1. These appeals by the assessee are directed against the consolidated order of the AAC dated 30-6-1981 relating to the assessment years 1978-79 and 1979-80.
2. I have heard the parties. The issue involved in these appeals is regarding relief under Section 23(1) in respect of two residential units let out for use otherwise than residence during the accounting periods relevant to the assessment years under appeal.
3. The ITO found that the assessee had constructed six flats in respect of which deduction under Section 23(1) was claimed at the rate of Rs. 1,200 per flat in the assessment year 1978-79. However, according to him, such deduction with respect to two flats which were let out to Chief Fire Officer for commercial purposes was not admissible.
Therefore, for the assessment year 1978-79, he allowed deduction for four flats and for the assessment year 1979-80 when 7 flats had been constructed, he allowed deduction for five flats. In other words, in each of the assessment years under appeal, with regard to two flats let out to Chief Fire Officer, the deduction was not allowed. This action of the ITO was confirmed by the AAC.4. After hearing the parties and on perusal of the relevant provisions of law, it is seen that there is no specific prohibition contained in provisions of its second proviso (b)(i) to Section 23(1) of the Income-tax Act, 1961 regarding non-residential use of the residential units constructed. A reading of the section shows that the incentive provided by the Parliament was for investment in property for residential purposes during a limited period. But it will be adding to the words in the statute to stretch their meaning to the limit to which the ITO went to hold that only when a residential unit is occupied for purposes of residence, exemption is available under the Act. Therefore, he erred in not allowing exemption to the assessee for all the six flats in the assessment year 1978-79 and for 7 flats in the assessment year 1979-80, which had been accepted to have been constructed as residential units within the statutory period provided. The revenue relied on the ratio of the Andhra Pradesh High Court judgment in D.R.Sunder Raj v. CIT  123 ITR 471 but I find that the case law is not applicable to the issue before me because that was on the interpretation of Section 23(2) and not Section 23(1). I set aside the orders of the authorities below on this point and direct that necessary relief be allowed to the assessee.