SHIELA KAUSHISH versus COMMISSIONER OF INCOME-TAX, DELHI

Citation: [1982] 1 S.C.R. 309 · Decided: 18-08-1981 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

' " 
309 
SHIELA KAUSHISH 
v. 
COMMISSIONER OF INCOME-TAX, DELHI 
August 18, 1981 
[P, N. BHAGWATI AND BAHARUL [SLAM, JJ.] 
Income Tax Act, 1961, S. 23(l)-lnco111efrom house property-Chargeability 
to income tax-" Annual value" of building-Determination of-fVhether standard 
rent determinable under provisions of Rent Act or actual rent received by landlord 
from tenant. 
Words and Phrases-" Annual Vafue"-Meaning of-Income Tax Act, 1961, 
s. 23(1). 
The appellant-3.ssessee constructed a warehouse and let out different portions 
under different tenancies comn1encing on different dates. Later on a new lease 
was entered into between the assessee and her tenant for letting out of the entire 
warehouse and the assessee started receiving rent at the rate of Rs. 34,797/- per 
month in respect of the entire warehouse from 1st April, 1968. 
In the course of assessment of the assessee for the assessment years 1969-70 
and 1970-71 the question arose as to how the "annual value" of the warehouse 
should be determined for the purpose of chargeability to income tax under the 
head "income fro1n house property". The assessee claimed before the Income. 
Tax Officer that on a proper construction of sub-section (1) of section 23, it was 
not the actual rent received by her from the warehouse that was material for 
determining the annual value of the warehouse but the hypothetical amount for 
which the warehouse might reasonably be expected to be let from year to year , 
and since the Delhi Rent Control Act 1958 was applicable in the area in which the 
warehouse was situate, the warehouse could not reasonably be expected to be 
let from year to year at a rent exceeding the standard rent determinable under 
the provisions of that Act. The Income Tax Officer rejected this claim and took 
~·he view that the actual rent received by the assessee provided the ·most accurate 
-and satisfactory measure of the amount for which the warehouse might reasonably 
be expected to let from year to year and the annual value of the warehouse must 
therefore be taken to be the actual rent received by the assessee and he accord-
ingly assessed the assessee to tax on the basis of the actual rent. 
The assessee's appeals for each of the two assessment years to the Appellate 
Assistant Commissioner were unsuccessful. The Income-Tax Tribunal took the 
same view on further appeals by the assessee and held relying on the deciSion of 
this Court in M. M. Chawla v. J. S. Sethi (1970) 2 SCR, 390 tbat!in the absence 
of fixation of standard rent, the agreed rent which is legally recoverable and 
not tainted by fraud, relationship or any other consideration must be taken to be 
the standard rent and hence the actual rent received by the assessee was rightly 
taken as the annual value of the warehouse. 
\ 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
E 
F 
G 
H 
310 
SUPRBME COURT REPORTS 
[1982] 1 S.C.R. 
The assessee's applications to the Tribunal as welJ as to the High Court 
for the making of a reference uoder section 256 of the Income-Tax Act, 1961 
were also dismissed. 
Allowing the, appeals to this Court, 
HELD: 1.The annual value of the building according to the definition 
given in sub-section (I) of section 23 of the Inrome-Tax Act, 1961 is the standard 
rent determinable under the provisions of the Rent Act and not the:actual rent 
received by the landlord from the teoant. (316 H-317 A] 
2. Jn Dewan Dau/at Rai Kapoor etc. v. New Delhi Muncipal Co1nmittee 
[1980] 2 S.C.R. 607 a decision of this Court given on the interpretation of the 
definition of 'annual value' in the Delhi Municipal Corporation Act 1957 and 
the Punjab Municipal Act 1911 for the purpose of levy of house tax, it was held 
that even if tbe standard rent of a building has not been fixed by the Controller 
under section 9 of the Rent Act, the landlord cannot reasonably expect to receive 
from a hypothetical tenant anything more than the standard rent determinable 
under the provisions of the Rent Act and this would be equally so whether the 
building has been let out to a tenant who has lost his right to apply for fixation 
of standard rent by reason of expiration of the period of limitation prescribed 
by section 12 of the Rent Act or the building is selfMoccupied by rhe owner, and 
that the standard rent determinable under the provisions of the Rent Act and not 
the actual rent received by the landlord would constitute the correct measure of 
the annual value of the building. 
[314 H, 316 A-CJ 
3. Thi

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