Tivoli Investment & Trading Co. Pvt. Ltd Vs ACIT (Bombay High Court)
Bombay High Court held that if municipal rateable value doesn’t depict correct annual value, AO can make independent enquiry under section 23(1)(a) of the Income Tax Act and determine the sum which the property is reasonably expected to fetch for purpose of determining annual value u/s. 22.
Facts- The issue involved here is whether it is permissible for the Assessing Officer to determine annual value of the property for the purposes of taxation u/s. 22 of the Income Tax Act, 1960 (the Act) higher than the rateable value determined under the Municipal laws. The issue arises in the light of challenge raised by the Assessee to the order dated 30 June 2003 passed by the Income Tax Appellate Tribunal (ITAT) pertaining to the Assessment Years 1990-91 and 1991-92, by which the orders passed by the Commissioner of Income Tax (Appeals) and Assessing Officer are upheld. Notably, AO has determined the gross annual letting value of the property under the provisions of Section 23(1)(a) of the Act at Rs.22,00,000/- and has subjected the same to tax u/s. 22 of the Act.
Conclusion- The Assessing Officer can make an enquiry under Section 23(1)(a) of the Act to find out the sum which the property is reasonably expected to fetch for the purpose of determining the annual value under Section 22. After the Assessing Officer, on his own enquiry, finds out that the gap between the municipal rateable value and the annual rent of the property is likely to fetch in not too wide, the Assessing Officer can consider the annual value of the property corresponding to the municipal rateable value. However, the moment the Assessing Officer notices that the gap between the two amounts is wide, he cannot be compelled to accept the municipal rateable value for the purpose of Section 23 of the Act. Thus, the principle of accepting municipal rateable value for the purpose of Section 23 of the Act cannot be uniformly applied to every case and there is no bar for the Assessing Officer from making an independent enquiry under Section 23(1)(a) and determine the sum which he believes is likely to be fetched as rent in respect of the property in question.
