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

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 fro m 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. 1, 85, 892 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 t hat the claim could properly be made for the deduction in the assessment for the three years with which we ale concerned in spite of the fact that such claim had been allowed in assessees 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 theappeal before us Mr. Sharma on behalf of the appellant 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.

Reasoning: 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.