1989 (7) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Inclusion of annual letting value of the ground floor in the income of the assessee u/s 22 of the Income-tax Act, 1961.
2. Validity of reopening the assessment.

Summary:

1. Inclusion of Annual Letting Value u/s 22:
The core issue was whether the annual letting value of the ground floor of a building owned by the assessee and occupied by a firm in which the assessee was a partner should be included in the assessee's income u/s 22 of the Income-tax Act, 1961. The Tribunal held that the annual letting value was not includible in the assessee's income. The Tribunal's decision was based on the fact that the assessee, as the managing partner, was carrying on business in the premises, and the business profits were chargeable to income-tax. The Tribunal followed the Gujarat High Court's decision in CIT v. Rasiklal Balabhai [1979] 119 ITR 303, which stated that when a partnership carries on a business, each partner thereof carries on that business, and thus, the partner is deemed to be in occupation of the premises.

2. Validity of Reopening the Assessment:
The reopening of the assessment was challenged on the grounds that the annual value of the ground floor was not chargeable to tax as it was exempt u/s 22. The Tribunal confirmed that the reopening was not sustainable since the conditions for exemption under section 22 were satisfied. The assessee was in occupation of the property for the purpose of his business, and the business profits were chargeable to tax. The Tribunal's decision was supported by the reasoning that the occupation by the firm could be treated as occupation by the partner, aligning with the Gujarat High Court's interpretation.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the annual letting value of the ground floor occupied by the firm in which the assessee was a partner is not includible in the assessee's income u/s 22. Consequently, the reopening of the assessment was not sustainable. The judgment favored the assessee and was against the Revenue.