1. This appeal by the assessee relates to the assessment year 1979-80, for which the previous year ended on 31-3-1979.
2. The assessee, who is a native of Indore, owned a building in Indore jointly with his mother and sister. The ground floor of the building was let out up to 31-3-1978. It was vacant throughout the accounting period relevant to the assessment year under appeal. The first floor was occupied by the mother of the assessee. As the assessee was employed in Kerala and was also residing in Kerala, he had not occupied the first floor along with his mother during the relevant accounting period. The assessee could, therefore, have claimed total exemption under Section 23(3) of the Income-tax Act, 1961 ('the Act') with regard to the assessee's share of the annual value of the first floor. But the assessee returned Rs. 583 as the assessee's share in the- notional income of the first floor. He did not return any notional income from the ground floor as the same had not been let out during the accounting period.
3. The original assessment was completed on 20-2-1980 wherein the income returned by the assessee for the first floor, hereinafter referred to as the self-occupied portion, was accepted. No income was included as regards to the ground floor. This assessment was reopened under Section 147 of the Act, on the ground that the ground floor did not qualify for vacancy allowance as it had not been let out during any portion of the accounting period, in the light of the decision of the Supreme Court in Liquidator of Mahamudabad Properties (P.) Ltd. v. CIT  124 ITR 31 and that income had, therefore, escaped assessment.
In the reassessment, the ITO included Rs. 834 as the income from self-occupied property and Rs. 3,740 as the income from the ground floor, which was described in the assessment order as the let out property. The ITO had declined to accept the annual letting value as fixed by the municipality.
4. The AAC held that as far as self-occupied portion is concerned, the ITO should have determined the annual letting value as fixed by the municipality and that the income from this portion should, therefore, be taken as Rs. 583 as returned by the assessee. With regard to the ground floor, the AAC held that the assessee's claim for vacancy allowance under Section 24(1)(ix) of the Act is not sustainable in the light of the decision of the Supreme Court in the case of Liquidator of Mahamudabad Properties (P.) Ltd. (supra). He held that the assessee was eligible for vancancy allowance only if the ground floor had been let out at least for a portion of the accounting period. (The reference by the AAC to the ground floor as the residential portion and the first floor as the let out portion is a mistake). Aggrieved by the same, the assessee has come up in appeal.
5. The first contention advanced by the assessee is that no income should have been included with regard to the residential portion as the assessee had not actually occupied the same by reason of the fact of his employment in Kerala. This claim is based on Section 23(3). The correctness of the claim was not disputed by the learned departmental representative. But it was pointed out by him that in the original assessment, the income for this portion was assessed to tax on the basis of the return filed by the assessee, that the reopening of the assessment was only to bring to tax the escaped income with regard to the ground floor and that in the reassessment, the assessee cannot take up the matters, which are concluded by the original assessment. In support of this contention, the department relied upon the decision of the Kerala High Court in CWT v. C. Ravindran  107 ITR 547, which was a case arising under the Wealth-tax Act, 1957. It was held by the Kerala High Court that at the time of the reassessment, the assessee cannot urge a claim for exemption, which he could and should have urged at the time of the original assessment. The ratio of the decision is applicable to the present case. The assessee's claim for exemption of the income with regard to the residential portion under Section 23(3), which was made only during the course of the reassessment, is not, therefore, sustainable.
6. The second contention advanced by the assessee is that the AAC erred in rejecting the assessee's claim for vacancy allowance under Section 24(1) (ix) with regard to the ground floor. As already stated, the ground floor which was being regularly let out in the earlier assessment years was not let out during the entire accounting period relevant to the assessment year under appeal. It has been clearly held by the Supreme Court in the case of Liquidator of Mahamudabad Properties (P.) Ltd. (supra) that when the building was not let out during the previous year Section 24(1)(ix) did not apply and that the assessee was not entitled to vacancy allowance. The contention of the assessee is that the decision of the Supreme Court will apply only when the claim for vacancy allowance relates to the entire property and where the entire property had not been let out during the accounting period. It is claimed by the learned counsel for the assessee that when only a portion of the property was being let out and that portion had remained vacant throughout the accounting period, the decision of the Supreme Court will not apply and that the assessee is therefore, entitled to claim vacancy allowance under Section 24(1)(ix). In support of the position, the learnedc ounsel relied upon a decision of this Bench of the Tribunal in IT Appeal No. 200 (Coch.) of 1977-78 dated 11-4-1978. In this case, it was held by the Tribunal that Section 24(1)(ix) applies only to (a) where the property was vacant during a part of the year, and (b) where the property was let out in parts, where a part is vacant and that as far as the latter category of cases are concerned, Section 24(1)(ix) does not refer to a part being vacant for a part of the year, that it refers only to a part of the property being vacant, that if the part had remained vacant during the accounting period, the section provides that a deduction should be allowed of that portion of the annual value appropriate to the vacant part which is proportionate to the period during which such portion is wholly unoccupied, that there was no such restriction that the part should have been vacant for only a part of the year and that the ratio of the decision of the Calcutta High Court in the case of Liquidator, Mahmudabad Properties (P.) Ltd. v. CIT  83 ITR 470, does not, therefore, apply. It was this decision of the Calcutta High Court which was upheld by the Supreme Court in Liquidator of Mahamudabad Properties Ltd.'s case (supra). In the earlier case referred to above, the Tribunal directed the ITO to verify whether the portions remaining vacant formed part of a building and if so, to allow vacancy allowance in spite of the fact that that portion had not been let out throughout the accounting period. This decision will support the stand of the assessee, provided, the ground floor can be treated as part of the house property.
7. But it was pointed out by the department that in the light of the decision of the Kerala High Court in the case of CIT v. Joy P. Jacob  151 ITR 19, the ground floor has to be treated as an independent unit and cannot be treated as part of the house property. In this case, the Kerala High Court, following the decision of the Supreme Court in Liquidator of Mahamudabad Properties (P.) Ltd.'s case (supra) held that Section 24(1)0'*) will not apply if the property had not been let out during the relevant accounting period. But it was pointed out by the High Court that there may be many house properties in one building where the building is divided horizontally or vertically by parts which are independent units and let out or intended to be let out as separate house properties that in the case of a building having several floors or where several houses are attached to each other, each floor or house could be considered as an independent unit or a house property forming part of the whole building, that in a city where tall buildings having many floors or houses inseparably built from each other, are common, each floor or house may be treated as an independent and separate unit constituting by itself a house property for the purpose of the section, that in such cases, the benefit of Clause (ix) of Section 24(1) would not accrue except in regard in the separate property in question, that merely because one independent floor of a building, which is a separate house property, is vacant during part of the year and the other floors remain vacant throughout the year, the second limb of Clause (ix) of Section 24(1) would not be attracted and that, this is a question of fact which has to be considered in each case. The tests to be applied in deciding the question were also indicated by the High Court. The nature of the construction, the separateness of the floors from each other, the manner in which each floor is treated by the corporation or other civic bodies for the purpose of taxes or rates, the independent identity of the tenements and the like were held by the High Court to be matters which must be considered by the appropriate authority in evaluating the nature of the building in a given case for the purpose of applying Clause (ix) of Section 24(1).
8. We may now apply the tests to the present case. The mother of the assessee was residing in the first floor. The ground floor was being let out up to the close of the end of the earlier accounting period.
The self-occupied portion and the portion let out are on different floors. The copy of the municipal assessment produced by the assessee shows that the annual value was determined by the municipality separately for the two floors. The annual value for the self-occupied portion was determined at Rs. 3,240, while the annual value for the let out portion was determined at Rs. 10,300. This shows that the two portions were being assessed by the municipality separately. We made an offer to the learned counsel for the assessee to restore the matter to the ITO, in case the assessee wanted to furnish further materials for deciding the issue. It was submitted by the learned counsel that it was not necessary to do so as far as this assessment year is concerned as the annual value included in the assessment is only Rs. 3,740 and as it is not necessary to prolong the present assessment proceedings. We would make it clear that it would be open for the assessee to agitate the matter by furnishing particulars in any assessments that may be made hereafter, in which case the ITO will naturally decide the issue by applying the decision of the Kerala High Court in the case of Joy P.Jacob (supra) to the materials available. But on the materials available in the present case, we hold, by applying the decision of the Kerala High Court, that the ground floor and the first floor have to be treated as separate house properties. If so, the assessee's claim for exemption is not sustainable in the light of the decision of the Supreme Court in the case of Liquidator of Mahamudabad Properties (P.) Ltd. (supra).