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TMI Blog1985 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ark, Poona. He was occupying it himself. The Income-tax Officer computed the income from this self-occupied house property at Rs. 8,090, as against Rs. 5,663 returned by the assessee. In doing so, the Income-tax Officer did not allow deduction for municipal taxes in the sum of Rs. 3,032, in view of section 23 of the Income-tax Act, 1961. The Appellate Assistant Commissioner allowed the assessee's appeal. The Revenue went up before the Income-tax Appellate Tribunal which, upon a construction of section 23, held that the deduction on account of municipal taxes ought to have been allowed. The correctness of the Tribunal's conclusion is in question before us. Section 23 of the Income-tax Act, 1961, as it stood then, read thus " 23. (1) For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total income of the owner (the total income for this purpose being computed without including therein any income from such property and before making any deduction under Chapter VI-A or section 280-0) the excess shall be disregarded. Explanation.-.Where any such residential unit as is referred to in the second proviso to sub-section (1) is in the occupation of the owner for the purposes of his own residence, nothing contained in that proviso shall apply in computing the annual value of that residential unit. " It is a settled position, in view of the judgment of a Full Bench of this court in New Piecegoods Bazar Co. Ltd. v. CIT [1947] 15 ITR 319, that, in arriving at the annual value of property, being the sum for which the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready been made in computing it under subsection (1), which reduction could only be on account of local or municipal taxes. Our attention was drawn by Mr. Dalvi to the decision of the Gujarat High Court in CIT v. Arvind Narottam Lalbhai Dalpatbhai Vada [1976] 105 ITR 378, and the decision of the Madras High Court in Addl. CIT v. M. B. Rajeswari [1977] 110 ITR 443. The Gujarat High Court in the aforementioned case of Arvind Narottam Lalbhai Dalpatbhai Vada [1976] 105 ITR 378 at 386, observed that the words which required interpretation, having regard to the argument before it (which is the argument before us) in sub-section (2) of section 23 of the Income-tax Act, 1961, were: " the annual value shall first be determined as in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal taxes as contemplated by the first proviso. The decision of the Gujarat High Court was considered by the Madras High Court in M. B. Rajeswari's case [1977] 110 ITR 443. The Madras High Court came to the same conclusion as the Gujarat High Court but did not rest itself solely upon the words " and further be reduced " in sub-section (2) of section 23 of the Income-tax Act, 1961. The Madras High Court found, first, that the expression " the annual value shall first be determined as in sub-section (1) " occurring in sub-section (2) of section 23 would necessarily take in the first proviso to sub-section (1), thereby providing for the deduction of municipal taxes paid by the owner. Secondly, reliance was placed upon the second proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the landlord himself. In our view, the words " and further be reduced " in sub-section (2) of section 23 of the Income-tax Act, 1961, do not lead to the conclusion that there has already been a reduction in the annual letting value by the application of the provisions contained in sub-section (1). The words, it will be noted, are not " and be further reduced " but " and further be reduced ". As we see it, the word " further " must be read as indicating the further or next step to be taken in the computation of the annual letting value of the self-occupied house property ; which is to say that after the annual letting value of the self-occupied house property has been computed on the basis of what it would fetch if let from year to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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