1985 (4) TMI 113 - AT - Income Tax

Summary

Issues:
1. Assessment of income from self-occupied and let-out portions of a building.
2. Claim for vacancy allowance under section 24(1)(ix) for the ground floor.
3. Applicability of Supreme Court's decision in Mahamudabad Properties case.
4. Treatment of ground floor and first floor as separate house properties.

Analysis:

Assessment of Income:
The assessee, a resident of Indore employed in Kerala, owned a building jointly with family members. The ground floor was vacant, while the first floor was occupied by the assessee's mother. The assessee claimed exemption under section 23(3) for the first floor but returned a notional income of Rs. 583. The original assessment accepted this return. However, upon reassessment, the Income Tax Officer (ITO) included Rs. 834 as income from the self-occupied portion and Rs. 3,740 from the ground floor. The Appellate Authority Commission (AAC) held that the income for the self-occupied portion should be Rs. 583, as returned by the assessee, and denied vacancy allowance for the ground floor based on the Mahamudabad Properties case.

Vacancy Allowance Claim:
The assessee contended that vacancy allowance under section 24(1)(ix) should apply to the ground floor, which was vacant throughout the accounting period. The Department argued that the Kerala High Court's decision in CIT vs. Joy P Jacob supported treating the ground floor as an independent unit, not part of the house property. The High Court indicated that each floor or house in a building could be considered an independent unit for the purpose of vacancy allowance, subject to specific tests.

Applicability of Mahamudabad Properties Case:
The Supreme Court's decision in Mahamudabad Properties case was pivotal in determining the eligibility for vacancy allowance. The assessee argued that the decision applied only when the entire property was vacant, not when only a portion remained unoccupied. The Tribunal's previous decision and the Kerala High Court's ruling emphasized the independent assessment of floors or units within a building for vacancy allowance eligibility.

Treatment of Separate House Properties:
The Tribunal evaluated the nature of the building, considering the separate assessment of annual values for the self-occupied and let-out portions by the municipality. The assessee's contention for exemption was deemed unsustainable as the ground floor and first floor were treated as separate house properties. The Tribunal aligned with the Kerala High Court's decision, dismissing the appeal based on the Supreme Court's precedent in the Mahamudabad Properties case.

In conclusion, the Tribunal dismissed the appeal, upholding the reassessment's inclusion of income from the self-occupied and let-out portions of the building, and denying the vacancy allowance claim for the ground floor based on the specific treatment of separate house properties as per legal precedents.