RANGANATHAN, J. - (1.) THIS reference under S. 256(1) of the IT Act raises an interesting question regarding the construction of S. 24(1) of the IT Act, 1961, r/w S. 60 of the same Act.
(2.) THE assessee, Dr. Rameshwar Lal Pahwa, derived his income mainly from a house property situate at 20, Rajpur Road, Delhi. The annual letting value of the property from which he derived income was Rs. 11,115 and after deducting 1/2 of the municipal taxes paid and 1/6 of the annual value towards repairs the income from property worked out to Rs. 8,757. The assessee, however, declared the property income for the asst. yrs. 1964 -65, 1965 -66 and 1966 -67 (the relevant previous years being the financial years 1963 -64, 1964 -65 and 1965 -66 at Rs. 5,457. This was because from the figure of Rs. 8,757 already referred to, the assessee claimed deduction of a sum of Rs. 3,300 under S. 24(1)(iv) which at the relevant time allowed deduction "where the property is subject to an annual charge, not being a capital charge" for the amount of such charge. The assessee's contention was that under a deed of maintenance executed by him on April 27, 1963, he had undertaken to pay to his mother during her lifetime and after her to his father during his lifetime a sum of Rs. 275 per month and that the above amount had been charged on the income from the property belonging to him. The ITO allowed the deduction claimed by the assessee and computed the property income for each of the three years at Rs. 5,457 as returned by the assessee. However, the ITO proceeded to observe : "Since this charge is admissible against the income from house property, it is being allowed and is being separately considered for assessment as income from other sources according to the provisions of S. 60 of the IT Act, 1961. Since it is only the income which has been transferred without transferring the house property in question, this transfer is fully covered by S. 60 of the IT Act, 1961. The transfer of income of Rs. 3,300 would, therefore, be assessed in the hands of the assessee after allowing it from property income."
(3.) IN this manner, the ITO added a sum of Rs. 3,300 as income from other sources and computed the total income of the assessee accordingly. The assessee had other income outside India of Rs. 42 in the asst. year 1964 -65 and Rs. 2,018 in the asst. year 1966 - 67. Thus, the total income was determined by the ITO at Rs. 8,799, Rs. 8,757 and Rs. 10,775, respectively, for the three assessment years in question. The action of the ITO was upheld by the AAC on appeal but the Tribunal took a contrary view on the assessee's further appeals to them. The Tribunal first came to the conclusion that the provisions of S. 60 were clearly attracted in the present case. In their opinion, this would only mean that the income from the property had to be included in the hands of the assessee. That income could be computed only under S. 24 and, therefore, the assessee would be entitled to the deduction of the amount of Rs. 3,300 claimed under sub -cl. (iv) of S. 24(1). In this view of the matter, the Tribunal deleted the addition of Rs. 3,300 as income from other sources in each of the three assessment years in question.;