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PUNJAB & HARYANA HIGH COURT
D.K.Mahajan and Shamsher Bahadur JJ.
Daljit Singh
Versus
Commissioner Of Income-tax
Income tax Reference No. 34 of 1960,
Decided On : JULY 31, 1963
INCOME TAX - Deduction for irrecoverable rent - Notification No. 878-F (Income-tax) dated March 21, 1952 - Interpretation - Whether assessee entitled to deduction for unabsorbed irrecoverable rent of preceding year not exceeding one year's rent - Held, no.
Fact of the Case:
The assessee, Sardar Daljit Singh, owned half share in a building in Connaught Circus, New Delhi, known as the Regal Building. The other half of the building was owned by the Hindu undivided family headed by his brother Sardar Bhagwant Singh. The income from the whole of the building was computed in the assessment file of Sardar Bhagwant Singh. Half of the net income so computed from this building was assessed thereafter in the hands of the assessee. In computing the income from this building for the assessment year 1952-53, a sum of Rs. 10,059 was claimed as a deduction on account of irrecoverable rent. The amount did not represent the actual irrecoverable rent for that year. In the preceding year 1951-52 a sum of Rs. 17,646 on account of irrecoverable rent was claimed. The income-tax authorities allowed a sum of Rs. 7,587 being the amount equivalent to the rent payable for one year but not paid by the tenant. This deduction was allowed in terms of the Finance Departments Notification No. 878-F è(Income-tax) dated March 21, 1952, as amended form time to time. The claim for the balance of Rs. 10,059 was not entertained. This balance was claimed as a deduction in the assessment for the next year 1952-53 and a similar claim for the deduction of the unabsorbed irrecoverable rent was made for the years 1953-54 and 1954-55.
Finding of the Court:
The court held that the notification limited the quantum of relief to the extent of a year's rent in cases where such rent had become irrecoverable. The court also held that the assessee could not sleep over the matter and let the rent accumulate for a number of years and then try to take benefit of the exemption for the entire accumulation.
Issues: Whether on a true interpretation of the Finance Departments Notification No. 878-F (Income-tax) dated March 21, 1952, the assessee was entitled in computing the income from house property under section 9, to a deduction for the unabsorbed irrecoverable rent of the preceding year not exceeding one years rent?
Ratio Decidendi: The court interpreted the notification to mean that only one year's rent could be allowed as a deduction, and that the balance of the rent due after this deduction would lapse and would not fall within the exemption notification. The court also held that the assessee could not accumulate rent for a number of years and then try to take benefit of the exemption for the entire accumulation.
Final Decision: The court answered the question in the negative, holding that the assessee was not entitled to a deduction for the unabsorbed irrecoverable rent of the preceding year not exceeding one year's rent.
DAYAK KISHAN MAHAJAN, J.
1. This order will dispose of Income-tax References Nos. 34-D of 1960 and 2-D of 1961. The first reference is in the matter of Sardar Daljit Singh and the second in the matter of Sardar Bhagwant Singh. The assessee in the first reference is an individual and the assessee in the second reference is a Hindu undivided family whose karta is Sardar Bhagwant Singh. One of the questions that has been referred to this court under section 66(1) of the Income-tax Act, 1922 (XI of 1922), by the Income-tax Appellate Tribunal, Delhi, is common to both the references. That question is the only question in the first reference and is the third question in the second reference. The other two questions in the second reference are in these term :
"(1) Whether on the facts and in the circumstances of the case, the property at No. 7, Prithviraj Road, New delhi, èvalued at Rs. 1,40,000 and given to S. Bhagwant Singh by his father on the partition of the family belonged to S. Bhagwant Singh in his individual capacity?
(2) Whether on the facts and in the circumstances of the case, the share of S. Bhagwant Singh in the profits of the firms styled M/s. Sir Sobha Singh & Co. (Builders), Nagpur and M/s. Narbada Construction Co. as well as the salary paid by the former company was the income of S. Bhagwant Singh in his individual capacity?"
2. The first and the third questions in the first and the second references respectively is as follow :
"Whether on a true interpretation of the Finance Departments Notification No. 878-F (Income-tax) dated March 21, 1952, the assessee was entitled in computing the income from house property under section 9, to a deduction for the unabsorbed irrecoverable rent of the preceding year not exceeding one years rent?"
3. So far as the first and the second questions in the second reference are concerned it is conceded by the learned counsel for the assessee that they stand concluded by two decisions of this court in S. Bhagwant Singh v. Commissioner of Income-tax and Sri Mohan Tayal v. Commissioner of Income-tax. The only contention advanced by the assessees counsel is that these aforesaid decisions do not lay down the correct rule of law. He has tried to argue in a half-hearted manner that the decisions in the aforesaid two cases need reconsideration but has not bene able to place any matterial before us which would justify us in referring the matter to a larger Bench. Therefore, following the aforesaid two decisions, we answer the first and second questions against the assessee. It may be incidentally mentioned that the decision in S. Bhagwant Singh v. Commissioner of Income-tax was in a matter of the present assessee.
4. The only matter now left for determination is the first question in the first reference which is the third question in the second reference. It will be, therefore, proper to briefly set out the facts in both these references wherein the question has been referred for our decision. The facts in both the references are common and so far as they are necessary for our purposes are given belo :
The assessee, Sardar Daljit Singh, is an individual. He owns half share in a building situate in Connaught circus, New Delhi, known as the Regal Building. The owner of the other half building is the Hindu undivided family headed by his brother Sardar Bhagwant Singh. They are the sons of Sir Sobha Singh. The income from the whole of the building is computed in the assessment file of Sardar Bhagwant Singh. Half of the net income so computed from this building is assessed thereafter in the hands of the assessee. In computing the income from this building for the assessment year 1952-53, a sum of Rs. 10,059 was claimed as a deduction on account of irrecoverable rent, The amount did not represent the actual irrecoverable rent for that year. In the preceding year 1951-52 a sum of Rs. 17,646 on account of irrecoverable rent was claimed. The income-tax authorities allowed a sum of Rs. 7,587 being
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