SYED MOHAMMAD SAHEB S N Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF KERALA
S.N. SYED MOHAMMED SAHEB AND BROS., CALICUT
COMMISSIONER OF INCOME TAX, KERALA, ERNAKULAM
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(1.) The question referred to us by the Income Tax Appellate Tribunal is:
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the income from the properties had been properly assessed in the hands of the firm under S.28 of the Income Tax Act, 1961 "
(2.) The counsel of the Revenue raises preliminary objection that the question referred does not arise out of the order of the Tribunal. To appreciate this objection a few facts may be noted. The assessee is a registered firm with 17 partners; and the firm has both business income and house property income. The property income for the assessment year 1962-63 came to Rupees 40,515/-. and the assessee claimed that the amount should be assessed under S.26 of the Indian Income Tax Act of 1961 in the hands of the partners and should not be included in the total income of the firm itself under S.22. On the other hand, the Department claimed that the income should be included in the total income of the firm and assessed under S.22 of the Act. The matter ultimately came before the Tribunal; and the Tribunal confirmed the claim of the Department already accepted by the Appellate Assistant Commissioner. However, in the application for reference and in the question framed, the Section referred to is S.28, which should really have been S.22. The counsel of the Revenue contends that we should not correct this mistake and should not also answer the correct question. We do not think this objection has any force, What appears from the order of Tribunal is that the question decided by the Tribunal was whether the assessment should have Wen under S.32 or under S.36. Obviously, the mention of S.28 in the question framed as well as in the application for reference is a mistake for S.22. Therefore, we make this small correction and proceed to consider the correct question on merits.
(3.) The contention of the counsel of the assessee is that the house property income should have been assessed under S.26 of the Act. In other words, the contention amounts to that the firm, the assesses before us, is an association of persons. Under S.4 of the Act the charge of income tax is on the total income of every person. "Person" is defined under S.2(31) to include an individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals incorporated or not, a local authority and every artificial juridical person not falling within any of the preceding categories. In our opinion, S.22 deals with a case where the assessee is the owner of the house property, whereas S.26 applies to a case where the assessee is an association of persons and the members or the persons constituting such association own the house property in definite and ascertainable shares, in other words, as coowners. To put it differently, S.26 applies to a case where the controversy is whether the income from the house property should be included in the total income of an association of persons or whether the income should be assessed in the hands of the persons who constitute such association. Putting the idea again differently, in a case where the controversy is whether the income of the house property should be included in the total income, of a firm, a company or a joint Hindu family, or should be assessed in the hands of the members of the firm, company or joint Hindu family, S.26 does not come into operation: in all these cases, S.22 alone applies.;
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