1985 (5) TMI 71 - AT - Income Tax

Summary

Issues:
1. Interpretation of section 23(2) of the Income-tax Act, 1961 regarding deduction for self-occupied property.
2. Whether the assessee, who is the owner of a property let out to his employer, can claim deduction under section 23(2) for self-occupied property.

Analysis:
The case involved the interpretation of section 23(2) of the Income-tax Act, 1961, concerning the deduction for self-occupied property. The assessee owned a house rented to a bank where he worked as a manager, occupying the same house as a sub-tenant of the bank. The dispute arose when the assessee claimed a deduction under section 23(2) for self-occupied property, which was denied by the Income Tax Officer (ITO). The Appellate Assistant Commissioner (AAC) allowed the deduction, leading to an appeal by the revenue.

The revenue contended that section 23(2) is applicable only when an assessee resides in his own house as an owner, not as a tenant. Since the property was let out to the bank, the assessee's occupation was as a sub-tenant, making the provision inapplicable. On the other hand, the assessee argued that the Act does not specify the capacity in which the assessee should occupy the house for the deduction. The only conditions required were ownership and occupation, both of which were satisfied in this case.

The Tribunal analyzed the relevant sections of the Income-tax Act, particularly section 23(1) and section 23(2), to determine the applicability of the deduction. Section 23(2) clearly stated that the deduction is available when the owner resides in his own house, not as a tenant. The provision indicates that the property should not have been let out for the deduction to apply. In this case, the assessee had let out the property to the bank, which provided him with rent-free accommodation. The Tribunal emphasized that if the assessee wanted the deduction under section 23(2), he should not have let out the property. As the property was let out, the income would be taxed as in the case of any other let-out property.

Therefore, the Tribunal reversed the AAC's order and allowed the appeal filed by the revenue, holding that the assessee, who let out the property to his employer and occupied it as a sub-tenant, was not eligible for the deduction under section 23(2) for self-occupied property.