1981 (12) TMI 87 - AT - Income Tax

Summary

Issues:
1. Determination of share in house property between husband and wife.
2. Inclusion of interest income in the assessment.
3. Allowance of deduction under section 23(1), clause (b) to the second proviso of the Income-tax Act, 1961.

Detailed Analysis:
1. The judgment involves appeals by the assessee for the assessment years 1976-77 and 1977-78 against the order of the AAC. The main issue was the determination of the share of the assessee's wife, Smt. Shakuntaladevi, in a house property. The dispute arose from differing views on whether she owned 1/10th or 1/2 of the property. The AAC held her share to be 1/10th based on the amount she contributed, while the assessee claimed she was entitled to 1/2 as the sale consideration was given jointly. The Tribunal disagreed with the AAC, emphasizing that the entries in the books showing the loan and interest charged to the wife indicated an agreement between the co-owners, thus concluding that she was entitled to 1/2 share in the property.

2. Another issue was the inclusion of interest income in the assessment for the year 1976-77. The assessee contended that interest charged from Smt. Shakuntaladevi should be considered as his income. The Tribunal agreed, directing the ITO to include the interest income in the assessee's assessment for that year, based on the established agreement between the parties regarding the loan and interest charged.

3. The final issue pertained to the allowance of a deduction under section 23(1), clause (b) to the second proviso of the Income-tax Act, 1961, for the assessment year 1976-77. The assessee claimed a deduction of Rs. 1,200, which was denied by the ITO and upheld by the AAC. However, the Tribunal found that the deduction should be allowed to the present owners of the property, as the building was constructed within the stipulated period, irrespective of who the initial builder was. The Tribunal held that the deduction was allowable to the owner of the building, as the tax on income from house property is in respect of ownership, not limited to the initial constructor.

In conclusion, the Tribunal allowed both appeals, determining the share in the house property, including interest income in the assessment, and allowing the deduction under section 23(1), clause (b) to the second proviso of the Income-tax Act, 1961.