' MUHAMMAD MUJIBULLAH SIDDIQUI (JUDICIAL MEMBER)--This appeal is directed against the order, dated 29-8-1984 by the C.I.T.(A) Zone-6, Karachi in I.T.A. No, 387/Z-6/82-83.
2. Briefly stated the relevant facts giving rise to this appeal are that the assessee, hereinafter referred to as the respondent, is a private limited company engaged in construction business.
While finalizing assessm ent for the assessment year 1982-83 the I.T.O. Found that the respondent has received deposits to the tune of Rs,8,16,250 not adjustable against the rent payable by the tenants and, therefore, made addition of Rs,81,625 at the rate of 10% of the deposit by virtue of the provisions contained in section 12(13) of the Income-tax Ordinance. However, while allowing repair allowance at 1/5th of the annual value he excluded this amount of deemed income from the annual value of the property. The respondent felt aggrieved with the above treatment and preferred first appeal before the learned C.I.T.(A) contending that the deemed income under section 12(13) of the Income-tax Ordinance, 1979 at 10% of the non-refundable deposits is to be treated as income from house property and the allowance at 1/5th of the annual value should be inclusive of this deemed income. The contention found favour with the learned C.1.T.(A) who directed the I.T.O. To allow 1/5th for repairs on deemed income from house property under section 12(13) of the Income-tax Ordinance, 1979. The department felt dissatisfied with this direction and preferred this second appeal before us.
3. We have heard Mr. Yousuf Sharih, the learned D.R. And Mr. Sattar Adam, C.A. Learned A.R. For the respondent. Mr. Yousuf Sharih, the learned D.R. Initially argued that the deemed income under section 12(13) is not to be included in the annual value for the purpose of deduction in respect of repairs but when his attention was drawn to the relevant provisions contained in section 20(1)(a), sections 19(2)(b) and 12(13) of the Income-tax Ordinance, he conceded that the repair allowance is to be allowed on deemed income under section 12(13) as well.
4. The allowance in respect of repairs is allowed under section 20(1)(a) of the Income-tax Ordinance which reads as under:- "20. Deductions.-- In computing the income under the head 'Income from house property' the following allowances and deductions shall be made, namely:-
(a) in respect of repairs, an allowance equal to one-fifth of the annual value." The annual value is defined in section 19(2)(6) as follows:- `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: ' Provided that where the property is let on rent, the annual value shall not be less than the rent payable by the tenant."
' Section 12(13) of the Income-tax Ordinance providing that the advance of security not adjustable against the rent payable by the tenant shall be deemed to be income of assessee reads as under:- "Where an assessee, being the owner of a building, receives from any person to whom such building or any part thereof is let out on rent any amount which is not adjustable against the rent payable by such person, such amount shall be deemed to be the income of the assessee and chargable to tax under the head 'Income from the house property' in the income year in which such amount is received and the nine income years next following the said income year in equal proportion; and the amount so allocated to each income year shall be deemed to be the rent received in respect of such building or a part thereof."
5. A perusal of the above provisions shows that if a property is let on rent the annual value thereof would be taken at the rent payable by the tenants. The fiction of law created under section -12(13) of the Income-tax Ordinance clearly provides that 1/10th of the deposit/advance paid by the tenant to the assessee shall be deemed to be the rent received in respect of such building or part thereof. It means that for the purpose of determining the annual value of the property as defined in section 19(2)(6) of the Income-tax Ordinance the fiction of law created under section 12(13) is not to be extended by any process of interpretation or arguments but the very fiction of law itself is extended by its own force on a plain reading of the said provision. We are, therefore, of the considered opinion that in order to determine the annual value for the purpose of making allowance in respect of repairs the provisions of sections 19(2)(6) and 12(13) arc to be read together. Mr. Sattar Adam, learned representative for the respondent has further pointed out that the form of return of total income under the Income-tax Ordinance, 1979 IT-11 is a statutory form and Annexure 2 thereof is in respect of details of income from house property. The item No,2 of these details reads as under:- "Annual value (including 1/10th of the unadjustable advance or security deposit received from the tenant."
6. The statutory Form IT-11 is prescribed under Rule 190 of the Income-tax Rules, 1982. The entry in the prescribed statutory form lends support to the view that the annual value for the purpose of repair allowance is inclusive of the 1/10th of the unadjustable advance of security deposit received from the tenant. The finding of learned C.I.T.(A) is in consonance with the interpretation annual value by the C.B.R.
7.For the foregoing reasons it is held that the annual value for the purpose of repair allowance permissible under section 20(1)(a) of the Income-tax Ordinance is to be determined by reading the provisions of sections 19(2)(b) and 12(13) of the Income-tax Ordinance, 1979 together. The impugned order of learned C.I.T.(A) is, therefore, not open to exception and no interference is called. The departmental appeal is without substance and is dismissed accordingly.