A room in a lodge cannot be considered a residential unit for the purpose of claiming the benefit of reduction under the second proviso to s. 23(1) of the I.T. Act, 1961.

RAMANUJAM J.

Both the cases relate to the same assessee but for two assessment years. The first relates to the assessment year 1971-72, while the second relates to the assessment year 1972-73. The assessee is the owner of a building called "Giri Bhavan" bearing Door No. 16, Begam Sahib Street, Madras 2. The ITO estimated the annual letting value of the said building at Rs. 36, 000 on the basis of the order of the AAC for the earlier assessment year 1970-71, as against the annual value of Rs. 12, 000, returned by the assessee. The assessee appealed and the AAC following the Tribunal's order for the preceding year adopted the monthly letting value of the property at Rs. 1, 800 and this was confirmed in appeal by the Tribunal. Aggrieved by the order of the Tribunal, the assessee sought for and obtained a reference of the following questions of law to this court for its opinion Question for decision in T.C. No. 1352 of 1977.

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in fixing the bona fide letting value at Rs. 1, 800 per month as against Rs. 1, 000 per month, as per the lease deed ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is not entitled to the relief under the second proviso to s. 23(1) of the I.T. Act, 1961 ? "

Question for decision in T.C. No. 1597 of 1977.

" Whether, on the facts and in the circumstances of the case, the applicant was not entitled to relief under the second proviso to s. 23(1) of the I.T. Act in respect of each room as claimed by the assessee ?" *

The case of the assessee is that he has leased out the building to his wife only at Rs. 1, 000 per month, as evidenced by the registered lease deed and that the actual rent which he is receiving should alone be taken into account for the purpose of determining the annual letting value. But in this case the ITO, the AAC and the Tribunal have all found as a fact that the rate of rent referred to in the lease deed is too low and that the lease deed which has been executed between the assessee and his wife cannot be taken to be genuine. The Tribunal in this case has, therefore, not chosen to adopt the annual rent as disclosed by the lease deed as the basis for determining the annual letting value of the building. After referring to the three methods adopted by the ITO, the Tribunal taking note of the area of the ground floor occupied by the owner's son and wife and the area occupied by the owner in the first and second floors, which could not have been the subject-matter of the lease, held that a sum of Rs. 21, 500 would be a reasonable annual letting value of the building, which works out to Rs. 1, 800 per month. Having regard to the fact that on the other methods referred to by the ITO, the rental value was high, the annual letting value determined by the Tribunal appears to be very much in favour of the assessee. We have, therefore, to agree with the finding of the Tribunal that the letting value of the building is Rs. 1, 800 per monthComing to the other question, it is seen that the assessee claims the benefit of reduction under the second proviso to s. 23(1) of the I.T. Act. We have already found that the letting value of the entire building is Rs. 1, 800 per month. It is not in dispute that the building has been used as a lodging house and there are 36 rooms therein. The case of the assessee is that every room by itself is a residential unit, since each of the rooms is separately let out to different tenants as independent units. According to the assessee, since the building comprises of as many as 36 residential units, the second proviso to s. 23(1) will come into operation and, therefore, there should be a reduction in the annual letting value, as provided therein. It is not in dispute that in the corporation's books there is only one assessment for the entire building and there are not as many assessments as there are rooms in the buil