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2012 (6) TMI 539 - HC - Income TaxIncome from house property - Determination of annual value - self occupied property - Whether HUF can claim benefit of self occupancy u/s 23(2) - held that - (i) the benefit of section 23(2) is available if the house is in occupation of the owner for the purpose of his own residence ; and (ii) a partnership firm, which is a fictional entity, cannot physically reside and so a partnership firm cannot claim the benefit of the provision, which is available to an assessable entity only. The question arises as to, whether a Hindu undivided family can be held to be a fictional entity? The answer will be in the negative. A Hindu undi- vided family is nothing but a group of individuals related to each other by blood relations, or in a certain manner. A Hindu undivided family can be seen being a family of a group of natural persons. There is no dispute that the said family can reside in the house, which belongs to the Hindu undi- vided family. A family cannot consist of artificial persons. HUF is entitled for benefit of Section 23(2) in respect of self occupied property.
Issues:
Interpretation of section 23(2) of the Income-tax Act regarding benefit availability to a Hindu undivided family. Analysis: 1. The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the availability of the benefit of section 23(2) to a Hindu undivided family (HUF). The Income-tax Appellate Tribunal referred the question to the High Court for consideration. 2. The Division Bench of the High Court noted conflicting decisions from other High Courts and decided that the matter deserved a Full Bench hearing due to its general importance. The question revolved around whether the benefit of section 23(2) is applicable to an HUF. 3. The dispute arose when the Income-tax Assistant Commissioner and the Commissioner of Income-tax (Appeals) rejected the HUF's claim for deduction under section 23(2). The Commissioner of Income-tax (Appeals) argued that the benefits of section 23(2) were only available to individuals, citing a judgment from the Jammu and Kashmir High Court. 4. The learned counsel for the Revenue referred to various High Court decisions on the issue while presenting their case. 5. The court examined the relevant provisions of section 23(2) of the Income-tax Act, both before and after the amendment by the Finance Act, 2001, to understand the scope of the benefit provided. 6. The court highlighted that the relief for self-occupied property under section 23(2) is intended for individual owners who can reside in their own property, emphasizing that the relief is not applicable to fictional entities. 7. Previous judgments from the Jammu and Kashmir High Court, Delhi High Court, and Madras High Court were analyzed to determine the eligibility criteria for claiming benefits under section 23(2). 8. The court emphasized that the relief under section 23(2) is available only to individual assesses and not to fictional entities like partnership firms or companies. 9. The court also drew parallels with a similar provision under the Wealth-tax Act and how it was interpreted in previous judgments by the High Court. 10. Ultimately, the court concluded that a Hindu undivided family is not a fictional entity but a group of individuals related by blood or in a certain manner. Therefore, an HUF can claim the benefit under section 23(2) as it can reside in a property owned by the family. 11. The court answered the reference question in favor of the assessee (HUF) and directed the Revenue to bear the costs. The judgment reaffirmed that the benefit of section 23(2) is available to Hindu undivided families based on the interpretation of the relevant legal provisions and precedents.
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