1993 (10) TMI 123 - AT - Income Tax

Summary

Issues:
1. Whether the income from the house property is taxable in the hands of the assessee for the relevant assessment year.
2. Whether the liability towards building tax can be allowed as a deduction while computing income from the property.

Analysis:

Issue 1:
The case involved a dispute regarding the taxability of income from a house property constructed by the assessee. The Assessing Officer did not address the contention raised by the assessee that no income should be assessed under the head "Income from house property" as the assessee was the owner for only 10 months of the year. The CIT (Appeals) relied on the decision of the Special Bench of ITAT and held that if a property does not give rise to annual income or gives income for a lesser period, the income from that property cannot be included in the total income. The ITAT agreed with the CIT (Appeals) that the rental income from the property should not be taxed as income from house property for the year in question.

Issue 2:
Regarding the allowance of building tax as a deduction, the CIT (Appeals) referred to the first proviso to section 23(1) and held that since no building tax had been levied, it could not be deducted. The ITAT upheld this decision, citing a decision of the Andhra Pradesh High Court. The departmental representative argued that all income accruing to an assessee should be taxed, even if not under the head "Income from house property." The ITAT agreed that the rental income should be assessed as "Income from other sources" and directed the CIT (Appeals) to consider the allowability of expenses against the rental income in accordance with section 57(iii) of the Income Tax Act.

In conclusion, the departmental appeal was partially allowed, directing that the rental income from the property be assessed as income from other sources and remitting the question of allowability of expenses against the income back to the CIT (Appeals) for consideration.