ivil Appeal Nos
150 1542 of 1971
From the Judgment and Order dated 18 12 1969 of the Allahabad High Court in Income Tax Reference No 32864
GC Sharma PL Juneja and SP Nayar for the Appel lant
SC Manchanda VC Prashar  Ujjal Singh for the Respondent
203 The Judgment of the Court was delivered by KHANNA J
These three appeals on certificate by the Commissioner of Income tax are against the judgment of the Allahabad High Court whereby the High Court answered the following question referred to it under section 661 of the Indian Income tax Act 1922 hereinafter referred to as the Act in favour of the assessee respondent and against the revenue Whether in the facts and circumstances of the case the assessee is entitled for each of the years under consideration to the exclusion from the income under the head property  of an amount equal to the irrecoverable rent of the Grand Hotel property for one year which has not been so excluded in the preceding assessments  The matter relates to the assessment years 1957 58 1958 59 and 1959 60
The assessee is the owner of a build ing known as Grand Hotel in Civil Lines Delhi
The income from this building was assessed from year to year under section 9 of the Act as income from property
Subsequently there was a dispute between the assessee and her tenant
Protracted litigation followed and ultimately a compromise was reached between the assessee and the tenant as per compromise deeds dated December 8 1954 and July 9 1955
According to the assessee a total amount of Rs 185892 representing rent due on account of Grand Hotel became irrecoverable from the tenant
At the time of the assessment year 1956 57 the assessee was able to secure deduction under item No 38 of the Government of India notification No 877F dated March 21 1922 as regards unrealised rent in previous years
The assessee made similar claims for deduction at the time of the assessment for the years 1957 58 1958 59 and 1959 60
The claim was not specifically made before the Income tax Officer but was made in appeal before the Appellant Assistant Commissioner
The Appellate Assistant Commissioner declined to entertain the claim made at such a late stage
When the matter went up before the Tribunal in further appeal the Tribunal permitted the assessee to raise that point before it
It was then urged on behalf of the department that in view of the deduction made for the assessment year 1956 57 no further deduction could be claimed by the assessee for the subsequent years
This contention advanced on behalf of the department was not accepted by the Tribunal
The Tribunal took the view that the claim could properly be made for the deduction in the assessment for the three years with which we ale con cerned in spite of the fact that such claim had been allowed in assessee s favour in the year 1956 57
On this view the Tribunal directed the Income tax Officer to compute the total rent which had become irrecoverable in respect of Grand Hotel property
The Tribunal further directed that to the extent the irrecoverable rent had not been exempted in the previous assessment for 1956 57 should be exempted during the year under appeal in so far as income from property was concerned
On application filed by the Commissioner of Income tax the question reproduced above was referred to the High Court
The High Court as stated above answered the question in the affirmative in favour of the assessee
204 In appeal before us Mr Sharma on behalf of the appel lant has assailed the judgment of the High Court
As against that Mr Manchanda on behalf of the assessee respondent has canvassed for the correctness of the view taken by the High Court
Before dealing with the contentions advanced before us it would be appropriate to refer to the relevant provisions on the subject
Section 9 of the Act deals with tax pay able under the head Income from property
According to that section the tax shall be payable by an assessee under the head Income from property in respect of the bona fide annual
value of property consisting of any buildings or lands appurtenant thereto of which he is the owner other than such portions of such property as he may occupy for the purposes of any business profession or vocation carried on by him the profits cf which are assessable to tax subject to certain allowances
These allowances have been speci fied in section 9 but for the purpose of present appeals it is not necessary to refer to them Annual value any property for the purpose of section 9 shall according to subsection 2 of that section be deemed to be the sum for which the property might reasonably be expected to let from year to year
Subsection 2 is followed by a number of provisos but we are not concerned with them in these ap peals
Section 60 of the Act empowers the Central Govern ment to make exemptions
According to the section the Central Government may by notification in the Offi cial Gazette make an exemption reduction in rate or other modification in respect of income tax in favour of any class of income or in regard to the whole or any part of the income of any class of persons
In exercise of the powers conferred by the above section the Central Government issued notification No 878F dated March 21 1922
Item 38 of that notification reads as under The following classes of income shall be exempt from the tax payable under the said Act 38 Such part of the income in respect of which the said tax is payable under the head property  as is equal to the amount of rent payable for a year but not paid by a tenant of the assessee and so proved to be lost and irre coverable where a the tenancy is bona fide b the defaulting tenant has vacated or steps have been taken to compel him to vacate the property c the defaulting tenant is not in occupation of any other property of the assessee d the assessee has taken all reasonable steps to substitute legal proceedings for the recovery of the unpaid rent or satisfies the Income tax Officer that legal proceedings would be useless and 205 e the annual value of the property to which the unpaid rent relates has been included in the assessee s income of the year during
which that rent was due and income tax has been duly paid on such assessed income
 Section 9 of the Act makes provision for computation of income from property on a notional basis
According to this section the income shall be taken to be the bona fide annual value of the property
In making the computation certain allowances which are mentioned in section 9 would have to be deducted
In case the property in question was in occupation of a tenant the taxing authorities have while computing the income from that property to take into account its bona fide annual value
The questions to wheth er the tenant who was in occupation of the property has
in fact paid the rent or not would not enter into considera tion at that stage unless it be found that the rent due from the tenant has become irrecoverable
The fact that the rent due from the tenant has become irrecoverable would in a majority of cases be known only in subsequent years and not in the year during which the tenant has remained in occupa tion
None of the clauses dealing with allowances which are permissible under section 9 1 of the Act deal with rent due from a tenant which remains irrecoverable
It was to meet such an eventuality that exemption was granted as per item No 38 in notification No 878F dated March 21 1922
Item 38 exempts from payment of tax such part of the income in respect of which tax is payable under the head property  as is equal to the amount of rent payable for a year but not paid by a tenant of the assessee and so proved to be lost and irrecoverable
In order to claim the benefit of the above exemption the assessee has also to show that the requirements of clause a to e of item 38 have been satisfied
It was not disputed before the High Court that conditions mentioned in clauses a to e of item No 38 had been fulfilled in the instant case
The dispute between the parties centres on the point as to whether in the event of the amount of the irrecoverable rent being more than the amount of rent payable for a year the assessee can claim the deduction only in one year equal to the amount of rent payable for a year or whether the assessee can claim deduc tions for the balance of the irrecoverable rent in subse quent years also
In other words the question is whether in the event of the amount of irrecoverable rent being more than the amount of the rent payable for a year of the property the assessee can claim the benefit of the exemp tion mentioned in item 38 only once or whether the assessee can claim the benefit of that exemption in successive years also till such time as
the assessee gets relief in respect of the whole of the amount of irrecoverable rent
Both the Tribunal and the High Court took the view that it would be permissible to claim the benefit of the exemption in succes sive years
After hearing the learned counsel for the parties we find no cogent ground to take a different view
The language of item 38 which has been reproduced above shows that if other conditions
are satisfied the deduc tion which can be claimed by the assessee at an assessment cannot exceed the amount of 206 rent payable for a year
The item thus places a limit in respect of the deduction which is permissible in an assess ment for one year
In case however the amount of irrecov erable rent exceeds the amount of rent payable for a year the right of the assessee to claim the benefit of the above exemption does not in our opinion get exhausted by his having claimed exemption in one year
We land no cogent reason as to why the assessee should become disentitled to claim the benefit of the above exemption in respect of the balance of the irrecoverable rent in subsequent years sub ject to the condition that in no year the deduction would exceed the amount of rent payable for a year
the asses see it has to be borne in mind seeks exemption in respect of the notional rental income which he in fact never received but on which he had in terms of section 9 of the Act to pay tax
The underlying object of the exemption granted by item 38 is that the assessee shall be entitled to claim deduction under the head property  in respect of the notional rental income which it subsequently so transpires was never received by him but on which he had to pay tax
Although item 38 fixes the limit of deduction which is permissible in one year there is nothing in the language of that item to warrant the inference that the benefit of the exemption can be claimed only once
There is also nothing in the language of that item to indicate that in respect of the balance of the irrecoverable rent no relief is permissible even though tax on that balance amount too has been paid by the assessee
It is well settled that there is no equity about tax
if the provisions of a taxing statute are clear and unambiguous full effect must be given to them irrespective of any consideration of equity
Where however the provisions are couched in language which is not free from ambiguity and admits of two interpretations a view which is favourable to the subject should be adopt ed
The fact that such an interpretation is also in conso nance with ordinary notions of equity would further fortify the court in adopting such a course
Mr Sharma has invited our attention to the judgment of the Punjab High Court in the case of Daljit Singh v Commissioner of Income tax Delhi1 wherein the Punjab High Court took a different view
For the reasons stated above
we prefer the view taken by the Allahabad High Court in the judgment under appeal to that of the Punjab High Court in Daljit Singh s case
The appeal consequently fails and is dismissed with costs
One hearing fee
PBR Appeal dis missed
1 52 33


Summary:
While assessing the income of the assessee under the head property  the Income Tax Authorities allowed for one year
deduction of a part of a large sum of unrealised rent but rejected the claim for exclusion of the remainder during the three subsequent assessment years
Before the Tribunal the authorities contended that no deduction could be claimed by the assessee for more than one assessment year
The Tribu nal held that to the extent the irrecoverable rent had not been exempted in the previous assessment year should be exempted in the subsequent years from the income from property of the assessee
The High Court answered the refer ence in favour of the assessee
Dismissing the appeal to this Court HELD There is no reason why the assessee should become disentitled claim the benefit of the exemption in respect of the balance of the irrecoverable rent in subsequent years subject to the condition that in no year the deduction would exceed the amount of rent payable for a year
206 B Section 9 of the Indian Income Tax Act 1922 provides for computation of income from property on a notional basis
While computing the income from the property the tax Author ities have to take into account its bona fide annual value
The fact that the rent due from the tenant had become irre coverable would be known only in subsequent years
Section 91 of the Act does not deal with deductions in respect of irrecoverable rent
Item 38 in Notification No 878F dated March 21 1922 exempts from payment of tax such part of the income in respect of which tax is payable under the head property  as is equal to the amount of rent payable for a year but not paid by a tenant of the assessee and so proved to be lost and irrecoverable
205 B D The underlying object of the exemption granted by item 38 is that the assessee shall be entitled to claim deduction under the head property  in respect of the notional rental income which it subsequently so transpires was never received by him but on which he had to pay tax
Although item 38 fixes the limit of deduction which is permissible in one year there is nothing in the language of that item to warrant the inference that the benefit of the exemption can be claimed only once
There is also nothing in the language of that item to indicate that in respect of the balance of the irrecoverable rent
no relief is permissible even though tax on that balance amount too had been paid by the asses see
208 C D Daljit Singh vs Commissioner of Income tax Delhi not approved