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Interpretation of Section 22 of the Income-tax Act, 1961 regarding taxation of house property used for business purposes by a partnership firm owned by a Hindu undivided family. Analysis: The judgment delivered by the High Court of Allahabad pertains to the interpretation of Section 22 of the Income-tax Act, 1961, in relation to the taxation of a house property owned by a Hindu undivided family and used by a partnership firm for business purposes. The key issue revolved around whether the user of the property by the partnership firm could be considered as the user by the assessee for the purposes of business carried on by the assessee, within the meaning of the aforementioned section. The case involved an assessment of the annual letting value of a property owned by a Hindu undivided family, which was being utilized by a partnership firm for business activities. The Income-tax Officer assessed the annual letting value as the assessee's income from house property, a decision upheld by the Appellate Assistant Commissioner. However, the Income-tax Appellate Tribunal ruled in favor of the assessee, stating that since no rent was charged by the assessee from the partnership firm and the property was used for business for a significant period without being taxed as the assessee's income, it should not be considered taxable. The court examined the provisions of Section 22, emphasizing that liability to be taxed on income from house property does not necessitate actual receipt of rent. It highlighted an exception for property occupied for business or profession carried on by the assessee. The court noted that although the business was being conducted in the property, it was not owned by the assessee, but by individuals in partnership. The income from the business did not belong to the assessee and was not taxable in its hands. In considering precedents, the court differentiated the present case from others where partners were property owners. It noted that the income from the business and house property should not be doubly taxed in the hands of the same person. As the income from business was taxable in the hands of individuals while the house property income was taxable in the hands of the Hindu undivided family, the court ruled against the assessee. It held that the user of the property by the partnership firm could not be deemed as the user by the assessee for business purposes, thereby deciding in favor of the Revenue and against the assessee. The judgment provides a detailed analysis of the application of Section 22 in the context of property ownership, business activities, and taxation, establishing a clear distinction between ownership, usage, and taxability of income from different sources.
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