ARREARS OF RENT RECEIVED IN A LATER YEAR OF ACCOUNT ARE NOT TAXABLE AS INCOME FROM HOUSE PROPERTY IN THAT YEAR BUT ARE TAXABLE AS INCOME FROM HOUSE PROPERTY OF THE EARLIER YEAR TO WHICH THEY PERTAIN.

AJIT K. SENGUPTA, J.

( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following question of law has been referred to this court pertaining to the assessment years 1982-83 and 1983-84 :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the additional or extra rent attributable to preceding years of account which could not be taxed under Section 22 of the Act should, instead, be taxed under the head "income from other sources"

( 2 ) THE facts giving rise to an identical question for both the years are as under : the assessee derives income, inter alia, from house property being the premises known as "hamilton House" at Connaught Place, New Delhi. The assessee received an aggregate amount of Rs. 9,70,960 by way of rent from as many as six tenants. This rent is attributable to 12 months, comprised in the previous year ending October 31, 1981, relevant to the assessment year 1982-83. The said amount represented what may be called the "odd rent".

( 3 ) IT would appear that, as a sequel to negotiations going on for quite some time, higher rents were agreed to by some tenants with retrospective effect. Consequently, during the year of account ending October 31, 1981, relevant to the assessment year 1982-83, the assessee received an aggregate amount of Rs. 1,52,094. 20 as arrears of rent relatable to the period from July, 1979, to October, 1980, relevant to the earlier assessment year. The assessee, it would appear, also received a further sum of Rs. 1,30,430 pertaining to the year of account relevant to the instant assessment year 1982-83 but after the close of the relevant year of account. The Income-tax Officer included both the amounts as the gross rent for the said accounting year, though the first amount of Rs. 1,52,094. 20 relates to the earlier accounting period, namely, July 1979, to October, 1980.

( 4 ) ON appeal, the Commissioner of Income-tax (Appeals) held that the arrears of rent of Rs. 1,52,094,20 are assessable as rent for the accounting year relevant to the assessment year 1982-83 by reason of the same having been received during the accounting year. But the sum of Rs. 1,30,430, though it related to the year of account ending October 31, 1981, but received after the close of the relevant previous year under an agreement dated May 15, 1982 (a date falling after the year ending, namely, October 31, 1981), was held not to be brought to charge in the assessment year 1982-83. In this regard, the Commissioner of Income-tax (Appeals) took the line that the Income-tax Appellate Tribunal, in its order relating to the assessee's appeal for the assessment year 1978-79, had held that, where the right to receive the additional rent accrued or arose after the close of the relevant previous year, the same could not be brought to tax in respect of the previous year that expired before such accrual of the additional rent.

( 5 ) AS for the sum of Rs. 1,52,094. 20 being the arrears of rent pertaining to the earlier previous year but received during the relevant previous year ending October 31, 1981, he held that it was correctly exigible to tax as income from house property arising in the previous year relevant to the assessment year 1982-83 because, not only did the right to receive the arrears of rent accrue but they were received during the relevant year of account.

( 6 ) A similar issue arose for consideration in the assessment for the assessment year 1983-84 and was likewise decided.

( 7 ) IN its appeal before the Tribunal, it was urged on behalf of the assessee that the charge under Section 22 is limited to the notional value of a house property in a year. Therefore, rent not attributable to a particular previous year cannot be rental income of that year merely by reason of receipt. Any arrears of rent received on account of past previous years cannot be brought to tax in the year of receipt under Section 22 of the Act.

( 8 ) THE Tribunal implicit

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