Summary of Judgement

In his appeal to the Appellate Assistant Commissioner, the assesse argued that the two properties
in question were temples. These temples were dedicated to two deities, namely, Sri Sri Iswar
Benode Behari Jew and Sri Sri Iswar Benodeswar Mahadev. Thereby the said properties have
not been let out and no income accrued from them.

The assesse asserted that the Income-tax Officer’s computation of reasonable expected annual
income of these two properties for taxation was unjustified. In the earlier assessments too no
such computation was made. Therefore, the annual value computed by the income tax officer, of
the said properties should be negated as these properties were not taxable. The Appellate
Assistant Commissioner allowed assesse’s objection based on above arguments1.

The revenue board appealed before the Appellate Tribunal against the assistant commissioner’s
order. The tribunal also agreed with the above order deleting the computed income of the two
debutter premises from taxable income.

The Income-tax Officer computed the bona fide annual value of the properties at the amount
which they are likely to fetch if let out in the open market i.e. their reasonable expected annual
income. However, the tribunal opined and agreed with the Appellate Assistant Commissioner’s
observation that the said properties were neither let out nor they accrued any income to the
assessee. The tribunal also referred to clause 17 of the will in their judgement. It observed that
the injunctions contained in the said clause against the residence of anybody, apart from the
priest performing the worship of the deity and its servants, in the premises, makes it quite
obvious that these properties have no letting value. Thereby, the Appellate Assistant
Commissioner was justified in excluding the computed annual income of the aforementioned
properties from income tax assessment2.

Then, on Appellate Tribunal’s refusal to refer certain questions of law to the high court, the
Income-tax officer, enforced section 66(2) of the Income Tax Act, 1922 in the Calcutta High
Court to call for a statement of case from the Tribunal. The point of contention was, whether the
Tribunal misdirected itself on point of law, factually and circumstantially, in holding that above
1
Commissioner of Income-Tax, West ... v. Biman Behari Shaw Shebait. on 19 March, 1967, , available at:
https://indiankanoon.org/doc/585905/ (last visited 31 /03/2021)
2
Ibid.
two properties in contention had no bona fide annual value within the meaning of section 9(2) of
the Income-tax Act, 1922?

While answering the question rose, the High court referred to Section 9(1) and (2) [section 22
and 23(1) (a) in the Income tax Act, 1961] of the Income-tax Act, 1922. It observed that these
sections make it apparent that even when a property is not let or does not produce any income,
the Income-tax Officer is to proceed on the basis of a notional income, which the property might
reasonably be expected to yield in any assessment year. Thus, this principle of notional income
creates a legal fiction. This legal fiction justifies inclusion of a reasonable annual notional
income from a property not actually let, in the assessment of the income of owner of such
property3.

The court opined that letting value of a property, whether let or not, can be objectively
ascertained on reasonable basis. Any restrictions on the property being let may merely reduce the
letting value but it per se does not suffice to assert that there can be no notional annual income
deemed to arise from such property. To support their contention the court also referred to the
decisions made in D.M. Vakil v. Commissioner of Income-tax4 and Sir Currimbhoy Ebrahim
Baronetcy Trust v. Commissioner of Income-tax5.

In D.M. Vakil’s case, the court inferred the legislature’s intention on levying tax on income form
house property under the Income Tax Act, 1922. Referring to section 9(2), they observed that it
expressly provides that the tax shall be payable by the assessee on the bona fide annual value.
Whether he receives the value or not is inconsequential. The expression ‘annual value’ shall be
deemed to mean the expected reasonable sum which the property might accrue on being let from
year to year. The court also pointed out that section 9(2) uses the word used ‘might’ and not
‘can’ or ‘is.’6

A reading of these two subsections makes it certain that the income from house property is thus
an artificially defined income evolving

3
Ibid.
4
(1946) 14 I.T.R. 298, 302
5
(1963) 48 I.T.R. 507
6
Supra note 19