1999 (4) TMI 46 - HC - Income Tax

Summary

Issues:
1. Interpretation of the second proviso to section 23(1) of the Income-tax Act, 1961 regarding the claim of loss of the assessee in respect of a new residential unit.
2. Clarification on whether the word 'income' in the second proviso refers only to the annual value and not the 'income' after deductions under section 24.

Analysis:
Issue 1: The court examined the interpretation of the second proviso to section 23(1) of the Income-tax Act, 1961, in relation to the claim of loss by the assessee for a new residential unit. The Assessing Officer initially disallowed the claim of loss based on the provision that "the income in respect of any residential unit is in no case a loss." However, the Tribunal reversed this decision, emphasizing that the deduction admissible under section 24 should not be limited to the annual value. The court noted that the deletion of certain words from the proviso in 1984 aimed to remove ambiguity and ensure that losses arising from other deductions claimed by the assessee, such as interest on borrowed capital for construction, could be allowed. The court held that even before the amendment, there was no restriction on the assessee's right to compute losses from house property income.

Issue 2: The court delved into the distinction between the provisions of section 23 and section 24 of the Income-tax Act. Section 23 pertains to the annual value of house property, while section 24 governs the computation of income from house property, including deductions. The court clarified that the limitation mentioned in the second proviso to section 23(1) only applies to the annual value determined under section 23 and does not impact the deductions provided for under section 24. It emphasized that section 24 does not mandate that the result of computation cannot be a loss, and the words of limitation in the proviso should not be considered part of section 24.

In conclusion, the court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The judgment clarified that the limitation in the second proviso to section 23(1) does not restrict the assessee's right to claim deductions under section 24, ensuring that losses arising from house property income computations can be allowed without hindrance.