JUDGMENT [ENTITY], J.
1. In this reference under [SECTION] of the [ACT], relating to the assessment years 1967-68 to 1977-78, the Tribunal has referred the following questions of law :
"(1) Whether, on the facts and in the circumstances of the case, the rent for the portion of the said premises which was allegedly low could be computed at a rate higher thari the reasonable rent under the provisions of the [ACT], and/or at a rate higher than taken in the income-tax assessment?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal could take into consideration any notional rent for part of the said premises for determining its value ignoring the actual rent received for such part of the premises and which alone an intending purchaser could receive?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the value of additional land available for separate development should be added in addition to the value of the building as such?
(4). Whether, on the facts and in the circumstances of the case, the Tribunal was right in adding to the valuation of the said premises any further separate value for part of the land in the said premises on the alleged ground that such land was available for future development ?
(5) Whether, on the facts and in the circumstances of the case, the rental income of the self-occupied portion of the said premises could be computed at a higher rate than taken in income-tax assessments and/ or higher than the reasonable rent under the provisions of the [ACT] ?
(6) Whether, on the facts and in the circumstances of the case, the rental income in respect of the self-occupied portion of the said premises could be computed by the Tribunal on an increased basis for later years ? "
2. Out of the above six questions, questions Nos. 1, 2 & 3 are not pressed by learned counsel appearing for the assessee. We, therefore, decline to answer those questions.
Shortly stated, the facts are as under :
3. On the relevant valuation dates for the assessment years involved as aforesaid, the assessee was the owner of a property being premises No. 4, Middleton Street, Calcutta, All these years, the property was in part let out, the rest being self-occupied. The Tribunal followed the rental method for determining the value of the property. The dispute, however, arose over the mode of rent capitalisation adopted by the Wealth-tax Officer, The first aspect that is in question is whether the Tribunal was correct in substituting the sum of Rs. 17,220, the estimated annual value of the portion leased out, for the actual lease rent received being Rs. 3,630. The substitution was upheld in pursuance of the departmental valuer's report that the owner had spent as much as Rs. 99,748 for the additions and alterations to the part of the house so let out arid the floor area of the same portion was 2,870 sq. ft. The rate of rent actually received worked out to Re. 0,11 p. per sq. ft., while the current market rate of rent in the locality, according to the Valuation Officer, should be at least Re. 0.50 p. per sq. ft., regard being had to the type of construction. Therefore, the rent charged by the owner had not been considered to be reliable, particularly because it appeared that the owner had got substantial interest in the firm which is the tenant occupying the said part. Before the Tribunal, the assessee contended that the said premises were actually let out to an existing tenant. Therefore, the rent could not be fixed by the Departmental Valuation Officer on the basis of any comparable instance. That apart, the assessee also pointed out to the Tribunal certain demerits of the house such as that the building had no lift and the floor being very high, was not attractive to any tenant in the absence of the facility of a lift. It was further urged that the income from the house property, on the basis of the rent so received, had been accepted in the income-tax assessment for all the years. Therefore, the annual letting value of the property cannot be a subject-matter of issue in the wealth-lax assessment. The assessee also cited a comparable case where a tenant in a neighbouring house, viz., 4/1, Middleton Street, had been paying rent that works out to Rs. 0.125 p. per sq. ft. A certificate was also produced purportedly issued by M/s. Rameswarlal Dedraj & Co. in proof of the assessee's comparable case. It was further argued that, once the rent capitalisation method is adopted, it could not be any more open to the taxing authorities to depart from the rent adopted as the annual letting value of the property for income-tax purposes. Reliance was placed upon a judgment of the Madras High Court in [PRECEDENT] for the proposition that once a view has been accepted by the taxation authorities, the same should not be departed from by it.
4. All the arguments, however, did not impress the Tribunal. The assessment orders under the [ACT] in respect of the assessee for the years as produced before the Tribunal led the Tribunal to the inference that the assessee had substantial interest in the firm, M/s. Rameswarlal Dedraj & Co., which had been the tenant of the assessee and the assessee earned a substantial income from the said firm. Therefore, the plea of the assessee that the rent in question was being computed by an independent tenant would hardly be of any help to the assessee, in the view of the Tribunal. The Tribunal, therefore, questioned the independent inter se relation of landlord and tenant between the assessee and the said firm. The Tribunal also mentioned that the lease agreement with the firm as the tenant had not been produced before it to show that it really reflected an independent agreement of tenancy between two different persons at arms' length. The Tribunal expressed an apprehension that a person can let out property to a concern in which he has substantial interest at any rate he pleases. It may be accepted for the purpose of income-tax assessment because that is the actual income that he derives therefrom. The Tribunal, however, admitted that it is correct that it was open to the income-tax authorities to take recourse to the provisions of [SECTION] of the [ACT] and held that the actual annual letting value of the property was higher than the rent that was being received by the assessee. But, according to the Tribunal, the mere fact that such course was not taken does not mean that the market value of the property thereby becomes lesser than the true market value. As the property had been actually let out by the assessee to his own firm on a nominal rent, the actual rent received is of no consequence for value determination. Thus, the Tribunal observed that, while the extra benefit derived by the assessee's firm as a result of having the premises at a nominal rent would be indirectly reflected in the income of the firm and all its partners, it would not at all be reflected in the wealth because partnership firms are not assessed to wealth-tax at all. Therefore, the real rental value of the property, according to the Tribunal, has to be estimated for the purpose of wealth-tax if the rent capitalisation method has to be adopted for the purpose of computing the same.
5. It was also argued on behalf of the assessee before the Tribunal that, under the [ACT], a tenant is to pay his landlord a fair rent and the fair rent is to be calculated in accordance with the provisions of [SECTION] of the said Act according to certain percentage of the cost of construction which, in the present case, would be comparatively very low. The Tribunal, however, declined to accept this argument. According to the Tribunal, unless and until a fair rent was fixed, the agreed rent is to prevail under [SECTION], but the Tribunal held that the agreed rent in the present case is not genuine. Therefore, the comparative instance as to rates of rent prevailing in the locality is of material consideration, the contracted rent not being the rent arising from a genuine agreement between the parties. The Tribunal went to the length of holding that the tenancy in the present case is practically a case of a person letting his property to himself and, therefore, there could not be any restriction on the amount of rent that he could charge because he would not apply the fixation of a fair rent against himself. Coming to the actual instance, the Tribunal referred to some instances quoted by the Valuation Officer before the authorities below as well as before the Tribunal.
6. Such actual instances need not detain us ; suffice it at this moment to say that there were a number of cases cited by the Valuation Officer which show that the actual rent realised by a number of landlords in the locality are in the range of Re. 1 per sq. ft. as against Re. 0.11 p. per sq. ft. received by the assessee.
7. On this issue, learned counsel for the assessee laid particular emphasis that no rent can be estimated at any figure higher than what is accepted as the standard rent or the fair rent under the legislation regulating and controlling the rates of rent. Any rent collected in excess of such standard rent or fair rent under the relevant regulatory statute is extortive or exploitative rent and, therefore, could not be taken as a measure of the annual letting value or the annual value of the property. For this proposition, reliance was heavily placed on the decision of the Supreme Court in [ENTITY] v. New Delhi Municipal Committee .
8. The Tribunal did not, however, admit as evidence the comparable instance cited by the assessee since the same was not before either the Wealth-tax Officer or the Valuation Officer. Moreover, the Tribunal considered such instance as not relevant as the commencement of the tenancy in the comparable case is not known. The Tribunal relied upon the notorious fact that the rent in the city has gone up manifold during the past few decades and inferred that the present tenancy having been created quite recently, it was open to the assessee to secure the highest rent. Therefore, the annual rental value of the property as determined by the Wealth-tax Officer at Rs. 17,220 was confirmed by the Tribunal. Before the Tribunal, the assessee's representative placed reliance upon the [ENTITY]'s case . But the Tribunal declined to be guided by that decision on the ground that as the pronouncement of the Supreme Court is not under the [ACT], it has nothing to do with the market value of the property.
9. We have considered the facts as well as the various authorities relied, upon by learned counsel for the assessee. The main ground for the Tribunal refusing to be guided by the rent received from the tenant stands on the factual plane that the tenant is a firm wherein the assessee is interested as a partner. According to the Tribunal, the tenancy agreement is not one entered into by independent parties at arms' length and the same virtually amounts to renting the property to one's own self. It appears that this particular fact has found over-weight age in the Tribunal's consideration of the matter. The determinative factor should have been whether the rent as agreed to by, and received from, the tenant, a partnership firm, is below the fair rent under the [ACT]. The contention on behalf of the assessee is that the fairness of the rent should be adjudged not by the extortionate rent which the landlord could squeeze out from the tenants. Such rent cannot be taken as a yardstick for measuring the legitimacy of the rent. The Tribunal itself has taken judicial notice of the notorious fact that there has been an exorbitant rise in the rates of rent in the city, obviously on account of increasingly acute shortage of housing facilities. Therefore, in our view, the fair rent has a major place in deciding the issue. The task of finding out the fair rent within the meaning in [SECTION] of the [ACT], has not at all been addressed. The first step that we consider necessary before rejecting the rent under the tenancy agreement as understated was to give a clear finding that the fair rent under the relevant statute is higher than the rent at which the assessee had let out its property to the tenant, a firm, regardless of the fact that the assessee was one of the partners of the said firm. The assessee's interest in the tenant-firm may be an alerting factor but not a conclusive one to warrant straightaway rejection of rent as being below the fair rent. If the rent agreed upon and received by the assessee is equal to or more than the fair rent, there would be no room for ignoring that rent as the basis for valuing the property on rent capitalisation method. It is not that the Tribunal does not consider the rent capitalisation method as the method to be adopted as proper and just in the case. That being so, no option is left to the Tribunal except to go by what is the fair rent under the statutory regulation for control of the rent.
10. The Tribunal has observed that the ratio in [ENTITY]'s case has no bearing on the matter. We cannot share this view. Though the authoritative and binding effect of that decision arose from the interpretation of the provisions of the [ACT] in connection with determination of the annual value of a property for the purpose of levy of municipal lax which is related to annual value, yet the definition of "annual value" in the [ACT]s is the same as the annual letting value under the [ACT]. The [ACT] fundamentally defines annual value as the rent for which the property might reasonably be expected to be let from year to year. Virtually the same words also define the annual value under the [ACT]s. In the absence of any variation in definition, the decision of the Supreme Court bearing on the definition of the annual value though under a different Act has the same bearing under the [ACT] also.
11. We agree that any definition under any other Act should not be freely imported in defining the same expression under another Act, the objective and the contexts of the legislations contained in various Acts not being identical. Therefore, caution must be exercised in drawing upon any decision under an extraneous legislation. But, this is not an absolute rule. Where the context and purpose under two different legislations have any intersecting point on any particular aspect, aid can always be drawn from the judicial proclamations under the other Act only to the extent of that particular common ground. Here, the decision in [ENTITY]'s case decides the issue which is common to both the [ACT]s and the [ACT]. The expression is common : so is the context the levy of tax on the annual value. The annual value is the base for the levy of tax under both the legislations. The purpose of taxation may be different but the measure of taxation is dependent, in connection with a house property, on what the annual value of the property is. Therefore, the Tribunal was wrong in excluding from consideration the authoritative value and the binding nature of the decision of the Supreme Court in [ENTITY]'s case . In fact, the Supreme Court later acknowledged this unity of the two Acts, i.e., the [ACT] and the [ACT], on the question of annual value and the Supreme Court applied the ratio in [ENTITY]'s case to cases falling for decision under the [ACT] with regard to the question as to what the annual value of a property within the meaning of [SECTION] of the [ACT] should be. The ratio decidcndi in [ENTITY]'s case was applied in [PRECEDENT] and [PRECEDENT] . The Supreme Court held that such annual value should not exceed what the regulatory legislation for tenancy of premises determines as standard rent or, for that matter, fair rent under the [ACT]. In all these cases, the assessee contended that the rent which the assessee had been receiving in excess of the standard rent under the legislation for rent control cannot be treated as part of the annual value so as to be taxed under [SECTION]. Because rent extorted in excess of the rent which is statutorily fixed as standard rent cannot be the same which one can reasonably expect to receive by letting the property year to year. What can be reasonably expected must be the lawful rent, not the rent illicitly secured. The Tribunal has erred on this particular aspect. It should not have come to its decision on the assumption that the rents are being paid and received at exorbitant rates in recent times. The Tribunal's observation that it is a matter of common knowledge that the rent in the city has gone up many fold is virtually immaterial. The Tribunal also overlooked the import of the decisions of the Supreme Court referred to above. As a matter of fact, by reason of the decisions of the Supreme Court, the Legislature found it necessary to amend the definitidn of the expression "annual value" in [SECTION] so that the Revenue could bring to tax the excess of the rent over the standard rent or fair rent actually received by the landlord. In this case, it is not that the assessee is alleged to have received rent exceeding the fair rent, the allegation is the other way round. The assessee, allegedly, had been receiving lesser rent than what the assessee could have obtained.
12. In any case, for the purpose of income-tax, the actual rent received can be substituted by a higher sum only where the assessee is found to be receiving rent below the fair rent. Therefore, what appears to be, in our view, the proper course in this case for the taxing authorities was to find out what the annual value in accordance with statutory fair rent could be in this case and, if the actual rent comes short of it, then only to the extent of the shortfall, the rent received could be increased for the purpose of arriving at the annual value and, for it, the maintainable rent which is the base for the rent capitalisation method.
13. The Tribunal has not gone into the real question involved in the case whether the rent received is below the "fair rent" within the meaning of [SECTION] of the [ACT] ; if not, what the fair rent should be in the case.
14. It is the fair rent which should be the conclusive criterion. The Tribunal fell into error by not holding that the fair rent is the ultimate test. If this principle is correct for a tenant-occupied portion of a property, it should be equally correct for valuing the self-occupied portion of the property. The quantum of annual value is an invariable quantum. It does not vary depending on whether it is self-occupied or tenant-occupied.
15. Therefore, the annual value of the property for the capitalisation should in all cases be the fair rent. We, therefore, decline to answer questions Nos. 5 and 6 and remand the matter to the Tribunal with the direction to determine the issues in the light of our observations and the principles laid down by the Supreme Court in the decisions relied upon.
16. We now turn to question No. 4. It relates to the addition of the value of the excess appurtenant land to the valuation of the existing structure. Here, the Tribunal's view point is that since there was some land in the said property in excess, the same could be available for development as a separate house-site for sale. The assessee raised multiple contentions against such additions before the Tribunal. The first plea was that the open area was in the actual occupation of the tenants. It was also submitted before the Tribunal that one of the tenants, viz., [ENTITY], had asserted his right to the lawn in the premises as the land for common use in the title suit being [CASE NUMBER]. It was further urged that the Municipal bye-laws at the time of the construction of the building, i.e., in 1925, required 2/3rds of the area to be left open. The last contention of the assessee was that no house-site was possible to be developed since the open land lies in the rear portion of the building without a possible passage to such site. Thus, such vacant land had no potential value. The Tribunal, however, found that, on the relevant valuation date, there was no contest by any tenant as to the open space forming part of the common amenity. The Tribunal, however, found that the assessee could not prove the right of use of the open land as part and parcel of the tenancy of the existing building. On the contrary, the assessee was disputing the tenant's right to use the land. The Tribunal also observed that, under the present Municipal Regulations, the appurtenant land has to be 50 per cent. of the area constructed. Therefore, the unbuilt part of the land according to the Tribunal, is open for development as a site for constructing new building.
17. The controversy, in our view, is wholly unnecessary. [SECTION] in the past or [SECTION] to the [ACT], has a clear prescription for treatment of unbuilt area. When the statute prescribes the mode of treatment, it is pointless to enter into any debate on this. We, therefore, decline to answer question No. 4 and direct to the Tribunal to decide the issue afresh and make adjustments for the unbuilt area according to the rules.
18. There will be no order as to costs.
[ENTITY], J.
19. I agree.