Law: Income Tax Act, 1922

Section:

(a) Wealth tax----Valuation of property---Computation of net maintainable rent---Amount paid to lessees under agreement to allow assessee to let out property at higher rent--¬Deductible---Indian Wealth Tax Rules, 1957, R.1-BB. The assessee-company owned a house property. The Assessing Officer determined the value of the house property on the basis of the "net maintainable rent" under rule 1-BB of the Wealth Tax Rules, 1957. Before the Assessing Officer, the assessee claimed deduction of Rs.72,000 while working out the "net maintainable rent". The said amount was payable to three lessees at the rate of Rs.2,000 per month under agreement under which these lessees permitted the assessee to let out the property at a higher rent. The Wealth Tax Officer rejected this claim of the assessee and added Rs.72,000 while computing the value of the house property under rule 1BB. The Tribunal found that the building had been given on rent to the Government of India. In fact before the agreement with the Government of India for renting out the entire premises was executed, the assessee entered into three separate agreements with the lessees for obtaining vacant possession of the building in order to fetch higher rental income from the tenant. The Revenue did not dispute the genuineness of the agreement. It was also not in dispute that the agreement had been acted upon. The Tribunal, therefore, accepted the assessees claim. The Assessing Officer also added Rs.5,13,566 and 5,83,183, respectively to the net wealth of the assessee for the assessment years 1984-85 and 1985-86 in view of section 40 of the Finance Act, 1983, which revived, in a limited way, the levy of wealth tax on companies which was suspended by the Finance Act, 1960. The Assessing Officer found that the assessee had shown the above amounts as representing unpaid municipal taxes as liabilities in the balance-sheet of the relevant period and allowed them as liability. According to the Assessing Officer, the amounts of unpaid Corporation taxes were utilised by the assessee by way of loans and advances and deposits in banks as also for acquiring shares. The said deposits and investments were debts secured on house…

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