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Commissioner Of Income-Tax, West Bengal v. Biman Behari Shaw Shebait.
Factual and Procedural Background
The reference arises under section 66(2) of the Indian Income-tax Act, 1922, concerning the assessment years 1957–58 and 1958–59. The case involves properties dedicated by Banku Behari Saha through a will dated November 24, 1925, to two deities, Sri Sri Iswar Benode Behari Jew and Sri Sri Iswar Benodeswar Mahadev. Two properties, No. 12 Benode Behari Saha Lane and No. 122A Manicktola Street in Calcutta, are at issue. The will dedicated these properties for religious use, with specific restrictions on their use and occupancy, including that only the priest and servants may reside in the temple premises and that the premises should not be used for public functions or meetings.
The Income-tax Officer assessed the bona fide annual value of these properties based on their likely market rental value, despite the properties not being let out. The assessee objected, arguing that no income accrued from these premises as they were temples and were not let out. The Appellate Assistant Commissioner allowed the objection, deleting the addition to income. The Revenue appealed to the Appellate Tribunal, which upheld the Appellate Assistant Commissioner's decision based on the restrictive clauses in the will preventing letting or other use of the premises.
The Commissioner of Income-tax then sought a legal opinion from this Court, questioning whether the Tribunal erred in law by holding that the premises had no bona fide annual value under section 9(2) of the Income-tax Act, 1922.
Legal Issues Presented
- Whether the Appellate Tribunal misdirected itself in law in holding that premises No. 12, Benode Behari Saha Lane, and No. 122A, Manicktola Street had no bona fide annual value within the meaning of section 9(2) of the Income-tax Act, 1922?
Arguments of the Parties
Assessee's Arguments
- The properties are temples dedicated to deities and have not been let out, hence no income accrues from them.
- The restrictive clauses in the will prevent letting or any other income-generating use of the properties.
- Previous assessments did not include any addition of income on account of these premises.
Revenue's Arguments
- Despite the properties not being let, section 9(2) requires income tax to be computed based on the notional annual letting value.
- The restrictive clauses may reduce the letting value but cannot eliminate the notional annual value altogether.
- Reliance on precedents that establish tax liability on notional income irrespective of actual receipt or ability to let the property.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| D.M Vakil v. Commissioner of Income-tax [1946] 14 I.T.R 298, 302 | The tax liability arises on the bona fide annual value of property regardless of actual receipt or letting, and restrictions on letting do not exempt the owner from tax. | The Court relied on this case to hold that the existence of restrictive clauses in the will does not negate the notional annual value of the property for tax purposes. |
| Sir Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax [1963] 48 I.T.R 507 | Supports the proposition that tax is payable on notional annual value even if the property is not let out due to restrictions. | The Court cited this precedent to reinforce that the owner's inability to let the property does not exempt them from tax on the notional income. |
Court's Reasoning and Analysis
The Court examined section 9(1) and 9(2) of the Income-tax Act, 1922, which impose tax based on the bona fide annual value of property, defined as the amount the property might reasonably be expected to fetch if let out. The Court emphasized that the tax liability exists irrespective of whether the property is actually let or produces income. It acknowledged that restrictive clauses in the will limiting occupancy and use of the properties are relevant in determining the bona fide annual value and may reduce it significantly. However, such restrictions do not eliminate the notional annual value altogether.
The Court found the Appellate Tribunal's conclusion—that the premises had no letting value because of the restrictions—was legally incorrect. The Court held that the premises must be considered to have some notional letting value, even if reduced by the restrictions. The Court refrained from deciding whether a temple exclusively used by a deity falls within the ambit of section 9(2), as that issue was not before it.
Holding and Implications
Holding: The Court answered the question referred in the affirmative, holding that the Appellate Tribunal erred in law in holding that the premises had no bona fide annual value within the meaning of section 9(2) of the Income-tax Act, 1922.
Implications: The decision means that the premises dedicated to the deities are liable to be assessed for income tax based on their notional letting value, notwithstanding the restrictive clauses in the will. The ruling clarifies that restrictions on letting reduce but do not eliminate the taxable annual value of property. The Court did not establish a new precedent regarding properties exclusively occupied by a deity, leaving that question open. The direct effect is in favor of the revenue, reversing the Tribunal's exclusion of the annual value from assessment.
The Judgment of the Court was delivered by
Banerjee, J.:— This reference, under section 66(2) of the Indian Income-tax Act, 1922, has been made in circumstances hereinafter stated.
2. The assessment years with which we are concerned are years 1957–58 and 1958–59. One Banku Behari Saha executed a will on November 24, 1925, and thereby intended to found a debutter estate. He dedicated several properties to two deities installed by him, namely, Sri Sri Iswar Benode Behari Jew and Sri Sri Iswar Benodeswar Mahadev. In this reference we are concerned with two of the dedicated properties, namely, No. 12, Benode Behari Saha Lane and No. 122A, Manicktola Street, both in the town of Calcutta. It is necessary for us to consider the following clauses of the will, in order to understand the question referred to this court. The dedication opens with the following paragraph:
“According to the wishes of my revered father I have built the edifice of a temple, a Thakurbari at premisses No. 12, Benode Behari Saha Lane, in close proximity to our said family dwelling house and have installed therein the deity of Sri Sri Iswar Benode Behari (an image of Sri Sri Iswar Radha Krishna) and Sri Sri Iswar Bendeswari Sina (possibly a misprint for Sri Sri Iswar Benodeswar Mahadev) and have been performing the Puja worship and seva, etc., of the same
The list of all the immovable properties included in this will is given in the schedules Ka, Kha and Ga written below. This property is my estate long enjoyed and possessed.”
“Clause (11). By this instrument of Will I dedicate to the deity Sri Sri Iswar Benode Behari and Sri Sri Iswar Benodeswar Mahadev established by me the properties as included in the schedule (Ga) of this will and all such properties that will be included in the schedule (Ga) in future according to the provisions of this Will from and out of the schedule ‘Ka’ and ‘Kha’. From the time of my death the aforesaid properties shall be used in the aforesaid Dev Seva and for pious acts mentioned below and shall not at any time be transferred in any manner such as gift, sale, etc., save and except for reasons stated here below…
Clause (17). Nobody save and except the Brahmin performing the Worship) of the deity and servants shall ever be competent to reside in the Thakurbati at No. 12, Benode Behari Saha Lane and the said Thakurbati shall never be used as a place of agitation and meeting for the sake of interiors (sic-invitation) or for any public functions.”
3. In schedule “Ga” premises No. 122, Manicktola Street is not described either as a temple or a Thakurbati but the area of the land only, included in the premises, is given. Premises No. 12, Benode Behari Saha Lane, however, is described in the schedule as “Thakurbati and temple”. There is no dispute that 122, Manicktola Street, later on was subdivided or renumbered as premises No. 122A, Manicktola Street and a temple was actually constructed on the site.
4. For the assessment years with which we are concerned, the Income-tax Officer computed the bona fide annual value of the premises No. 12, Benode Behari Saha Lane and 122A, Manicktola Street, at the amounts which they were likely to fetch if let out in the open market. The assessee objected to the assessment of an annual value on the two premises and appealed before the Appellate Assistant Commissioner. The reasons which appealed to the Appellate Assistant Commissioner were:
“As regards the second ground, No. 122A, Manicktola Street, Calcutta, and No. 12, Benode Behari Saha Lane, Calcutta are the temples of the two deities mentioned above. These premises have not been let out and no income accrues therefrom. The Income-tax Officer therefore was not justified in adding any income on account of these premises. In the earlier assessment no such addition has been made. The addition of Rs. 3,334 (Rs. 4,000 less Rs. 666 for repairs) would be therefore deleted in each of the two assessments under appeal.”
5. In the above view the Appellate Assistant Commissioner allowed the objection of the assessee.
6. Against the order of the Appellate Assistant Commissioner, the revenue appealed before the Appellate Tribunal. We are not concerned with the other grounds involved in the appeal. The Appellate Tribunal agreed with the order of the Appellate Assistant Commissioner deleting the bona fide income from two debutter premises mentioned above with the following observations:
“The Income-tax Officer computed the bona fide annual value of the house at the amount which they are likely to fetch if let out in the open market. The Appellate Assistant Commissioner has, however, found that these premises were not let out and no income accrued therefrom to the assessee. In fact, clause (17) of the Will aforesaid says that nobody save and except the priest performing the worship of the deity and its servants shall ever be competent to reside in the temple and it shall never be used as a place of agitation or meeting or for the sake of any public function. In view of the injunctions contained in the will against the residence of any body in the premises apart from the priest performing the worship of the deity and its servants, it is quite obvious that these premises have no letting value and the Appellate Assistant Commissioner was, therefore, justified in excluding from the assessment the annual value thereof.”
7. Thereupon, the Commissioner of Income-tax, at first tried to induce the Appellate Tribunal to refer certain questions of law to this court and therein failing, induced this court to call for a statement of case from the Tribunal on the following point of law:
“Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that premises No. 12, Benode Behari Shaw Lane, Calcutta, and No. 122A, Manicktola Street, Calcutta, had no bona fide annual value within the meaning of section 9(2) of the Income-tax Act, 1922?”
8. In order to answer the question, it is necessary for us to remind ourselves of the provisions of sub-sections (1) and (2) of section 9 of the Income-tax Act, which are couched in the following language:
“9. (1) The tax shall be payable by an assessee under the head ‘income from property’ in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of which he is the owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax, subject to the following allowances, namely,
(2) For the purposes of the section, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year.”
9. It is apparent from the section quoted above that even where a property is not let and even where it does not produce any income, the Income-tax Officer is to proceed on the basis of a notional income, which the property might reasonbly be expected to yield from year to year. Now, where a property is not actually let, even then there ought to be included in the annual income of the owner a notional income from the property. The letting value of a property, whether let or not, can be objectively ascertained on reasonable basis. If there be restrictions on the letting of the premises, that may merely reduce the letting value but it cannot be said, without more, that because of the existence of a restrictive clause there can be no notional annual income deemed to arise from the premises. For this proposition we find ample support from two decisions of the Bombay High Court, namely, D.M Vakil v. Commissioner of Income-tax [1946] 14 I.T.R 298, 302. and Sir Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax [1963] 48 I.T.R 507.. In the first mentioned case Kania, Ag. C.J (as he then was), observed:
“The legislature has therefore expressly provided that the tax shall be payable by the assessee in respect of the bona fide annual value irrespective of the question whether he receives that value or not. Section 9(2) provides that for the purposes of this section, the expression ‘annual value’ shall be deemed to mean the sum for which the property might reasonably be expected to let from year to year. It is again significant to note that the word used is ‘might’ and not ‘can’ or ‘is’. Reading these two paragraphs of section 9 together, it is clear that the income from property is thus an artificially defined income and the liability arises from the fact that the assessee is the owner of the property. It is further provided in the section that if the owner occupies the property he has to pay tax calculated in the manner provided therein. Therefore, by reason of the fact that the property is not let out, the assessee does not escape taxation.
On behalf of the trustees it was urged that in the present case the trustees are prevented from letting out the property to any one by virtue of clause 5 of the will itself. That, however, in my opinion, makes no difference. The liability to tax does not depend on the power of the owner to let the property, as it also does not depend on the capacity of the owner to receive the bona fide annual value of the property. The law has laid down an artificial rule by which the amount is to be considered the income of the assessee from immovable property and provided that he should be taxed on that footing. In my opinion the argument of the Commissioner on this point is correct.”
10. In that view of the law, we have to uphold the contention of Mr. Pal, appearing for the revenue, that the Tribunal was not correct in holding that, in view of the injunction contained in the will against the residence of any body in the premises (apart from the priest performing the worship of the deity and its servants), the premises have no letting value. That injunction will be of relevant consideration in finding out the bona fide value and the weight of the injunction may very much reduce the bona fide letting value of the house. But because of the existence of the injunction, the premises cannot be said to have no letting value, notional or otherwise. In the view that we take, we have to answer the question referred to us in the affirmative and in favour of the revenue. We, however, make one position clear. We are not sure that a temple, which is wholly and exclusively occupied by a deity or for use of the deity, comes within the mischief of section 9(2). We do not express any opinion on the point because that point does not call for a decision in the present reference. In the facts and circumstances of the case we do not make any order as to costs.
K.L Roy, J.:— I agree.
11. Question answered in the affirmative.
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