1. In this appeal by the revenue against the order of the Commissioner (Appeals) dated nil relating to the assessment year 1980-81, the issue involved is whether the addition made by the ITO to the total income of the assessee by taking the annual letting value of the portion occupied by the members of the family at Rs. 6,000 was rightly reduced by the Commissioner (Appeals) to Rs. 834.
2. The assessee before us is Shri Hira Lal Sibbal, advocate. He derives income from legal profession, house property, dividends, interest, etc.
Shri Sibbal had acquired House No. 29 in Sector 5, Chandigarh, as his individual property. He threw this properly into the common hotchpotch of the family of which he is the karta. A portion of this converted property was let out for a consideration of Rs. 10,000 per annum. A part of this property was used for self-residence by the members of the family.
3. When the ITO took up the assessment for the year under appeal, he estimated the income from the self-occupied property at Rs. 6,000 and brought it to tax along with the sum of Rs. 10,000 received as rent under the provisions of Section 64(2) of the Income-tax Act, 1961 ('the Act').
4. In appeal, the Commissioner (Appeals) had upheld the addition of Rs. 10,000 but reduced the addition of Rs. 6,000 to Rs. 834 for the reasons recorded by him in his order. Hence, the grievance of the revenue.
5. The parties have been heard and after careful consideration of the rival submissions and relevant provisions of law, we are of the opinion that the decision taken by the learned Commissioner was fully justified. The reasons for this are as under : Sub-section (2) of Section 64 enacts that where, in the case of an individual being a member of a HUF, any property having been the separate property of the individual has, at any time after 31-12-1969, been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family or been transferred by the individual, directly or indirectly, to the family otherwise than for adequate consideration, then, notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, for the purpose of computation of the total income of the individual under the Act, the following presumptions shall be raised : (a) the individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly ; (b) the income derived from the converted property or any part thereof shall be deemed to arise to the individual and not to the family ; (c) where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the income derived from such converted property as is received by the spouse or minor child from the portion of the converted property allotted to them shall be clubbed in the total income of the individual under the provisions of Section 64(1) of the Act.
There is a proviso to this sub-section wherein it is clarified that the income referred to in (b) and (c) above, on being included in the total income of the individual, shall be excluded from the total income of the family or, as the case may be, the spouse or minor child of the individual.
6. Sub-section (2) of Section 23 of the Act provides that where the property consists of: (i) a house in the occupation of the owner for the purposes of his own residence, the annual value of such house shall first be determined in the same manner as if the property had been let and further be reduced by one-half of the amount so determined or one thousand and eight hundred rupees, whichever is less ; (ii) more than one house in the occupation of the owner for the purposes of his own residence, the provisions of clause (i) shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf:" The proviso to this sub-section clarifies that where the sum so arrived at exceeds 10 per cent of the total income of the owner, the total income for this purpose being computed without including therein any income from such property and before making any deduction under Chapter Vl-A, the excess shall be disregarded.
7. A careful perusal of Section 64(2) shows that after the self-acquired property has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family, etc., the property will belong to the family. In other words, the joint family will be the owner of the property. It is only by three legal fictions created by the Legislature, the income from such property, etc., is to be assessed in a prescribed manner. However, it is clear that first of all the income from such converted property has to be determined in the hands of those to whom the property belongs or in the hands of the owners of the property. Therefore, the income from the property so converted shall have first to be computed as if the HUF was the owner of the property.
8. If so much is clear, then we revert back to the provisions of Section 23(2) proviso to which shows that where the sum so arrived at, i.e., as worked out under clauses (i) and (ii) ibid. exceeds 10 per cent of the total income of the owner, the excess shall be disregarded.
Now if we come to the facts of the case before us, we find that the HUF has only this property from which there is rental income of Rs. 10,000 and the income from self-occupied portion has to be worked out. If the income from self-occupied portion were to be worked out as if the HUF is the owner of the property, the sum that can be determined relatable to the self-occupied portion comes to Rs. 834. Therefore, in place of Rs. 6,000, the learned Commissioner rightly directed the ITO to take only Rs. 834.
9. The revenue relying upon the judgment of the Calcutta High Court in the case of Calcutta Stock Exchange Association Ltd. In re.  3 1TR 105 submitted that the word 'residence' used in Sub-section (2) of Section 23 connotes the same meaning for the word 'residence' used in the proviso to Sub-section (2) of section 9 of the Indian Income-tax Act, 1922. Therefore, resident could be only of a human being, that is, an individual. Since the building was occupied by the members of the family, the income could not be computed for the self-occupation as if that portion of the building was under self-occupation. To our mind, this is too narrow a view propounded by the revenue because the HUF, it is now well settled, can have a residence of its own where all its members eat, drink and sleep. The property was in the self-occupation of the members of the family and has to be given the treatment as if it was used as residence within the meaning of this term incorporated in Sub-section (2) of Section 23.
10. Even if it were possible to argue that there are two reasonable views, it is now well settled that in the interpretation of taxing statute, the construction that favours the subject has to be adopted.
On that count also the issue has to be decided in favour of the assessee. The learned Commissioner was justified in taking the decision that he did.