1979 (7) TMI 38 - HC - Income Tax

Summary

Issues:
Interpretation of provisions of sections 22 and 23 of the Income-tax Act, 1961 regarding the entitlement to claim statutory allowance for self-occupation of a house property.

Analysis:
The case involved a reference under section 256(i) of the Income-tax Act, 1961, regarding the entitlement of the assessee to claim the statutory allowance for self-occupation under section 23(2) of the Act. The assessee, an individual, owned a house which he let out to his employer-company and occupied as rent-free quarters. The assessing authority disallowed the claim for statutory allowance, but the AAC allowed it. The Income-tax Appellate Tribunal disagreed with the AAC's decision, leading to this reference.

The key issue revolved around the interpretation of sections 22 and 23 of the Act. Section 22 establishes the liability to pay tax on the income from house property on the owner, whether legal or beneficial. Section 23 outlines how the annual value of house property is determined for taxation purposes. Sub-section (2) of section 23 provides a method to determine the annual value for a house in the occupation of the owner for his own residence, offering a beneficial reduction in the taxable amount.

The court emphasized that to claim the relief under section 23(2), two conditions must be met: the house must be occupied by the owner for his own residence, and the occupation must be solely for residential purposes. The relief is intended for owners who occupy their houses for personal use, not for cases where the property is let out. The court held that the owner, in this case, was occupying the house as a sub-tenant of the employer-company, not as the owner for his own residence, thus not entitled to the relief under section 23(2).

The court further highlighted that the proviso to section 23(3) supports this interpretation, stating that no benefit should be derived by the owner from the house in any way to claim the relief. The court concluded that the Tribunal's decision was in line with the provisions of sections 22 and 23, and the assessee was not entitled to the statutory allowance for self-occupation under section 23(2) of the Act.