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income-tax Officer Vs. K.L. Ramachandra - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Bangalore
Decided On
Judge
Reported in(1984)9ITD643(Bang.)
Appellantincome-tax Officer
RespondentK.L. Ramachandra
Excerpt:
.....cent of the assessee's other income, the minor's share included under section 64 of the act in the total income was also to be considered. it was submitted that in the absence of a specific prohibition of relief to hufs under section 23(2), the annual letting value has to be determined in the case of individuals.3. we have heard the rival submissions. section 23(2) reads as follows : (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,.....
Judgment:
2. The second ground is about the granting of concession in the matter of determining the annual letting value permissible to self-occupied property. The revenue's ground is that the assessees being members of HUF the concession regarding self-occupied properties would not be allowable in their case. The concession is permissible in the case of individuals only. Reliance was placed on the words used in Section 23(2) of the Income-tax Act, 1961 ('the Act), which refers to the property in the occupation of the owner for his own residence. Support was sought for this proposition from the decision of the Jammu and Kashmir High Court in the case of CIT v. Mohd. Amin Tyamboo [1980] 125 ITR 375. The learned Counsel for the assessee submitted that the above decision was not applicable as the point for consideration was whether for the purposes of limiting the annual letting value to 10 per cent of the assessee's other income, the minor's share included under Section 64 of the Act in the total income was also to be considered. It was submitted that in the absence of a specific prohibition of relief to HUFs under Section 23(2), the annual letting value has to be determined in the case of individuals.

3. We have heard the rival submissions. Section 23(2) reads as follows : (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 : Provided that for the purposes of Clauses (i) and (ii), where the sum so arrived at exceeds ten 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 VIA), the excess shall be disregarded.

Explanation : Where any such residential unit as is referred to in the second proviso to Sub-section (1) is in the occupation of the owner for the purposes of his own residence, nothing contained in that proviso shall apply in computing the annual value of that residential unit.

Coming to Section 22 of the Act, we find that similar words are used.

This section reads as follows : The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head 'Income from house property'.

If we were to interpret the word 'he' occurring in this section as relatable to individuals, it might mean that exemption from taxation under the head 'Income from house property' is available in respect of business premises where the business is carried on only by individuals.

Conversely, it might mean that property income from let out properties is assessable only in the case of individuals and not HUFs, firms, companies, etc. Such cannot be the intention of the Legislature. This is only by way of illustration to show that wherever the word 'he' is used, it need not necessarily be restricted to an individual.

4. But the question in the present case is about applicability of the proviso to Section 23(2) to HUFs. While there is no ambiguity about the applicability of the proviso to an individual owner who occupies the residence for his own purpose, the question for consideration before us is whether the same concession could be extended to the HUF whose members occupy the property and use it for their own residence. The relevant portions of the observations of the Jammu and Kashmir High Court in Mohd. Amin Tyamboo's case (supra), relied on by - the departmental representative are given below ; A slight consideration of these provisions makes it clear that the benefits of the relief in respect of self-occupied property is available only to an individual assessee. No other assessable entity can claim this benefit. The reference to occupation for the purposes 'of his own residence' unmistakably shows that the owner in question must be a natural person, that is, what is known in income-tax law as 'an individual'. Therefore, when the proviso speaks of total income of the owner it is in this sense that the word 'owner' has been used in it. It has no other significance. It does not limit or restrict the meaning of the expression 'total income', which has to be understood as it is defined in Clause (45) of Section 2 of the Act....

A careful reading of the above will suggest that the emphasis is on the total income of the owner. In that sense the Court upheld the revenue's contention that the total income of the assessee would mean the total income determined for the purpose of income-tax which automatically included the share of the minor added to the income of the assessee by virtue of Section 154. The question whether proviso to Section 23(2) would apply to joint families also, was not before the Court. In this sense the observations of the Court regarding the interpretation of the words 'his own residence' are obiter dicta.

5. The assessee's claim can be justified on other grounds also. The joint family consists of a number of persons. The only criterion for application of the proviso to Section 23(2) is that the owner should use the premises for his 'own residence'. Therefore, if the property belongs to the joint family which consists of a group of persons, the condition set out in the proviso to Section 23(2) would be satisfied if the members of the joint family use the property for their own residence. What is required is that natural persons should make use of the property for their own residence. If the section is interpreted that the proviso applies only to the case of individual owner occupying his house, it would appear that when the individual is away and his wife occupies the house, the relief given by the proviso is not available. This would be too far-fetched and, as already stated, the logical consequence of an interpretation confining the application of the proviso to individual owners may as well take away property income of owners other than individuals from the ambit of taxation. We can understand an interpretation in favour of the revenue in case of a company which is an artificial juridical person and is quite different from the shareholders who are individuals. But such difficulty is not encountered in the case of a joint family. The concession given by the proviso will be applicable, if any of the members of the joint family use the house for their own residence. In this view of the matter, we hold in favour of the assessee and dismiss the appeals filed by the revenue.


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