1971 (10) TMI 10 - SC - Income Tax

Income From House Property paid to minor - property pass to the settlor s successor - In order to include the income of the wife/ minor child it is not necessary that the transfer should be to the wife/minor child - assessee has more than one residence and is able to establish that all the houses are kept by him for the purposes of his own residence, then he is entitled to claim the allowance under s. 9(2) - appeals of assessee are allowed in part

Issues Involved:
1. Inclusion of income received by the minor daughter under the trust deed in the assessee's total income under Section 16(3)(b) of the Indian Income-tax Act, 1922.
2. Entitlement to reduction of the annual letting value of a second residential house under Section 9(2) of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Inclusion of Income Received by Minor Daughter:

The core issue here was whether the amounts received by the assessee's minor daughter under the trust deed dated April 1, 1955, should be included in the assessee's total income under Section 16(3)(b) of the Indian Income-tax Act, 1922. The High Court affirmed this inclusion, and the Supreme Court upheld the High Court's decision.

The assessee argued that Section 16(1)(c) should apply, not Section 16(3)(b). The High Court rejected this, stating that Section 16(3)(b) applies when assets are transferred for the benefit of the wife or minor child, even if the corpus of the trust property is not transferred directly to them. The High Court also dismissed the contention that Section 16(3)(b) requires the transfer to be exclusively for the benefit of the wife or minor child, noting that the provision applies even if other persons benefit from the trust.

The Supreme Court agreed with the High Court, emphasizing that Section 16(3)(b) does not require the corpus to be transferred to the wife or minor child, only that the assets be transferred for their benefit. The Court referenced the Bombay High Court's decision in Commissioner of Income-tax v. Sir Mahomed Yusuf Ismail, which supported this interpretation. The Supreme Court also rejected the argument that only the income of the trustee should be included, clarifying that the share of the income received by the minor daughter under the trust deed should be included in the assessee's total income.

2. Reduction of Annual Letting Value of Second Residential House:

The second issue concerned the assessee's claim for a reduction in the annual letting value of a second residential house under Section 9(2) of the Indian Income-tax Act, 1922. The High Court had denied this claim, agreeing with the revenue that the allowance could only be claimed for one residential house.

The Supreme Court, however, found that the first and second provisos to Section 9(2) indicate that an assessee can claim an allowance for more than one residential house if all the houses are used for the assessee's own residence. The Court noted the finding of the Appellate Assistant Commissioner, which was not disputed by the Appellate Tribunal or the High Court, that both houses were used for residential purposes by the assessee. Therefore, the Supreme Court concluded that the assessee was entitled to the reduction for the second house as well.

Conclusion:

The Supreme Court upheld the High Court's decision on the first issue, affirming that the income received by the minor daughter under the trust deed should be included in the assessee's total income under Section 16(3)(b). However, the Court reversed the High Court's decision on the second issue, ruling that the assessee was entitled to a reduction in the annual letting value for the second residential house under Section 9(2). The judgment and order of the High Court were thus modified, and the appeals were allowed in part, with each party bearing their own costs.

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