9911796707
TMI Blog1983 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed before the ITO that this income of Rs. 12,000 by way of rent was not assessable in his hands as the provisions of section 22 of the Income-tax Act, 1961 (' the Act '), were not applicable in view of the decision of the Gujarat High Court in the case of CIT v. Rasiklal Balabhai [1979] 119 ITR 303. The plea of the assessee was accepted by the ITO who did not assess this income either as income from property or under any other head. 2. The Commissioner was of the view that the order of the ITO was erroneous insofar as it was prejudicial to the interests of the revenue. The assessee relied on the decision of the Gujarat High Court and contended that, when a partner allows his property to be used for the business of the firm, it shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Rasiklal Balabhai and submitted that, in that case the assessee was not receiving any rent though his property had been given to the firm in which he was a partner. The department had assessed the notional income in the hands of the assessee. It was held by the High Court that the annual letting value of the godown could not be included in the total income of the assessee under section 22 as the property was being used for business carried on by him. It was contended that in this case the fact that the assessee was receiving rent from the firm would not change the position. He further argued that it was not necessary that every receipt constituted income. He gave an example of the rent received over and above the annual lettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is evident that such a case was not intended to fall within the charging section. The learned counsel submitted that there was no error in the order of the ITO who had followed the order of the High Court. In this connection he reiterated the arguments given before the Commissioner. He also referred to the notice given to him under section 263 of the Act and submitted that the ultimate order of the Commissioner was different from what was stated in the notice. It was, therefore, submitted that assessment of Rs. 12,000 was unwarranted in the circumstances of the case. The learned departmental representative, on the other hand, submitted that this was a case where an actual income his arisen to the assessee, and if such income was exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money benefit derivable from property, but the sum for which the property might reasonably be expected to let from year to year. The exception is provided where the actual rent is more than the notional annual value. Any such notional annual value of such properties which are used for the assessee's business are totally excluded from the charge under section 22. Thus, where the charge is on the basis of ownership alone and what is chargeable is the notional annual value, such a charge cannot be laid on the property occupied for business. Section 56 of the Act provides that income of every kind which is not to be excluded from the total income under the Income-tax Act shall be chargeable to income-tax under the head ' Income from other sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 of the Act come into play, and if there is an income, it becomes chargeable there. This is so, because while laying down the charge under section 22, such properties which are occupied by the assessee for his business are completely excluded. However, by that very reason they set included in the charge provided in section 56. 6. At this stage we may consider the decision of the Gujarat High Court which has been relied on by the assessee. That was a case where the assessee was not deriving any actual income from the property occupied by the firm in which he was a partner. It would appear from the above decision that the ITO had fixed a notional annual letting value of the property and had included it in the assessee's income as income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income from other sources. In this connection the Commissioner referred to the fact that there was no exemption for such income in the hands of the assessee, and he, therefore, directed enhancement of the income by Rs. 12,000 under the head income from other sources. 8. In our opinion, the action of the Commissioner was legally correct and cannot be objected to. The ITO had not charged this income as, according to his understanding, the decision of the Gujarat High Court covered the case of the assessee. The Commissioner found that the decision of the Gujarat High Court did not cover the case of the assessee and was distinguishable on facts. Where an ITO applies a legal proposition or a Court's decision by a wrong interpretation, his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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