2004 (10) TMI 62 - HC - Income Tax

Relief under proviso (c) to section 23(1) - we find that from the very beginning the property has been let out to the Fertilizer Corporation of India Ltd. for non residential use. Even when the construction of the ground floor of the building was made it was let out to the Fertilizer Corporation of India Ltd. Thus the intention of the applicant from the very beginning was to construct the building for non-residential purpose. In order to claim the benefit of deduction under clause (c) of the second proviso to section 23(1) of the Act from the annual value the unit should be a residential unit. - In view of the foregoing discussions the applicant was not entitled for deduction under clause (c) of the second proviso to section 23(1)

Summary

Issues:
1. Interpretation of proviso (c) to section 23(1) of the Income-tax Act, 1961 regarding relief entitlement for residential units.

Analysis:

The High Court of Allahabad was presented with the issue of whether the assessee was entitled to relief under proviso (c) to section 23(1) of the Income-tax Act, 1961. The case revolved around the assessment year 1979-80, where the applicant, an individual deriving income from salary and property, owned a property in Lucknow. The ground floor of the property was let out for non-residential use to the Fertilizer Corporation of India Ltd. The applicant claimed a deduction under clause (c) of the second proviso to section 23(1) of the Act, but the Income-tax Officer disallowed it, leading to appeals and subsequent legal proceedings.

The Tribunal reversed the Appellate Assistant Commissioner's decision, stating that relief under clause (c) is only applicable to residential units. The court analyzed the provisions of the Act, emphasizing that the relief is available for buildings comprising one or more residential units completed within a specified period. The court highlighted the conditions for claiming the deduction under clause (c) and noted that the property in question was used for non-residential purposes, rendering the applicant ineligible for the relief.

In considering various legal precedents, the court referred to cases from different High Courts interpreting similar provisions of the Act. The judgments emphasized the importance of the residential nature of the units for claiming deductions under the relevant clauses. The court also discussed cases where the purpose of construction and subsequent usage of the building influenced the eligibility for relief under the Act.

Ultimately, the court concluded that the applicant, by letting out the property for non-residential use from the beginning, did not meet the criteria for claiming the deduction under clause (c) of the second proviso to section 23(1) of the Act. Therefore, the court ruled in favor of the Revenue, denying the relief to the assessee. The judgment provided a detailed analysis of the legal provisions, relevant precedents, and the specific circumstances of the case to arrive at its decision.