Ram Pershad and Sons vs Commissioner of Income Tax

Bhat, J.—In respect of the assessment year 1971-72, at the instance of the assessee, the following two questions have been referred for our consideration :

"1. Whether, on the facts and in the circumstances of the case and on true interpretation of section 22 of the income tax Act, 1961, the Tribunal was right in holding that what is charged u/s 22 is the annual value of the ownership of the property irrespective of the fact whether or not any income was either actually received or had accrued to the assessee?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the disallowance of the vacancy allowance claimed by the assessee at Rs. 14,400 for the assessment year 1971-72 ?"

The finding is that the owner has been occupying the property in question and it was not let out. On the basis of this finding, we have to proceed to answer the question. The income from the property which is a distinct head of taxation under the Act is covered by the provisions of sections 22-27 of the income tax Act, 1961 (''the Act''). The manner of arriving at the income as stated in section 22, read with section 23, is to find out the annual value of the property. Whether the property is in the direct occupation of the owner or leased to a tenant, the basis to arrive at the income is the same, subject to some variations regarding the deductions. Nowhere a different method is provided to arrive at the annual value of the property when it is under the occupation of the owner. As per section 23(1)(a), the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. In other words, a reasonable estimate shall have to be made of the value as provided under the Act. The fact that the owner has not earned any income from the property is entirely irrelevant. Therefore, there can be no doubt that the first question shall have to be answered in the affirmative and against the assessee.

The conclusion we have reached as above also finds support from the reasoning of the Calcutta High Court in Liquidator, Mahmudabad Properties Ltd. Vs. Commissioner of Income Tax, . It was confirmed by the Supreme Court in Liquidator of Mahamudabad Properties P. Ltd. Vs. Commissioner of Income Tax, West Bengal-II, though the Supreme Court has not specifically dealt with this aspect of the question. As regards the second question, again provisions of section 24(ix) are quite clear and specific. The section provides that the vacancy allowance is permitted only where the property is let out and was vacant during a part of the year. But, when admittedly, the property was never let out, and the owner was in the occupation, this provision will not be attracted. To the same effect is the reasoning of the Supreme Court in the aforesaid decision in Liquidator of Mahamudabad Properties (P.) Ltd.''s case (supra). Consequently, the second question is also answered in the affirmative and against the assessee. Reference answered accordingly.