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2008] 304 ITR 401 [2008] 167 TAXMAN 324 (BOM.) HIGH COURT OF BOMBAY Commissioner of Income-tax v. Akshay Textiles Trading Agencies (P.) Ltd.* F.I. REBELLO AND J.P. DEVADHAR, JJ. IT APPEAL NO. 607 OF 2005 OCTOBER 17, 2007 Section 23 of the Income-tax Act, 1961 - Income from house property - Annual value - Whether annual letting value has to be determined with reference to annual rent received by assessee and not what has been received by its tenants from ultimate users - Held, yes FACTS The assessee-company let out three properties to the three companies and those tenants further sub-let the same property to 'RIL' for higher consideration. The assessee filed the return showing rent received from three companies. The Assessing Officer, however, held that for the purpose of section 23, the annual value of the property should not be one entered into by the assessee with its tenants, but the amount received by the tenants from RIL. On appeal, the Commissioner allowed the assessee's claim. On revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). HELD Section 23(1)(a ) uses the expression 'the sum for which the property might reasonably be expected to be let from year to year'. This has to be considered in the context of the applicable rent laws. The Courts have construed the rent receivable in such circumstances to be either the standard rent or the rateable value as fixed by the local authority, though the rateable value may also on occasions has to consider the standard rent in cases where the rent law may be applicable. Before the amendment brought about to section 23 by the Finance Act, 2001 with effect from 1-4-2002 even if an assessee had received higher rent than the standard rent, the additional amount would not be subjected to tax. To overcome this omission, the section was substituted to cover also those cases where rent received was higher than the standard rent or rent based on municipal rateable value. It is not possible to give a meaning wider amplitude than what is contained in section 23(1)(a). The Legislature had substituted the provision and brought in section 23(1)(b) to cover the part of the annual value which otherwise…

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