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Issues involved: Interpretation of exemption u/s 23(1)(b)(ii) of the Income-tax Act, 1961 for a property in Green Park Extension, New Delhi.
Summary: The High Court of Delhi considered a case where the Revenue challenged the allowance of exemption to the assessee for a property in Green Park Extension, New Delhi, u/s 23(1)(b)(ii) of the Income-tax Act, 1961. The assessee claimed exemption for a house property let out to the Cabinet Secretariat, Government of India, on the grounds that it was constructed as a residential unit. The Assessing Officer rejected the claim, stating that the property was not being used for residential purposes. The Appellate Assistant Commissioner allowed the exemption, emphasizing that temporary office use did not change its residential nature. The Revenue appealed to the Tribunal, which upheld the exemption, considering the building's construction as residential units. The Tribunal's decision was challenged by the Revenue, leading to the reference to the High Court. The Court analyzed the provision of u/s 23(1)(b)(ii) which grants exemption for residential buildings comprising residential units erected during a specific period. It emphasized that various factors, including the constructor's intention, actual use, and potential for different use, must be considered to determine if a unit is residential. The Court highlighted that user is a relevant but not conclusive factor, and the constructor's intention at the time of erection is significant. In interpreting exemption provisions, the Court noted that they should be construed strictly, with the burden on the taxpayer to prove entitlement. The Court cited precedents emphasizing strict construction of exemption clauses to avoid increasing the burden on other taxpayers. It stressed that exemptions should be interpreted liberally only in cases of doubt, where the statutory language's meaning is not clear. Considering the factual aspects, including permissions obtained and the temporary office use due to non-availability of accommodation, the Court found that the building was constructed as a residential unit in a residential area. The Court distinguished a Calcutta High Court decision where the units were not constructed as residential, unlike the present case. Based on the factual findings, the Court upheld the Tribunal's decision to allow the exemption u/s 23(1)(b)(ii) in favor of the assessee against the Revenue. In conclusion, the High Court of Delhi affirmed the Tribunal's decision, holding that the exemption claimed for the property in Green Park Extension, New Delhi, was allowable u/s 23(1)(b)(ii) of the Income-tax Act, 1961.
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