TMI Blog1991 (1) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... " The facts in brief are that, in the assessment year 1982-83, the assessee claimed deduction of Rs. 6,000 out of the house property income under the second proviso to section 23(1) of the Act. The Income-tax Officer rejected this claim of the assessee as, according to him, four floors of the building stood let out to the bank and were not utilised for "residential purposes". On appeal, the Commissioner of Income-tax (Appeals) confirmed the action of the Income-tax Officer. Being aggrieved, the assessee preferred a second appeal before the Tribunal. For the following reasons, the Tribunal held that the assessee was entitled to deduction under the second proviso to section 23(1) of the Act : "We have considered the contentions of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner's own residence. The material portions of section 23(1) of the Act as it stood at the relevant time run thus: "23(1) For the purposes of section 22, the annual value of any property shall be deemed to be (a) the sum for which the property might reasonably be expected to be let from year to year ; or (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable : Provided that where the property is in the occupation of a tenant, the taxes levied by any local authority in respect of the property shall, to the extent such taxes are borne by the owner, be deducted in determining the annual value of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each residential unit was the whole of the annual value of the unit in cases where such annual value did not exceed Rs. 600 and Rs. 600 in cases where such annual value exceeded Rs. 600. There was a further condition attached, that the income in respect of any such residential unit should in no case be a loss. The deduction was available for a period of three years from the date of completion of the building. The object and purpose underlying the introduction of the said proviso was explained by the then Finance Minister in his Budget Speech while introducing the Finance Bill, 1961, in the following terms : "In order to stimulate construction of housing for the use of persons in low income group, I propose to provide for a deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 1978, the annual letting value of the house property will be reduced by an amount up to Rs. 2,400 in respect of each residential unit for a total period of five years from the date of completion of the property. This amendment is operative for and from the assessment year 1979-80. From the legislative history, it will be evident that the object of allowing this concession was to encourage the construction of residential houses. Even if a house is constructed as a residential unit, but used for commercial purposes, it can no longer be said to be a residential unit. The purpose for which the tenant uses the flat or the house is important in deciding this issue. It is true that the second proviso to section 23(1) of the Act refers to resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the annual value of the two residential units and not from the annual value of the building. Our attention has also been drawn to a decision of the Andhra Pradesh High Court in Dr. J. V. Desai v. CIT [1985] 154 ITR 828. In that case, the assessee who owned a two-storeyed building the construction of which was done between April 1, 1970, and April 1, 1978, let out both the units to the National Textile Corporation. The first floor of the building was used for housing the office of the National Textile Corporation while the ground floor was used as a guest house. The assessee claimed deduction of a sum of Rs. 2,400 from the annual rent of the building. The Income-tax Officer and, on appeal, the Appellate Assistant Commissioner rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, the benefit conferred by clause (b) of the second proviso to section 23(1) of the Act could only be availed of if the building was actually used for residential purposes and not otherwise. The nature of the user of the building let out determines the grant or denial of relief envisaged by clause (b) of the second proviso to section 23(1) of the Act. Had the object of the Legislature been to allow this concession irrespective of the user of the building, it was not necessary to qualify the word "unit" by the expression "residential". An owner may construct a building with self contained floors with the object of letting out the same to tenants, but such letting out has to be for the purpose of residence of the tenants and not otherwise. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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