Law:

Section:

Section 23 of the Income-tax Act, 1961, (corresponding to section 9 of the Indian Income-tax Act, 1922) - Income from house property - Annual value - Assessment year 1960-61 - Whether tax is payable by assessee in respect of bona fide annual value of property and same is not dependent upon question whether he receives that value or not - Held, yes - Whether, where, assessee purchased certain property and permitted vendor to remain in possession of said property as licensee for part of previous year without paying any licence fee, annual value of property for entire period was includible in total income of assessee - Held, yes FACTS The assessee purchased a property under a registered sale deed. The vendor was in terms thereof allowed to use the premises till 31-5-1959, as a licensee without payment of any fee. He, however, did not vacate the premises even after that date and as such the assessee had to file a civil suit against him. This was compromised in 1961, in terms of which the vendor was allowed to occupy the property upto 31-12-1962, as a licensee on payment of licence fee from 1-6-1959 till 31-12-1962. The assessee claimed that since no income was realised by it from this property prior to 1-6-1959, the property income could be taxed during the relevant previous year for four months only, i.e., from 1-6-1959 to 30-9-1959, when the accounting year ended. This, however, did not prevail with the Income-tax Officer, as he held that receipt of rent was not necessary for the determination of income under the head "Property". According to him the income had to be assessed on the annual value whether the rent was received or not. Therefore, he assessed the property on its annual value for the full 12 months. This decision was upheld in appeal by the AAC and the Tribunal. On reference : HELD The scheme of the Act shows that tax is payable by an assessee in respect of thebona fide annual value of the property and the same is not dependent upon the question whether he receives that value or not. It is because of the artificially defined income and the liability arising from the ownership of the property that the same is treated to accrue. The liability does not…

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