Commissioner of Income-tax Vs. Mohd. AmIn Tyamboo - Court Judgment

Mufti, J.

1. The assessee is an individual. He is a partner of the firm, M/s. M. A. Ramzana, in which his son, Javeed Ahmad, has been admitted to the benefits of the partnership. The assessee owns house property which is self-occupied for his residence. For the assessment year 1974-75, the assessee filed his return of income and determined the annual letting value of the said property at Rs. 4,420, but limited the assessable amount to Rs. 2,638 only. His contention was that the 10% limit as contemplated by Section 23(2) of the I.T. Act, 1961 (shortly ' the Act '), was relatable to the total income of the assessee without including therein the minor's income assessable in his hands under Section 64 of the Act. The ITO repelled the contention. On appeal, the AAC disagreed with the ITO and upheld the con-tention. Feeling aggrieved the department preferred an appeal before the Tribunal. The Tribunal preferred the view taken by the ITO and reversed the order passed by the AAC observing :

' Section 2(45) defines ' total income ' as to mean the total amount of income referred to in Section 5 computed in the manner laid down in the Act. Section 5 on its part brings within the ambit of total income of a person all income from whatever sources derived which has been received or accrued or deemed to be received or accrued in India by or on behalf of such person. This section is qualified by the words ' subject to the provisions of this Act'. In other words, the scope of ' total income ' under Section 5 is not exhaustive and in case there are other provisions in the Act enlarging the scope of total income, they have as well to be kept in view. Section 64 next postulates that in computing the total income of any individual there shall be included such income as arises directly or indirectly to the spouse or a minor child of such individual from membership in a firm in which he is also a partner or from assets transferred directly or indirectly to them otherwise than for adequate consideration. This section thus leaves without any pale of doubt that ' the total income ' of any individual has to include the income which is clubbed in his hands under its provisions. These provisions, thus, have broadened the scope of ' total income ' considerably and incomes deemed to be received by or on behalf of an assessee are includible in his hands. So also the income under Section 64. The latter income is deemed to be the total income of the assessee by operation of law.'

2. and again as under :

' Moreover, the only exceptions which the proviso to Section 23(2) envisages are that the income of the property is not to be included and further that the deductions under Chapter VIA are to be excluded. There is no other exclusion envisaged. It would, therefore, not be correct to exclude the income enjoyed under Section 64. In this respect, we may as well refer to Section 80B(5) of the Act which defines ' gross total income '. There, a specific exclusion of the income under Section 64 has been provided for. Had the Legislature so envisaged for Section 23(2) as well, it would have naturally enacted so in its proviso.'

3. At the instance of the assessee, the Tribunal has referred the following questions of law for our opinion :

' 1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the term ' total income of the owner under the proviso to Section 23(2) ' includes income under Section 64 ?

2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that under ' total income ' as laid down in Section 5 the basis of charge of income-tax tantamounts to gross total income as denned in Section 80B(5) of the Act '

4. Section 23(2) reads :

' Where the property consists of-

(i) a house in the occupation of the owner for the purposes of his own residence, the annual value of such house shall first 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 ;

(ii) more than one house in the occupation of the owner for the purposes of his own residence, the provisions of Clause (i) shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf : Provided that for the purposes of Clauses (i) and (ii), where the sum so arrived at exceeds ten per cent. 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 VIA), the excess shall be disregarded....'

5. 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 denned in Clause (45) of Section 2 of the Act. Under that definition the 'total income ' means ' total amount of income referred to in Section 5 computed in the manner laid down in this Act '. Section 5 reads thus :

' 5. Scope of total income.--(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which-

(a) is received or is deemed to be received in India in such year by or on behalf of such person ; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or

(c) accrues or arises to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of Sub-section (6) of Section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

2. Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which-

(a) is received or is deemed to be received in India in such year by or on behalf of such person ; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year....'

6. This section, being subject to the provisions of the Act, is controlled by the provisions of Chap. III which has the effect of excluding from the concept of total income various items which are otherwise income according to the general law. Therefore, by Section 5 read with Section 2(45), ' total income ' comprises the total amount of income computed in the manner laid down in the Act including all income from whatever source derived, which accrues or arises or is received or is deemed to accrue, arise or to be received as provided in Section 5 and which is not excluded under Chap. III. The crucial words in the definition are ' computed in the manner laid down in the Act', The requirements of computation of ' total income in the manner laid down in this Act' attract other provisions of the Act. They are :

(i) those that relate to items deemed to be the income of the assessee [sections 7(i), 7(ii), 41(1), 41(4), 58 to 69B, 198],

(ii) those that relate to the incomes of other persons, but which aie fictionally regarded as the income of the assessee [sections 60, 61, 62(2), 64(i to iv), 92],

(iii) those that relate to incomes on which no tax is leviable but which are nevertheless included in the total income for rate purposes (sections 86 and 86A),

(iv) those that relate to the deductions by way of permissible expenditure (Chapter VI-A and Section 280-O)

7. Thus, it would be seen that ' total income ' ss defined in Section 2(45) means total amount of income of an assessee from all sources, including-

(i) Incomes, other than those mentioned in Chap. III, chargeable to tax under the Act ;

(ii) Incomes chargeable to tax by way of deduction at source under Section 198 ;

(iii) Incomes deemed to be those of the assessee by force of certain provisions including Section 64 of the Act ; and

(iv) Incomes on which no tax is leviable but which are nevertheless included for rate purposes ;

but after making deductions by way of permissible expenditure under Chap. VI-A and Section 280-O of the Act.

8. It necessarily follows that in the proviso to Sub-section (2) of Section 23 the ' total income of an owner ' would include income of his minor child assessable in his hands under Section 64 of the Act. In this view, question No. 1 must be answered in the affirmative.

9. So far as the second question is concerned, it does not really arise out of the order of the Tribunal. The Tribunal has nowhere stated that ' total income ' and ' gross total income ' are interchangeable. The Tribunal has pressed into service Section 80B(5) as it stood before amendment by the Taxation Laws (Amendment) Act, 1970, in order to support its contention that the total ineome as contemplated by Section 2(45) would include income of a minor child assessable in the hands of an assessee under Section 64 of the Act.

10. Section 80B(5) provided as under :

''Gross total income ' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under Section 280-O and without applying the provisions of Section 64,'

11. The Tribunal has argued that where the Legislature wanted to exclude income under s 64, it has expressly said so. The argument cannot be reasonably interpreted to mean the ' total income ' chargeable under Section 5 is equivalent to the amount of 'gross total income ' as defined in Section 80B(5). If at all the Tribunal meant that, we must say at once that it has fallen into an error. For this we rely upon the discussion hereinbefore appearing which clearly shows that the ' total income' and ' gross total income ' are not synonymous. They are mutually exclusive. The concept of each is different from the other. In this view the ' total income ' chargeable under Section 5 is not the same as ' gross total income ' defined in Section 80B(5) of the Act. Therefore, question No. 2 is liable to be answered in the negative.

12. The result is that question No. 1 is answered in the affirmative andquestion No. 2 in the negative. In view of the divided success, the partiesare left to bear their own costs. Counsel's fee is assessed at Rs. 150.

Mir, J.

13. I agree.