Section 23(1)(b)

Section 23(1)(b) — the law in short

What the courts have decided on section 23(1)(b), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Tivoli Investment & Trading Co v ACIT High CourtHelps departmentNo later treatment found
  The officer says my declared rent is too low and has fixed a much higher annual value. Is he bound by the municipal rateable value?
  No. The Bombay High Court held that the municipal rateable value does not bind the Assessing Officer when he determines annual value under s.23(1)(a), and upheld an annual letting value of Rs 22,00,000 against a declared licence income of Rs 1,17,900 where the premises had been let to a bank for a nominal monthly fee alongside an interest-free security deposit of Rs 1.54 crore.
• CIT v Uberoi Sons (Machines) Ltd High CourtHelps taxpayerNo later treatment found
  My tenant overstayed, I sued, and years later the court decreed mesne profits at a much higher rate. The Assessing Officer has reopened the earlier years and taxed the enhanced figure as annual value in each of them. Can he?
  No. The Delhi High Court held that until the decree the assessee's right to the arrears was a contingent and inchoate right, that the arrears received as mesne profits could not be brought to tax for the previous years when they fell due and could be brought to tax only in the year of receipt, and that the reopening under section 147 beyond four years was not sustainable because there was no failure to disclose material facts.
• CIT v Sardar Exhibitors P Ltd High CourtHelps departmentNo later treatment found
  My client lets its shop to a group company at a low rent, and that company sub-lets to an outsider at many times the figure. Can the Assessing Officer assess my client on the sub-letting rent?
  The Delhi High Court refused to let that structure pass unexamined. It found the Tribunal had proceeded on the factually wrong footing that the tenant was not a sister concern, when the assessee had admitted the connection before the Assessing Officer, and it remitted the appeals to the Tribunal for fresh consideration, answering the question of law partly in favour of the Revenue. It expressly did not decide whether the sub-letting rent can be taxed in the owner's hands, and left that question open.
• CIT v Moni Kumar Subba (Full Bench) High CourtHelps taxpayer
  The property is not under rent control. My tenant paid a huge interest-free deposit and a small rent, and the Assessing Officer has added notional interest on the deposit to the annual letting value. Is that permissible, and what should the annual value be instead?
  Notional interest on an interest-free security deposit cannot be added to arrive at the annual letting value under s.23(1)(a) — the Full Bench held that view to be the consistent one across the High Courts and adopted it. What the Assessing Officer must do instead is determine the fair rent, for which the rateable value fixed under the municipal laws is a rational yardstick, though it is not binding on him and he may depart from it on material.
• Classic Mall Development Company Ltd v ACIT ITATHelps taxpayerNo later treatment found
  Eight units in my mall stayed empty for the whole year. The Assessing Officer relies on Vivek Jain and says section 23(1)(c) needs the unit to have been actually let during the year, so he has taxed deemed rent under section 23(1)(a). How do I meet that?
  The Tribunal held the annual value of units vacant for the whole year to be nil under section 23(1)(c) and deleted the addition of Rs 56,26,656. It construed the word 'let' in section 23(1)(c) purposively as meaning intended to be let or available to let, so that actual letting during the year is not a pre-requisite where the property was let in an earlier period, remained vacant for the whole year in question and continued to be held for letting. Counsel's submission that the Andhra Pradesh High Court's decision in Vivek Jain is a non-jurisdictional decision of persuasive force only was recorded at paragraph 8.3, and the Tribunal at paragraph 10 said it found force in the submissions of counsel and was in agreement with them; the Tribunal did not itself analyse the point.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.