Case: Commissioner of Income Tax, Lucknow Vs. Madho Pd. Jatia

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 whether the tenant who was in occupation of the property has, . in fact, paid the rent or not would not enter into consideration 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 occupation. 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 p art 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 condition s 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 t he 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 deductions for the balance of the irrecoverable rent in subsequent 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 exemption 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 successive 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 deduction which can be claimed by the assessee at an assessment cannot exceed the amount of rent payable for a year. The item thus places a limit in respect of the deduction which is permissible in an assessment for one year. In case, however, the amount of irrecoverable 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 subject to the condition that in no year the deduction would exceed the amount of rent payable: for a year. the assessee, 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 adopted. The fact that such an interpretation is also in consonance 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 Delhi (521. T.R. 933.) 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 Singhs case.5.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 subject to the condition that in no year the deduction would exceed the amount of rent payable: for a year. the assessee, 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 adopted. The fact that such an interpretation is also in consonance 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 Delhi (521. T.R. 933.) 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 Singhs case.