1. At the instance of the' Commissioner of Income-tax, New Delhi, the Income-tax Appellate Tribunal has referred under section 256(1) of the I.T. Act, 1961, the following question for the opinion of this court:
' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the annual value should be reduced by one-half of the amount determined or Rs. 1,800, whichever is less, in the computation of the dwelling house income of the assessed '
2. The assessment year involved is 1964-65.
3. The assessed, namely, Shyam Sunder, who is assessed in the status of an individual, is a co-owner in property bearing No. 59/23, Rohtak Road, Karol Bagh, New Delhi. His share is 1/4th. The other co-owners are his two brothers and the wife of a third brother. The property has 12 rooms. Each co-owner is stated to be in occupation of three rooms. They pay house tax separately and have separate electric meters.
4. There is no dispute so far as the annual value of the property as a whole is concerned. The controversy, however, pertains to whether the reduction by half of the amount so determined or Rs. 1,800, whichever is less, for self-occupation in terms of Section 23(2) of the I.T. Act, 1961, is permissible to the property as a whole or to each of the co-wners. The assessed had asserted before the ITO that this reduction should be allowed from the share in annual value of each of the co-owners, and not once from the annual value of the property as a whole. The ITO, however, did not accept this, and permitted reduction of Rs. 1,800 once from the overall total annual value of the property as a single unit. Thereafter the amount was apportioned amongst the four co-sharers. This decision was upheld in appeal by the AAC.
5. In second appeal, however, the Tribunal took the view that the provisions contained in Section 23(2) and Section 26 of the I.T. Act, 1961, were not free from ambiguity, and that unless the Act had in clear terms enjoined that the reduction envisaged by Section 23(2) of the Act was to be allowed only once to the property as a whole, the benefit of reduction should be permissible to each of the co-owners separately. It was accordingly directed.
6. Sections 22 to 27 of the I.T. Act, 1961, contain provisions relating to the assessment of income from house property. Section 22 is in general terms and provides for chargeability to income-tax of the annual value of properties consisting of any buildings or lands, appurtenant thereto of which the assessed is the owner. Section 23 next elaborates the modes of determination of that annual value. Broadly, it is the sum for which the property might reasonably be expected to let from year to year. Provision is next made for allowance of various deductions in different cases. One such is contained in Sub-section (2) of this section. The same is to the following effect:
' 23. (2) 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 assessed 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 VI-A), 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. '
7. The present assessed is not shown to be the owner of any property apart from the share in property No. 59/23, Rohtak Road, Karol Bagh, New Delhi. It is, thereforee, the first clause of this Sub-section which is applicable to his case. The annual value of this property admittedly exceeds Rs. 3,600.
8. Section 26 of the Act next provides as under:
' 26. Property owned by co-owners.--Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income.
Explanation.--For the purposes of this section, in applying the provisions of Sub-section (2) of section 23 for computing the share of each such person as is referred to in this section, such share shall be computed, as if each, such person is individually entitled to the relief provided in that subsection. '
9. This Explanationn to the section was added with effect from April 1, 1976. It, thus, did not exist during the period involved in the present assessment. There is further no dispute that, in terms of this section, the respective shares of the co-owners in the property are definite and ascertainable.
10. A careful perusal of the provisions of Sections 23(2) and 26 of the Act shows that their scope is distinct. The former places focus on the property itself, and in the course of determination of its value, certain deductions have been made permissible. At this stage, the ownership of the property, whether in a single hand or in several hands, does not come into the picture. Section 26, on the other hand, concerns primarily the ownership of the property and lays down that when the same is owned by several co-owners who have definite and ascertainable shares, they are not to be assessed as an association of persons. This section tends to connote plurality of buildings or buildings and lands when it speaks of what a property is consisted of. Section 23(2), however, makes mention of property consisting of a ' house '. What has been the significance of the plurality of buildings when consisting of ' property ' under section 26 is not altogether clear. Perhaps they refer to more than one building. In any case, no arguments in this direction have been addressed before us. The I.T. authorities too have not dilated upon this and have not endeavored to draw any distinction between these two sections on this score.
11. This section 26, after providing that the income is not assessable as that of an association of persons, proceeds to lay down how the share of each co-owner in the income from property is to be computed. The same is required to be in accordance with Sections 22 to 25. One interpretation which appears to be quite obvious is that the annual value of the property should be first computed as a single unit in terms of Sections 22 to 25, and deductions permissible should be then allowed. Once that annual value gets determined, all that has to be done in the case of co-owners is to apportion that value to them in the ratio of the shares which they hold in the property. There is no question of allowing any further separate deductions at this stage to the co-owners in terms of Sections 22 to 25. On the other hand, the assessed has asserted that when Section 26 envisages the determination of the share of each co-owner in the income from the property it again speaks of computation in accordance with Sections 22 to 25. In other words, it is pleaded that in the determination of the shares of these co-owners, the deduction permissible under section 23(2) is individually permissible to each of them. It was as such that it is pointed out, that the legislature had of its own on April 1, 1976, introduced the Explanationn to this section and permitted to each individual co-owner the deduction under section 23(2), This Explanationn, it is asserted, was clarificatory in nature and should be taken as explaining the nature of law as it always was.
12. Thus, the Supreme Court in the case of Channan Singh v. Smt. Jai Kaur : 1SCR803 , observed that it is well settled that if a statute is curative or merely declares the previous law, retrospective operation would be more rightly ascribed to it than the legislation which may prejudicially affect past rights and transactions. Consequently, retrospective intention was attributed to an amendment introduced in the Punjab Pre-emption Act, whereby a step-daughter was rendered inclusive of the words ' in the son or daughter of such female '.
13. The Privy Council had also in the case of Abdul Latif Khan v. Abadi Begum , treated an Explanationn introduced to Section 22 to the Oudh Estates Act, 1869, as inserted ex abundant cautela, lest certain grounds under the Act were nullified.
14. The Gujarat High Court in Ramji Virji v. Kadarbhai Esufali, : AIR1973Guj110 , similarly interpreted an Explanationn introduced in 1963 in Section 13(1)(b) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, as retrospective in operation and its operation was extended to even cases of pending litigations.
15. Dealing with what normally should be considered the proper function of an Explanationn, the Allahabad High Court in the case of Shamin Ahmad Alvi v. Azizul Rahman Khan, : AIR1974All354 , observed that the same is to make plain or elucidate what is enacted and not to add or subtract from it. It was further observed that the fundamental general rule is to construe an Explanationn according to its own terms having regard to its context and setting.
16. In this view of the matter, we are inclined to agree with the contention of the assessed that the Explanationn introduced with effect from April 1, 1976, to Section 26 of the I.T. Act was clarificatory in nature and sought to set at rest the ambiguity in the provisions contained in Section 23(2) and Section 26 of the Act as referred to above. We, thereforee, answer the question referred in the affirmative. No order as to costs.