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Assessment of annual letting out value of house properties under the income tax law based on a will's provisions. Interpretation of the terms of the will regarding the rights of the assessee in the properties. Disagreement on the assessment between the Income Tax Officer and appellate authorities. Previous court judgment on a similar matter impacting the current assessment. Determining ownership status and liability to tax under the Income Tax Act. Applicability of taxation on property income when properties are not generating rent. Analysis: The judgment concerns a case where the assessee, as per a will, was granted life interest in certain house properties with restrictions on occupation and rent collection. The Income Tax Officer assessed the annual letting out value of these properties as part of the assessee's income, even when the testator's sons were occupying them. Appellate authorities upheld the assessment, leading to a legal challenge. A previous court judgment on a similar issue disagreed with the assessment, emphasizing the unique terms of the will and the nature of the interest granted to the assessee. The central issue revolved around the ownership status of the assessee in the house properties and the applicability of tax under the Income Tax Act. The court clarified that while the assessee technically owned the properties due to the life interest conferred by the will, the practical restrictions rendered her ownership a "delusion and a snare." The court highlighted the conditions in the will, preventing the assessee from deriving any rental income as long as the testator's sons occupied the properties. The court analyzed the taxation scheme under the Income Tax Act, noting the distinction between income from properties under tenant occupation and owner occupation. Despite the assessee's ownership, the absence of rental income due to the unique circumstances of the will raised questions about the tax liability under the head "Income from property." The court emphasized that ownership alone may not suffice for taxation if the property is neither under the owner's nor tenant's occupation. Regarding the specific questions referred in the present case, the court concluded that the assessee's ownership rights, while existent on paper, were practically non-functional due to the restrictions in the will. The court also clarified that the inclusion of rental income in the assessment was erroneous since the properties were not let out to tenants, and the sons occupying them were not considered tenants. Consequently, the court held that the assessment of property income for the year was not in line with the law, overturning the Tribunal's decision. In summary, the judgment delves into the intricacies of property ownership, tax liability, and the practical implications of legal provisions in a will on income assessment under the Income Tax Act. It underscores the importance of considering the actual economic substance of ownership rights rather than mere legal titles in determining tax obligations on property income.
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