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C.I.T. WEST BENGAL V. BIMAN BEHARI SHAW SHEBAIT (1968) 68 ITR 815

C.I.T., WEST BENGAL V. BIMAN BEHARI SHAW SHEBAIT (1968) 68 ITR 815

 

FACTS

  • Banku Behari Saha executed a will on November 24, 1925, intending to found a debutter estate, dedicating properties to two deities. Two dedicated properties were No. 12, Benode Behari Saha Lane, and No. 122A, Manicktola Street, in Calcutta.
  • Clause (11) of the will dedicated properties to the deities for worship and specified restrictions on their transfer.
  • Clause (17) restricted residency in the temple premises to the priest and servants, forbidding use for public functions.
  • Premises No. 122, Manicktola Street, later became No. 122A, and a temple was constructed.
  • The Income Tax Officer assessed the properties' annual value based on potential market rent.
  • The assessee objected, citing the properties' religious nature and lack of rental income.
  • The Appellate Assistant Commissioner upheld the objection, considering the properties as temples with no rental income.
  • The revenue appealed to the Appellate Tribunal, which agreed with the Appellate Assistant Commissioner's decision. 
  • Hence, Present appeal before HC

ISSUE

  • Whether the properties had bona fide annual value under Section 9 of the Income-tax Act, 1922? (reference to Section 22 of Income Tax Act,1961)

RULE

  • Section 9(1) of the Act imposes tax on the bona fide annual value of property owned by the assessee.
  • Section 9(2) deems the annual value to be the sum for which the property might reasonably be expected to let from year to year.
  • The properties do have an annual value under the Act even if the properties are not let out by the assessee.

HELD

  • The Bombay High Court rulings in D.M. Vakil v. Commissioner of Income-tax and Sir Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax supported taxing property based on its potential rental value.
  • In D.M. Vakil's Case, it has been expressly provided that the tax shall be payable by the assessee in respect of the bona fide annual value irrespective of the question whether he receives the value or not.
  • The presence of restrictions on letting, as in the will, may reduce the letting value but does not negate the existence of a notional income.
  • The Tribunal erred in concluding that the properties had no letting value due to the restrictions in the will.
  • The injunction/restrictions against residency apart from the priest and servants may reduce the letting value but does not eliminate it entirely.
  • The court answered in favour of revenue, supporting the revenue's position that the properties had bona fide annual value for tax assessment purposes
  • The court refrained from expressing an opinion on whether a temple solely used by a deity falls under Section 9(2) as the question was not referred to the HC. 

 

Commentaries RATIO/ NOTE

  • No escape from taxation if property is not let out. — It is provided in section 23 (operative up to assessment year 1986-87) that if the owner occupies the property, he has to pay tax in respect of the bona fide annual value determined in accordance with the provisions of that section. Therefore, it can be stated that by reason of the fact that the property is not let out, the assessee does not escape taxation [D.M. Vakil v. CIT, (1946) 14 ITR 298, 302 (Bom). Also see, Sir Currimbhoy Ebrahim Baronetcy Trust v. CIT, (1963) 48 ITR 507 (Bom) ; Liquidator, Mahmudabad Properties Ltd. v. CIT, (1972) 83 ITR 470 [LNIND 1970 CAL 146] (Cal) ].

 

What is charged under section 22 is the annual value of the ownership of the property irrespective of the fact whether or not any income was either actually received or had accrued to the assessee [Ram Pershad & Sons v. CIT, (1995) 81 Taxman 332, 334 (Del) ].