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Issues: Assessment of self-occupation allowance under section 23(2) of the Income-tax Act, 1961 for joint holders of property.
Detailed Analysis: The case involved an individual's assessment for the years 1963-64 and 1964-65, where the assessee had a one-third share in a property he self-occupied. Initially, the income was assessed with self-occupation allowance for both years. However, the Income Tax Officer (ITO) later initiated reassessment proceedings under section 154 of the Income-tax Act, 1961, arguing that the allowance was incorrectly given separately to all occupants instead of proportionately restricting it. The assessee objected, but the reassessment was upheld, resulting in higher income figures for both years. The assessee appealed to the Appellate Assistant Commissioner (AAC), arguing against the rectification orders. The AAC ruled in favor of the assessee, stating that the correct procedure was to compute the share of the assessee in the property's annual value and then allow the self-occupied allowance under section 23(2) accordingly. The ITO appealed this decision to the Tribunal, claiming that section 26 should apply to co-owners and that section 23(2) allowance was not available to them. However, the Tribunal disagreed, stating that co-owners should receive the allowance proportionate to their share as per section 26. The Tribunal's decision was further challenged, arguing that section 23(2) relief was not applicable to co-owners. The argument focused on the interpretation of sections 23 and 26, with the contention that relief under section 23(2) should not extend to jointly-owned properties. However, the court held that the relief should be liberally construed in favor of the taxpayer, especially for self-occupied properties, where the income is theoretical. Therefore, the AAC and Tribunal were correct in allowing the self-occupation allowance to the co-owner, leading to a ruling in favor of the assessee. The court emphasized that the relief under section 23(2) should be available to all co-owners in self-occupation of jointly held property, rejecting the narrow interpretation proposed by the Commissioner's representative. The judgment highlighted the need for a liberal interpretation of provisions allowing relief or reduction in taxation, particularly in cases involving self-occupied properties. Ultimately, the court answered the question in the affirmative, supporting the assessee's entitlement to the self-occupation allowance despite being a co-owner with a one-third share in the property.
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