Income from house property – Annual letting value – Section 23 – A. Y. 1986-87 – Annual value is lesser of fair rent and standard rent

For the A. Y. 1986-87, the Assessing Officer determined the annual value on the basis of the standard rent and not on the basis of the rateable value as determined by the municipal corporation. This was upheld by the Tribunal.

On appeal by the assessee, the following question was raised before the Bombay High Court:

“Whether, on the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal was right in holding that in computing the property income u/s. 23 of the Income-tax Act, 1961, the annual letting value of the self-occupied property has to be the sum equivalent to the standard rent under the Rent Control Act and not the municipal rateable value.”

The Bombay High Court held as under:

“(i) While determining the annual letting value in respect of properties which are subject to rent control legislation and in cases where the standard rent has not been fixed, the Assessing Officer shall determine the annual letting value in accordance with the relevant rent control legislation. If the fair rent is less than the standard rent, then, it is the fair rent which shall be taken as annual letting value and not the standard rent. This will apply to both self-acquired properties and general cases where the property is let out.

(ii) The order of the Tribunal had to be set aside. Matter stands remanded for consideration in accordance with the aforesaid norms.”