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I.T. Reference No.12 of 1975, decided on 1st April, 1984.
---Ss. 9(2) & 66(1)--Reference--Income from property Annual value-- Assessee's income from property was assessed in the previous years on the basis of annual letting value of said property assessed by the Excise and Taxation Department but in the year under review Income-tax Officer proceeded to change that practice and decided to arrive at the figure of actual income and he adopted a particular method in reaching same--No particular reason was given by I.-T.O. for departure from past practice but the underlying idea seemed to be that the actual gross receipts appeared to be much more than the annual letting value--Held, no point of law was involved in the reference and it was open to the Tribunal in appeal to take a view different from the Income-tax Department as to whether reasons fur departure from past practice were sufficient or not--Finding of Tribunal that sufficient evidence was not brought on record by department to justify estimate of annual letting value being essentially based on fact, would not require any decision on a point of law on Reference.
(1967) 15 Taxation 168 (170) ref.
Waheed Farooqui for Applicant.
Iqbal Naeem Pasha for Respondent
Date, of hearing: 1st April, 1985.
.--The applicant has referred the following question for decision to this Court.
"Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the income from property of the club should be computed on the basis of annual value as determined by the K.M.C., as against the actual rent received by the club in respect of that property."
2. The statement of facts appended to the application of the applicant giving rise to this reference are the following:-
"1. That the respondent assessee in an unregistered Mutual Association of restricted members and has been assessed in the status of Association of persons.
2. That the respondent declared income from property on the basis of municipal valuation and gross rent was declared tit Rs.77,760 which, after substracting the statutory allowance; resulted in giving the annual letting value of lts.22,352. However, while framing the assessment the Income-tax office,, noted that the income and expenditure statement filed by the respondent showed chamber income of Rs.2,78,528. Accordingly the Income-tax Officer called for an explanation in this behalf by means of a notice under section 23(3) in order to explain why chamber income should not be treated as bona fide Annual Letting value instead of valuation on the basis of municipal taxes paid. The respondent made a reply that the club provided furnished accommodation on fixed charges and the said charge included an element of rent also and also charges for other facilities such as electricity, garden expenses, painting and stationery and furniture. Accordingly, the Income-tax Officer held that the contention of the respondent was partially acceptable. He determined the annual letting value of Rs.1,15,629 after making allowance for various permissible deductions.
3. That aggrieved by the order of assessment the respondent filed an appeal before the Tribunal. The learned Tribunal allowed the same by its order, dated 8-3-1974 and directed that property income should be computed on the basis of annual value as determined by the K.M.C.
The year of assessment was 1971-72.
3. Mr. Waheed Farooqui had submitted that there was no justification far the Tribunal to interfere with the decision of the Income Tax Officer who had assessed the real income from property of the respondent. We are not convinced that any point of law has arisen in this case.
We find that section 9(2) of the Income-tax Act defines the expression annual value to mean a sum for which the property might reasonably be expected to let from year to year. Admittedly the respondent's income from the disputed property was, assessed in the' previous years on the basis of the annual letting value of the said property assessed by the Excise and Taxation Authorities, but in the year under review the Income-tax Officer proceeded to change that practice and decided to arrive at the figure of actual income from the chambers and he adopted a particular method in reaching the same. The Income-tax officer did not give any particular reasons as to why he was departing from the usual practice, but the underlying idea seems to be that the actual gross receipts appear to be much more than the annual letting value and, therefore, he departed from the practice.
4. This was not regarded as a sufficient reason by the Tribunal from departing from the usual practice and in our opinion, it was open to the Tribunal in appeal to take a view different from the Income-tax authorities as to whether the reasons for departure were sufficient or not. And, therefore, there was hardly any point of law involved in this reference. Moreover, the Tribunal was further of the view that sufficient evidence had not bee brought on record by the Income-tax authorities to justify his own estimate of the annual letting value. This finding is essentially based on facts and this again does not require any decision on a point of law.
5. Mr. Iqbal Naeem Pasha had referred to us 15 Taxation 1967 168 (170) where it was held in a case of Estate Duty Act that it was open to the Income-tax Appellate Tribunal to assess the value of the property on the basis of the net annual rental value assessed for the purposes of municipal assessment.
6. The result is that the answer to the question referred to us is given in the affirmative.
M.B.A./C-13/K Reference answered accordingly.
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