1980 (4) TMI 3 - SC - Income Tax

Computation of income from house property - assessee is not entitled to the deductions claimed by it in respect of municipal taxes and vacancy remission

Summary

Issues Involved:
1. Computation of income from house property under the I.T. Act, 1961.
2. Determination of annual value of the property.
3. Claim for deductions on account of insurance premium, municipal taxes, and vacancy remission.
4. Jurisdiction of the High Court in modifying the Tribunal's order.

Detailed Analysis:

1. Computation of Income from House Property under the I.T. Act, 1961:
The core issue revolves around the computation of income from house property, specifically under sections 22 and 23 of the I.T. Act, 1961. The property in question, owned by the assessee, was not in a habitable condition and was not let out during the relevant assessment year. The ITO initially disregarded the property for income computation, a view supported by the Tribunal but contested by the AAC and later by the High Court.

2. Determination of Annual Value of the Property:
The High Court held that the Tribunal misconceived the law by concluding that the property had no annual value due to its state of disrepair. The High Court emphasized that the property did possess an annual value, and this should be considered under section 22 of the I.T. Act, 1961. The court stated, "merely because the building was in a state of disrepair it could not be predicated that it had no annual value."

3. Claim for Deductions:
- Insurance Premium: The High Court allowed the deduction for the insurance premium paid by the assessee under section 24(1)(ii).
- Municipal Taxes: The claim for municipal taxes was denied based on the proviso to section 23(1), which allows such a deduction only if the property is in the occupation of a tenant. The court noted, "the proviso to s. 23(1) can be availed of only if the property is in the occupation of a tenant."
- Vacancy Remission: The High Court disallowed the vacancy remission under section 24(1)(ix) since the property was not let during the previous year. The court clarified, "we must read it to mean property which was let during the previous year and was vacant during a part of the year."

4. Jurisdiction of the High Court in Modifying the Tribunal's Order:
The High Court's jurisdiction is advisory, not appellate. It can decide the question of law referred to it and return its answer to the Tribunal, which then disposes of the case accordingly. The High Court erred in setting aside the Tribunal's order. The judgment stated, "The High Court, on a reference before it, does not act as a court of appeal. The jurisdiction is advisory and no more."

Conclusion:
The Supreme Court upheld the High Court's decision that the property had an annual value and that the assessee was entitled to a deduction for the insurance premium. However, the Supreme Court agreed with the High Court that the deductions for municipal taxes and vacancy remission were not permissible. The appeal was dismissed, affirming that the High Court's advisory jurisdiction does not extend to modifying or setting aside the Tribunal's order.