K D THAKAR Vs. COMMISSIONER OF INCOME TAX
LAWS(GJH)-1979-1-6
HIGH COURT OF GUJARAT
Decided on January 29,1979

K.D. THAKAR Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

B.K.MEHTA, J. - (1.) WE are concerned in this reference with three assessment years, viz., 1967 68, 1968 69 and 1969 70. Assessee, Kanaiyalal D. Thakkar, made a gift of Rs. 30,000 to his wife on February 2, 1963. Out of this amount of gift, the assessee's wife purchased a property for a sum of Rs. 28,000 on July 4,1963. This property was admittedly self occupied property. For asst. year 1967 68, the ITO did not include any income from the said property in the income of the assessee. Thereafter, the ITO initiated action under S. 154 of the IT Act, 1961, with a view to rectify the assessment for inclusion of a sum of Rs. 1,500 being the income from the said property. The assessee, at that time, did not object to the rectification of the order but submitted that the property income includible would be nil as the assessee's wife had no other income having regard to the proviso to s. 23(2) and, therefore, the value of the said property should be taken as nil. This contention of the assessee did not find favour with the ITO, who was of the opinion that in the past, that is, in asst. yr. 1965 66, the income from the property was included which was not objected to by the assessee. He, therefore, included a sum of Rs. 1,500 on that account for the assessment years under reference in the income of the assessee under S. 64(1)(iv) of the ITAct, 1961. The assessee being aggrieved by the said order, went in appeal before the AAC. Same contention was reiterated before the appellate authority that having regard to the proviso to S. 23(2), income from self occupied property is to be computed in the hands of the wife subject to a maximum value of 10per cent of the other income of the owner of the property, and that the income from house property could be included in the hands of the assessee under S. 64(1)(iv) of the IT Act, 1961. The AAC accepted this contention and granted reduction of Rs. 1,500 for each of the asst. yrs. 1967 68 and 1968 69 and Rs. 1,803 for asst. year 1969 70.
(2.) THE Revenue, therefore, carried the matter in further appeal before the Tribunal. The Tribunal read the relevant provisions and also considered the decision of the Supreme Court in CIT vs. Maharaj Kumar Kamal Singh 1973 CTR (SC) 181 : (1973) 89 ITR 1 and the decision of the Calcutta High Court in B. K. Guha, I.C.S. (Retd.) vs. CIT (1972) 84 ITR 592 and the decision of the Madras High Court in R. Ganesan vs. CIT (1965) 58 ITR 411. The Tribunal held, having regard to the observations contained in the decision of the Supreme Court in Maharaj Kumar Kamal Singh's case (supra), that once the income from house property is includible in the hands of the assessee, as a necessary corollary the annual value of the assessee's residential house has to be computed at 10per cent of the other income of the assessee. At the instance of the assessee, therefore, the following question is referred to us for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that the income from house property was to be computed at 10per cent of the total income of the assessee, and not that of the wife of the assessee ?" We are of the opinion that this reference should be accepted obviously for the following reasons: On a plain reading of S. 23(2) and S. 64(1)(iv) of the ITAct, 1961, we are of the opinion that both these provisions operate in different fields and unless we can read either in S. 64 or in S. 27 that the assessee is the owner of the house property in question, it is not possible to agree with the view of the Tribunal that once the income from house property is includible in the hands of an assessee as a necessary corollary the annual value of the assessee's residential house has to be computed at 10per cent of his total income. The Tribunal has overlooked a very important aspect of the question as to who is the owner of the house property in question. Sec. 23 of the ITAct, 1961, provides the mode of determination of annual value of a property which is broadly deemed to be the sum for which the property might reasonably be expected to let from year to year; or where the property is let and the annual rent received or receivable by the owner, subject to the deductions which have been provided in S. 23(1) where the property is in the occupation of a tenant. Sec. 23(2) provides for the mode of computation of income of property which is in the occupation of the owner for purposes of his residence. In the latter case, the annual value of such property would be determined in the same manner as if the property had been let and further be reduced by one half of the amount so determined or one thousand and eight hundred rupees, whichever is less. In a case where more than one house is in the occupation of the owner for purposes of his residence, the provisions of cls. (i) and (ii) of Sub S. (2), set out above, are to be applied in respect of one of such houses specified by the assessee in that behalf. Proviso to sub s. (2), however, restricts the maximum value of the income to 10per cent of the total income of the owner and the total income for this purpose is to be computed without including therein any income from such property and before making any deduction under Chap. VIA. In other words, the maximum value of income from house property which is occupied by the owner himself is 10per cent of his other income. Sec. 64 is a part of Chap. V, which provides for inclusion of income of other persons in assessee's total income. Sec. 64 provides for inclusion of income of spouse, minor child, etc., in the income of an individual. Sec. 64(1)(iv), which is relevant for the purpose of this reference, provides as under : "64. (1) In computing the total income of any individual there shall be included all such income as arises directly or indirectly ...... (iv) subject to the provisions of cl. (i) of S. 27, in a case not falling under cl. (i) of this sub section, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart" It is common ground that the present case is not falling under cl. (i) of Sub S. (1) of S. 64. As stated by us above, S. 64 and S. 23(2) operate in different fields. Sec. 23(2) provides for the method of computation of property income which is self occupied. Sec. 64, on the other hand, provides for inclusion of income of spouse or minor child in the income of an individual in various contingencies mentioned in cls. (i) to (vii) of Sub S. (1) of S. 64. It is, therefore, difficult to appreciate the view of the Tribunal that the moment the income from house property is included in the hands of an assessee for purposes of computation of value of such income, the assessee's total income, except the income from property, should be considered for purposes of finding out the maximum value. We do not think that this conclusion follows as a necessary corollary to the inclusion of income from house property in the income of an individual under S. 64(1)(iv) of the It Act, 1961, unless the case falls within the terms of S. 27(i).
(3.) IT should be recalled that S. 27 is a definition clause which defines various terms for purposes of computing income from house property under ss. 22 to 26. Sec. 27(i) defines who is the owner of a house property by a deeming fiction. It provides as under : "27. For the purposes of ss. 22 to 26 (i) an individual who transfers otherwise than for adequate consideration any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred" ;


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