 
habitable condition and did not admit of letting and therefore no 
question 
e.rose of applying the provisions of the Income Tax Act relating to the com-
putation of income from property. 
Accordingly, be held that the annual value-
as well as the vacancy claim had to be ignored. The assessee appealed to 
the Appellate Assistant Commissioner who held that although the property ha<L 
remained vacant, it possessed an aunue.l value and should be considered for 
assessment. 
On that view, he a1lo\.ved the deductions claimed by the assessee. 
In second appeal, the Incon1e Tax Appellate Tribunal favoured the 
view 
taken by the Income Tax Officer and e.ccordingly held that the claim to deduc-
tions made by the assessee must fail. 
The Tribunal, in other words, affirmed 
that the property fell outside the scope of s. 22 of the Act and, consequently, 
denied the deductions. 
The Revenue appeared 
satisfied 
with the order Of 
Appellate Tribunal. 
But, at the instance of the assessee a 
reference 
was. 
made to the High Court. The 
High 
Court was of the opinion 
that the 
Appellate Tribunal had misconceived the la\v in holding that 
because 
the 
property was in a state of disrepair it did not possess an annual value. 
As 
regards the assessee's claim to the specified deduction, it held that while the 
insurance premium paid by it could be allowed, there was no merit in the 
claim on account of vacancy remission and payments of 
municipal taxes, 
Hence the appeal by special leave to this Court. 
H 
Dismissing the appeal, the Court, 
HELD : I. Whether the High Court was right in including a direction to 
the Appellate Tribunal to take into account the annual value of the property 
• 
• 
1 
> 
• 
• 
LIQUIDATOR MAHAMUDABAO PROPERTIES V. C.I.T. 
429 
will depend on the appreciation of the true scope of the reference taken to 
A 
the High Court. The question referred to the High Court was rooted In the 
fundamental submission of the assessee that the property possessed an annual 
value for the purpose of Section 22 and it was, therefore, entitled to the 
vacancy remission end other deductions claimed by it. The frame of the 
question indicates that it has two parts, whether the Appellate Tribunal was 
right in holding that in computing the income from 
property the premises 
3, Gun Foundry, possessed an annual value and whether the Appellate Tri-
a 
bunal '\\'as right in disallowing the vacancy remission and other deductions 
in resoect of that property. 
[434C-E] 
Unless the property fall within the scope of Section 22 there was no occa-
sion for considering the assessec's claim to the deductions. 
The. High Court 
also, when considering the reference, examined the question in its bifurcated 
character. But although bifurcated. the thrust of the question was directed 
C 
to the consideration of the deductions claimed by the e.ssessee. Whether the 
property possessed an annual value was necessary to determine solely for the 
purpose of 

Excerpt shown. Read the full judgment & AI analysis in Lexace.