JUDGMENT
Sabyasachi Mukharji, J.
1. In this reference under Section 256(1) of the I.T. Act, 1961, in respect of the assessment years 1966-67 and 1967-68, for which the relevant previous years ended on 31st March, 1966, and 31st March, 1967, the following question has been referred to this court:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in determining the annual value of the house properties at 17 and 18, Gurusaday Road, Calcutta, and at 3/1, Raja Santosh Road, Calcutta, no account should be taken of the expenditure incurred in the purchase of air-conditioners, furniture and fans for the use of the tenants ?”
2. The assessee owns three properties situated at 17 and 18, Gurusaday Road, Calcutta, and 3/1, Raja Santosh Road, Calcutta. These properties have been let out to the members of the Birla family at the annual rent of Rs. 7,200 for the first two properties and Rs. 5,400 for the third property. The rentals were considered low by the ITO. The matter, for the first time, came up before the AAC in the assessment years 1957-58 to 1959-60, in Appeal Nos. 206 to 208/C/II/62-63, vide his order dated 30th Nov. 1963, wherein he directed the ITO to adopt the municipal valuation as increased by 1/9th thereof as bona fide annual value of the respective properties. For additional amenities like painting works on sas basis, water heater and refrigerator, etc., he directed that the bona fide annual value as arrived at above be increased at the rate of Rs. 1,250 in the case of Raja Santosh Road property and Rs. 2,500 in the case of the other two properties. This basis was followed by the ITO in the assessment years 1960-61 and 1961-62. In the assessment year 1962-63, the ITO again went into the question of the bona fide annual valuation of the properties. He found that the municipal valuation as fixed in 1959-60 was Rs. 23,760 for the property situated at 17, Gurusaday Road, while it was only Rs. 18,792 for the property situated at 18, Gurusaday Road. Except that the land of the latter property was short by about 12 kattahs, he did not find any other significant difference in the nature of the two properties. He was, therefore, of the view that the municipal valuation in the case of 18, Gurusaday Road, could not be taken as the proper or the correct bona fide annual value. According to him, it should have been equal to the first property, i.e., Rs. 23,760. He further found that while the municipal valuation fixed in 1959-60 had continued unchanged, heavy expenditure had been incurred by the company year after year on making improvements to the property. In the circumstances he held that the reasonable bona fide annual value for each of the above two properties could be taken at Rs. 30,000 and that it should be increased by Rs. 1,200 per annum in each of the subsequent years. For the property
at Raja Santosh Road, he fixed the annual value of Rs. 22,500 in the same assessment year 1962-63, and increased it by Rs. 900 per annum in the subsequent years. This procedure was adopted in the assessment years 1962-63 to 1965-66, and no separate addition was made for any of the improvements. The net valuations were of course arrived at deducting the municipal taxes wherever available and 1/6th of the amount for repairs.
3. In the assessment year 1966-67, the ITO found that the municipal valuation had been revised. He, therefore, took into consideration the revised figures of the three properties in question and increased them by 1/9th as was suggested by the AAC in the assessment years 1957-58 to 1959-60. He then found out the expenditure which had been incurred by tbe company on these properties in different years which according to him worked out to about Rs. 6 lakhs from the assessment years 1960-61 to 1966-67. Considering that the normal repairs incurred were of Rs. 95,000 he held that the balance of Rs. 5 lakhs was incurred for providing various facilities which are not provided by an ordinary landlord to his tenants. He estimated the extra bona fide annual value at 10% of the above expenditure of Rs. 5 lakhs which came to Rs. 50,000. This amount was added by him to the municipal valuation as increased by 1/9th thereof in the assessment year 1966-67. The net bona fide annual value after deducting the statutory repairs in this year worked out to Rs. 99,106. In the assessment year 1967-68, he adopted the same basis but increased the expenditure on amenities by another Rs, 73,000 which was incurred by the company in the above year. He added 10% of the total amount, i. e., Rs. 57,300 as additional amount to arrive at the bona fide annual value in this year worked out to Rs. 1,05,655. The above valuations were also confirmed by the AAC.
4. On further appeal by the assessee the Tribunal directed that tbe bona fide annual value of the properties should be taken equal to the municipal valuation as increased by 1/9th thereof. To the above should be added 1/6th of the expenditure incurred from year to year for the improvement of the property. This expenditure should be determined after deducting from it the amount of statutory repairs and the amount spent for the purchase of air-conditioners, furniture and fans.
5. The. Tribunal in coming to its conclusion observed, inter alia, in its order as follows :
“We entirely agree with the above views, which as mentioned above, are also supported by the decided English authorities. We, therefore, hold that the value of the air-conditioners, furniture and fans cannot be included while working out the improvement to the property. Since it is the responsibility of the landlord to maintain the buildings in proper
state of affairs, we further hold as has been admitted by the Income-tax Officer himself, that the expenditure on the normal repairs has also to be excluded. The Income-tax Officer in the assessment year 1966-67 has excluded a sum of Rs. 95,000 as in his opinion that was the amount of the normal repairs. It is not known how he arrived at this figure. Possibly, he made a lump sum exclusion from the total expenditure of Rs. 6 lakhs. However, overriding the findings of the Income-tax Officer, we would direct him to exclude the expenditure on the above items for which the details are available in the records. For ordinary repairs we would direct him to exclude that amount which is admissible to the assessee as statutory repairs. The Income-tax Officer will work out the net amount of the expenditure which we hold and which had been conceded by the learned counsel for the assessee before us also as and by way of improvement of the buildings. We would further direct that 1/6th of this expenditure should be taken as the extra amount of B.A.V. and should be added to the amount of the municipal valuation in each year on the basis of the expenditure incurred in that particular year. The percentage of 1/16th has been fixed by us following the various orders of the Tribunal in wealth-tax cases where a multiplying factor of 16 is taken to fix the valuation of the properties with reference to the net rental income. The Income-tax Officer is directed to recompute the B.A.V. of the three properties in all the years on the basis of the above findings given by us.”
6. In view of the provisions of Section 22 read with Section 23 and Section 56, Sub-section (2) of the I.T. Act, 1961, we are of the opinion that the Tribunal, in the facts and circumstances of this case and in respect of the three items, arrived at the correct conclusion. The question, therefore, is answered in the affirmative and in favour of the assessee.
7. The patties will pay and bear their own costs.
Suhas Chandra Sen, J.
8. I agree.
