All India Bar Examination (AIBE) 3-III Previous Year Question Papers with Answers

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99.

A owns a house in City B. The house used to fetch a rent of Rs. 15,000/- every month but it has been vacant for over two years. A is now unemployed and stays with family in City C and has been residing there for the past three years. Which of the following statements most accurately applies the principle stated below ?


Principle :

The 'annual value' of the property is defined as the sum for which the property might reasonably be expected to let from year to year. However, the annual value of property that is occupied by the assessee herself, or which is not occupied by her due to her employment in another place, is considered as zero, unless the assessee is deriving some benefit from the property.

A: Since A's house in City B is vacant, the annual value of it is zero.
B: Since A's house in City B used to be let out for Rs. 15,000/-, the annual value of it may reasonably be expected to be around Rs. 15,000/-.
C: Since A is residing in City C for over three years, the annual value of the house may be considered to be zero.
D: Since A is purposefully letting the house in City B be vacant, the annual value of the house must be considered to be zero.
E: Since A is unemployed and residing in another city, the annual value of the house must be considered to be zero.

The answer is: B

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Explanation

The correct option is:

B: Since A's house in City B used to be let out for Rs. 15,000/-, the annual value of it may reasonably be expected to be around Rs. 15,000/-.

Explanation:

The principle provided states that the annual value of a property is defined as the sum for which the property might reasonably be expected to let from year to year. In this case, A's house in City B used to fetch a rent of Rs. 15,000/- every month before it became vacant. Therefore, it is reasonable to expect that the annual value of the property would be around Rs. 15,000/-, as that was the amount it was fetching when it was let out.

Option B correctly applies the principle by considering the historical rent amount as the basis for estimating the annual value of the property. The fact that the property is now vacant does not change the reasonable expectation of its annual value based on its previous rental income.