ORDER
Shri S.R. Chauhan, J.M.
1. This appeal by the assessee for the assessment year 1991-92 is directed against the order of the CIT(A)-II, Calcutta, dated 30-10-1995 whereby he partly allowed the assessee’s appeal.
2. The relevant facts leading to this appeal are that the assessee has 50% share in the building at 1/2, Allenby Road, Calcutta. The co-owners of the property were realising, apart from the rent for the building, also the hire charges for providing additional facilities to the tenants. The Assessing Officer included the said hire charges to the gross maintainable rent for arriving at the Net Maintainable Rent (in short, NMR) in order to make the valuation of the property. Aggrieved thereby the assessee preferred his first appeal before the CIT(A) who vide his impugned order repelled the assessee’s contention that the hire charges were not includible in the rent inasmuch as the rent was assessed under the head ‘Income from house property’ whereas the amount of hire charges was assessed under the head ‘Income from other sources’ in the I.T. proceedings and so the hire charges were not includible in the Gross Maintainable Rent, and confirmed the action of the Assessing Officer in including the hire charges in the Gross Maintainable Rent in view of Explanation 2 to rule 5 of Schedule III to the W.T. Act. Hence, aggrieved, the assessee is in appeal before the Tribunal raising the following sole ground :
“That on the facts and circumstances of the case, Ld. Commissioner of Wealth-tax (Appeals) erred in holding that the Hire Charges received from the occupiers for the additional facilities (services common maintenance) (assessed under the head ‘Other Sources’ in the income-tax proceedings) are to be added to the rent received or receivable for the purposes of computing gross maintainable rent and determining the value of the immovable property at 1/2, Allenby Road, Calcutta in accordance with the Schedule III to the Wealth-tax Act, 1957.”
3. We have heard the arguments of both the sides and also perused the record.
4. The Ld. A.R. of the assessee has contended that the Assessing Officer has added hire charges/service charges to the rent for capitalising under rule 3 of Schedule III to the W.T. Act, in making valuation of the house property. He has contended that what is postulated in Explanation (2) to rule 5 of the said Schedule for adding in rent is the payment made for use of the property, i.e., the house property and the service charges, as such, are not for the use of the property and so are not covered in Explanation (2) to rule 5. He has also contended that for providing these service, there is no obligation of the owner and these charges even otherwise are not payable by the owner but by the tenant. He has therefore assailed the assessment order as also the Ld. CIT(A)’s impugned order confirming the source. As against this, the Ld. D.R. has supported the orders of the authorities below.
5. We have considered consciously the rival contentions as also the materials placed on record. In the present case the assessment year being 1991-92, the valuation of immovable property has, undisputedly to be done in accordance with the provisions of Part B of Schedule III to the W.T. Act. Rule 3 provides for capitalising the net maintainable rent N.M.R. is defined in rule 4 as the amount of gross maintainable rent reduced by the amount of local tax and 15% of gross maintainable rent. Now it is rule 5 which provides as to how the gross maintainable rent is to be computed. The relevant portions, for our concern in this appeal, are as under :
“Rule 5. For the purposes of rule 4 ‘gross maintainable rent’ in relation to any immovable property referred to in rule 3 means –
(i) where the property is let, the amount received or receivable by the owner as annual rent. . . .”
Explanation (1) to rule 5 provides that ‘annual rent’ means the actual rent received or receivable by the owner. The proviso to Explanation (1) provides for the actual rent being increased in the cases and the manner mentioned thereunder.
Explanation (2) to rule 5 is as under :
“‘rent received or receivable’ shall include all payments for the use of the property, by whatever name called, the value of all benefits or perquisites whether convertible into money or not, obtained from a tenant or occupier of the property and any sum paid by a tenant or occupier of the property in respect of any obligation which, but for such payment, would have been payable by the owner.”
6. If we analyse the above Explanation (2), it will be revealed that the ‘rent received or receivable’ shall include the following three items –
(i) all payments for the use of the property by whatever name called
(ii) value of all benefits or perquisites whether convertible into money or not, obtained from a tenant or occupier of the property
(iii) any sum paid by a tenant or occupier of the property in respect of any obligation which, but for such payment, would have been payable by the owner.
In the present appeal we are concerned with item No. (i) of the above Explanation (2). In our opinion, the above Explanation has been added not without a purpose and to give it a meaning the term ‘use of the property’ is to be considered in a practical sense implying thereby the effective use of the property. The service charges or the charges for amenities provided need be considered in this perspective. Otherwise, for instance, the use of a multi-storeyed building without a lift or without a water pump to store the water in the overhead tank may practically be meaningless though theoretically possible. Besides, these facilities/amenities, undoubtedly contribute to the real worth of the asset. The purpose for valuation of immovable property under the W.T. Act is, in a way, to ascertain the real worth of the asset as to burden the owner/assessee with a suitable wealth-tax amount. This valuation of the immovable property, in terms of real worth, as just discussed, will obviously be for W.T. purpose only and the same may be distinguishable from an otherwise valuation in terms of price. For a purchase price, the owner obtains the rights of ownership of the property which he earlier did not have; and for a sale price the owner completely disposes of his rights of ownership. But in the case of W.T. valuation, neither the property is being obtained, nor being disposed of but the property is kept retained by the owner/assessee and simply its real worth is ascertained for the purpose of levying wealth-tax.
7. One may, however, advance a logic that in Explanation (2) the term ‘rent received or receivable’ means only that sum which is pocketed by the owner and that the charges for the additional services/amenities provided by the owner are in a way only reimbursement of the expenses incurred for providing those services/amenities, so the said charges do not comprise the sum actually received by the owner. In our opinion, when the term rent received/receivable is considered contextually, the above logic stands nowhere. We may note that sub-clause (ii) of proviso to Explanation (1) provides for enhancing the ‘actual rent’ by its 1/9th in case the expenditure on repairs is borne by tenant. We take for instance a case where the owner is getting Rs. 9,000 as actual rent from the tenant and the tenant is also bearing the expenditure of repairs. In that case, the ‘rent received or receivable’ will be Rs. 9,000 plus 1/9th thereof equal to Rs. 10,000. It is just the same thing as a tenant paying actual rent of Rs. 10,000, and the owner expending Rs. 1,000 on repairs. The owner may have made a regular arrangement by having assigned the building maintenance/repair work to someone on a regular payment of Rs. 1,000. In this given situation also, the owner though receiving an actual rent of Rs. 10,000 is really getting only Rs. 9,000 in his pocket. As such construing the term in the context of the relevant provisions existing in the statute, the same cannot be circumscribed within the limit of the amount actually pocketed by the owner.
8. Similarly, the assessment of service charges amount under the head ‘Other sources income’ and that of the rent under the head ‘House property income’ in I.T. proceedings also does not appear to make any material difference in the matter or to offend the view we are taking. The relevant provisions under the I.T. Act have somewhat variance with those under the W.T. Act. First of all, and substantially too, there is no provision similar to Explanation (2) to rule 5 of Schedule III to the W.T. Act in the I.T. Act. Again under section 23 of the I.T. Act, in computing the ‘annual value’; the payment of local tax borne by the owner is to be deducted as provided in 1st proviso to section 23(1) whereas in computing ‘annual rent’ under the W.T. Act the amount of local tax borne by the tenant is to be added so that the actual rent received is increased by the amount of local tax so as to make it the ‘annual rent’ as provided in item (i) of proviso to Explanation (1) to rule 5. Likewise item (ii) of proviso to rule 5 provides for increasing the actual rent by its 1/9th if repair expenses are borne by the tenant, whereas in I.T. Act section 24(1)(i) provides for deduction of 1/5th of annual value for repairs. As such the provisions, related to the matter under consideration, are not exactly the same in the two Acts.
9. The matter may further be viewed from another angle. The valuation of property under Schedule III to the W.T. Act is done for computing wealth-tax leviable on the wealth of the assessee. The wealth, which is taxable under the W.T. Act, is inclusive of movable as well as immovable. Even assuming that the items of property like lift, waterpump, generator, etc., fitted for providing additional facilities to the tenant do not form the house property, still these items will, nevertheless, remain includible in the net wealth of the assessee, differently computed though, the resultant consequence may not, in any way, have any substantial difference.
10. However, we do not mean to opine, with a sweeping stroke, that charges in respect of each and every service/amenity have to be added to the actual rent so as to make it ‘annual rent’ within the meaning of Explanation (1) read with Explanation (2) to rule 5 of Schedule III to the W.T. Act. After consciously considering from various aspects, we are of the view that charges for those services/amenities which the owner is obliged to provide, whether by way of requirement under some municipal/local law/rules or by way of making the property fit/suitable for effective/proper use, and the owner has, for that purpose, made some substantial additional investment in or in connection with the property, so as to provide the additional services/amenities thereby, and thus facilitate the said user, and which investment, even apart, be capable of fetching some return worth-counting in the context, need be added to the actual rent. The services/amenities/facilities like those of the watchman or the sweeper, for which no material/substantial additional investment in or in connection with the property is necessitated to be incurred by the owner, may not be counted for the purpose, nor need the charges for the same be added to the actual rent to bring it within the expression ‘annual rent’ under rule 5 of Schedule III to the W.T. Act. Such exception we need make for the obvious reason that an arrangement to make such service/amenity available may not normally involve wealth to comprise therein and the purpose for valuation under consideration is to compute wealth so as to levy wealth-tax thereon.
11. In view of our above discussion, as the orders of the authorities below, merely refer the amount as being of ‘hire charges’ without there being available on record any break up thereof and also there being no details specifying the kind of amenity/service to which the charges pertain, we are of the view that the matter needs be restored to the Assessing Officer which we hereby do for verification of the amount of hire charges on the guideline elaborated above and add to the amount of actual rent only that amount of hire charges which is attributable to the service/amenity/facility which the owner is providing by making the additional investment in or in connection with the property, and not those charges, if any, which do not involve incurring of any additional substantial investment like the services of a watchman or sanitation/scavenging services as already discussed above.
12. In the result, the appeal is disposed of as indicated above.