Raghavulu Chetty (Huf) Vs. Income-tax Officer - Court Judgment

Excerpt:
1. this appeal is directed against the order of the commissioner of income-tax made under section 263 of the income-tax act, 1961. on a review of the assessment for the assessment year 1984-85 in respect of the assessee-huf, the commissioner found that the annual value had been determined under section 23(2) which was, according to the commissioner, erroneous inasmuch as that section cannot be applied to hindu undivided family. he relied on the decision of the jammu & kashmir high court decision in the case of cit v. mohd. amin tyamboo [1980] 125 it r375 and holding that the provisions of section 23(2) would apply only to living person, directed the income-tax officer to withdraw the allowance granted under that section.2. the assessee is in appeal to contend that neither the provisions of section 23(2) nor the decision relied on by the commissioner denied the relief available under section 23(2) to a hindu undivided family. on the other hand, the revenue supported the orders of the commissioner 3. on a consideration of the rival submissions, it is self-evident that the allowance under section 23(2) cannot be denied to a hindu undivided family. that section provides for the determination of the annual value in the case of a house in the occupation of the owner for the purpose of his own residence in a manner which is beneficial to the assessee.it cannot be denied by the revenue that the house was in the occupation of the owner and hence there can be no error in determining the annual value under that section in the case of the assessee. however, the commissioner has proceeded on the footing that reference to "his own residence" limits the scope of the section to a living person and has relied on the decision of the jammu & kashmir high court in mohd. amin tyamboo's case {supra) for that purpose. that was a case where the question referred was whether in determining the annual value under section 23(2) at 10 per cent of the total income, the income added under section 64 should be taken into account. since the assessee in that case was an individual, the issue whether section 23(2) applies to a hindu undivided family or not was not an issue before the court.while considering the provisions of section 23(2) the court only observed : a slight consideration of these provisions makes it clear that the benefits of the relief in respect of self-occupied property is available only to an individual assessee. no other assessable entity can claim this benefit. the reference to occupation for the purposes of 'his own residence' unmistakably shows that the owner in question must be a natural person, that is, what is known in income-tax law as 'an individual'. therefore, when the proviso speaks of total income of the owner, it is in this sense that the word 'owner' has been used in it. it has no other significance. it does not limit or restrict the meaning of the expression 'total income', which has to be understood as it is defined in cl. (45) of section 2 of the act.a reading of the above passage will indicate that the observations were made in the context of the construction of the expression "total income" and was, therefore obiter in the context of the applicability of the section to assessees other than individuals. moreover, even that passage shows that that court had no doubt that the section applied to a natural person. the only question is whether a hindu undivided family could be regarded as such a person. on this point we have the authority of the supreme court in the case of banarsi dass v. wto [1965] 56 itr 224 stating that an individual includes a hindu undivided family.moreover, even the income-tax act itself recognises that the huf has a residence in section 6. it is unfortunate that a provision which has existed even in the 1922 act to give a benefit to a self-occupied property and has been understood and applied to hindu undivided families for decades should be considered to be erroneously applied on the basis of a decision of a high court which is not directly on the point. again, when hundreds of hindu undivided families all over the country have been granted this benefit, it is discriminatory to choose this particular assessee for denying that allowance. thus, in any view of the matter the order of the commissioner is untenable. it is cancelled. the appeal is allowed.

Judgment:
1. This appeal is directed against the order of the Commissioner of Income-tax made under Section 263 of the Income-tax Act, 1961. On a review of the assessment for the assessment year 1984-85 in respect of the assessee-HUF, the Commissioner found that the annual value had been determined under Section 23(2) which was, according to the Commissioner, erroneous inasmuch as that section cannot be applied to Hindu undivided family. He relied on the decision of the Jammu & Kashmir High Court decision in the case of CIT v. Mohd. Amin Tyamboo [1980] 125 IT R375 and holding that the provisions of Section 23(2) would apply only to living person, directed the Income-tax Officer to withdraw the allowance granted under that section.

2. The assessee is in appeal to contend that neither the provisions of Section 23(2) nor the decision relied on by the Commissioner denied the relief available under Section 23(2) to a Hindu undivided family. On the other hand, the revenue supported the orders of the Commissioner 3. On a consideration of the rival submissions, it is self-evident that the allowance under Section 23(2) cannot be denied to a Hindu undivided family. That section provides for the determination of the annual value in the case of a house in the occupation of the owner for the purpose of his own residence in a manner which is beneficial to the assessee.

It cannot be denied by the revenue that the house was in the occupation of the owner and hence there can be no error in determining the annual value under that section in the case of the assessee. However, the Commissioner has proceeded on the footing that reference to "his own residence" limits the scope of the section to a living person and has relied on the decision of the Jammu & Kashmir High Court in Mohd. Amin Tyamboo's case {supra) for that purpose. That was a case where the question referred was whether in determining the annual value under Section 23(2) at 10 per cent of the total income, the income added under Section 64 should be taken into account. Since the assessee in that case was an individual, the issue whether Section 23(2) applies to a Hindu undivided family or not was not an issue before the Court.

While considering the provisions of Section 23(2) the Court only observed : A slight consideration of these provisions makes it clear that the benefits of the relief in respect of self-occupied property is available only to an individual assessee. No other assessable entity can claim this benefit. The reference to occupation for the purposes of 'his own residence' unmistakably shows that the owner in question must be a natural person, that is, what is known in income-tax law as 'an individual'. Therefore, when the proviso speaks of total income of the owner, it is in this sense that the word 'owner' has been used in it. It has no other significance. It does not limit or restrict the meaning of the expression 'total income', which has to be understood as it is defined in cl. (45) of Section 2 of the Act.

A reading of the above passage will indicate that the observations were made in the context of the construction of the expression "total income" and was, therefore obiter in the context of the applicability of the section to assessees other than individuals. Moreover, even that passage shows that that court had no doubt that the section applied to a natural person. The only question is whether a Hindu undivided family could be regarded as such a person. On this point we have the authority of the Supreme Court in the case of Banarsi Dass v. WTO [1965] 56 ITR 224 stating that an individual includes a Hindu undivided family.

Moreover, even the Income-tax Act itself recognises that the HUF has a residence in Section 6. It is unfortunate that a provision which has existed even in the 1922 Act to give a benefit to a self-occupied property and has been understood and applied to Hindu undivided families for decades should be considered to be erroneously applied on the basis of a decision of a High Court which is not directly on the point. Again, when hundreds of Hindu undivided families all over the country have been granted this benefit, it is discriminatory to choose this particular assessee for denying that allowance. Thus, in any view of the matter the order of the Commissioner is untenable. It is cancelled. The appeal is allowed.