Calcutta H.C : Whether the salary paid to the caretaker is an admissible deduction from the annual rent to determine the annual value of the property und er s. 23 of the IT Act, 1961 ?

AJIT K. SENGUPTA, J.:

At the instance of the assessee, the following question of law has been referred to this Court under s. 256(1) of the IT Act, 1961, for the asst. yr. 1971-72 :

“Whether the salary paid to the caretaker is an admissible deduction from the annual rent to determine the annual value of the property under s. 23 of the IT Act, 1961 ?”

The facts shortly stated are that the assessee claimed deduction of Rs. 3,000 as her share of the expenditure towards the salary paid to the caretaker against the income from house property. The ITO negatived this claim of the assessee.

The assessee appealed to the AAC who was of the opinion that engagement of a caretaker was necessary for the purpose of earning rent from the property and that the claim of the assessee was reasonable. He, therefore, directed the ITO to allow the deduction claimed by the assessee.

Against the said order of the AAC, the Revenue preferred an appeal before the Tribunal. It was contended on behalf of the Department that the AAC was in error in allowing the claim inasmuch as s. 24 of the IT Act, 1961 specified different items to be allowed as deduction in computing the rental income of the assessee. On behalf of the assessee, the order of the AAC was supported. The Tribunal, after hearing the submissions of both the parties, confirmed the order of the AAC by observing as under : “We are of the opinion that the contention of the Revenue does not appear to be sound, because it is first of all necessary to compute the annual value of the property. Sec. 23(1)(a) provides that for the purpose of s. 22 of the Act, annual value of the property shall be deemed to be the sum for which the property might reasonably be let out from year to year. Thus, for the purpose of determining the bona fide annual value of the property, we are to see what rent the assessee woul d expect from the property and while earning rental income from big properties, it is necessary to maintain a caretaker for which there is no dispute by the Revenue. In other words, for earning rental income, the amount paid to the caretaker is to be deducted before the bona fide annual value of the property could be arrived at. When this is done, it is not necessary to look further and see whether the claim could be allowed under s. 24 of the Act. As the claim could be allowed under s. 23 of the Act, it is not necessary to consider the applicability of s. 24 of the Act. The AAC has nowhere stated that the claim is to be allowed in terms of s. 24 of the Act. Thus, in our opinion, the order of the AAC appears to be reasonable.

Accordingly, we confirm his order and dismiss the departmental appeal.” We are, however, unable to sustain the reasoning or conclusion of the Tribunal.

5. Sec. 22 provides that the annual value of a property consisting of any building or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head “Income from house property”. Sec. 23(1)(a) provides that, for the purposes of s. 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to be let from year to year. The figure of annual value determined for municipal purposes, actual rent realised, existence of rent control legislation, etc., are all relevant factors to be taken into account in determining the municipal valuation. Service charges for lift, water pump, water tax, etc., may have to be deducted from the gross rent but not the salary of a caretaker which ha s nothing to do with the determination of municipal valuation. Where actual rent is taken as the basis for the determination of the annual value, salary of a caretaker cannot be deducted. The application of the provisions does not depend on the capacity of the owner to let the property out or on its own power to receive rent or income from bona fide annual value in determining the annual value. No expenditure which is allowable as deduction in computing the municipal valuation can be taken into account in the computation of annual value. The deductions under ss. 23(1) and 24(1) are exhaustive.

6. After the annual value is determined, the deductions as enumerated under s. 24(1) of the Act will be allowed from the annual value so determined. It may be noted that deduction for municipal taxes, where allowable, is given under s. 23(1), first proviso, in the course of the computation of the annual value of the property. The annual value will be reduced by the amount of municipal taxes if the property is let out. The deductions under s. 24(1) are to be made from and calculated on the basis of the annual value so determined. The deductions allowable are, inter alia, for repairs and collection charges. There is no specific item for deduction of the salary of a caretaker from the annual value of the property which is let out. It does not, in any way, affect the determination of the annual value. In our view, in determining the annual value, the salary paid to the caretaker cannot be taken into account.

7. For the reasons aforesaid, the question in this reference is answered in the negative and in favour of the Revenue.

There will be no order as to costs.

J.N. HORE, J.:

I agree.

[Citation : 179 ITR 46]