1979 (12) TMI 53 - HC - Income Tax

Amendment In 1968, Annual Charge, Income From House Property, Income From Other Sources, Rule Against Double Taxation

Summary

Issues Involved:
1. Applicability and interpretation of Section 24(1)(iv) of the Income-tax Act, 1961.
2. Application of Section 60 of the Income-tax Act, 1961.
3. Double taxation and computation of income from house property.

Detailed Analysis:

1. Applicability and Interpretation of Section 24(1)(iv):
The primary issue revolves around whether the deduction claimed by the assessee under Section 24(1)(iv) for an annual charge on the property is permissible. The assessee had executed a deed of maintenance, creating a charge on his property to pay Rs. 275 per month to his mother and, subsequently, his father. The Income-tax Officer (ITO) allowed this deduction, which was upheld by the Tribunal. The Tribunal noted that the language of Section 24(1)(iv) was broad and allowed deductions for any annual charge on the property, regardless of whether it was voluntarily created or imposed by legal obligation. This interpretation was supported by several judicial decisions including Khanderao Gaekwar v. CIT, CIT v. Bhayya, and others.

2. Application of Section 60:
Section 60 provides that income transferred without transferring the source of that income remains taxable in the hands of the transferor. The Tribunal agreed that Section 60 was applicable, meaning the income transferred to the assessee's parents should still be assessed in the hands of the assessee. However, the Tribunal concluded that Section 60 does not allow for the same income to be taxed again under a different head, such as "income from other sources." The section merely ensures that the income remains taxable in the hands of the original owner despite the transfer.

3. Double Taxation and Computation of Income from House Property:
The ITO's approach resulted in double taxation by including the Rs. 3,300 as "income from other sources" after allowing it as a deduction under "income from house property." The Tribunal and the High Court found this approach incorrect. The High Court emphasized that once the income from the property is computed under Sections 22 to 26, it cannot be taxed again under another head. The principle that income computation under a specific head must be exhaustive was highlighted, referencing the Supreme Court's decision in Nalinikant Ambalal Mody v. Narayan Row.

Separate Judgment:
Khanna J. agreed with the final conclusion but provided additional observations. He noted that the charge was created to meet the personal obligation of maintaining the assessee's parents and viewed it as an application of income after accrual. He suggested that a harmonious interpretation of Sections 24(1)(iv) and 60 could exclude voluntary charges from permissible deductions. However, given the consistent judicial interpretation allowing such deductions and the subsequent amendment of the law, he concurred with the overall conclusion.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the deduction under Section 24(1)(iv) was correctly allowed and that the income should not be taxed again under Section 60 as "income from other sources." The attempt to tax the Rs. 3,300 again was deemed unjustified, and the question referred was answered in the affirmative. There was no order as to costs.