Commissioner Of Income Tax Vs. Hariprasad Bhojnagarwala
(High Court of Gujarat at Ahmedabad)
Income Tax Reference No. 174 Of 1995 | 02-08-2011
The assesses is a Hindu Undivided Family (HUF for short). It derived income from house property. The claim of assesses for deduction u/s. 23(2) of the I.T. Act was rejected by Income Tax Assistant Commissioner (Assessment).
In further appeal, the learned CIT (A) also rejected the claim of the assesses. According to CIT (A), the benefits envisaged by Section 23(2) were available only to an individual and not to HUF. For this proposition, the CIT (A) relied upon the decision of J & K High Court in the case of Commissioner of Income Tax vs. Mohd. Amin Tyamboo reported in: 125 ITR 375.
However, in further appeal, the Income Tax Appellate Tribunal relied upon the decision of Income Tax Appellate Tribunal, Delhi Bench (SMC) in the case of ITO vs. Tarlock Singh & Sons reported in 29 ITD 139 and held that the benefit given u/s. 23(2) would be available to HUF.
Where the property consists of -
(a) a house or part of a house in the occupation of the owner for the purposes of his own residence, -
(i) which is not actually let during any part of the previous year and no other benefit therefrom is derived by the owner, the annual value of such house or part of the house shall be taken to be nil;
(ii) which is let during any part or parts of the previous year, that part of the annual value (annual value being determined in the same manner as if the property had been let) which is proportionate to the period during which the property is in the occupation of the owner for the purposes of his own residence, or, as the case may be, where such property is let out in parts, that portion of the annual value appropriate to any part which was occupied by the owner for his own residence, which is proportionate to the period during which such part is wholly occupied by him for his own residence shall be deducted in determining the annual value.
Explanation. - The deduction under this sub-clause shall be made irrespective of whether the period during which the property or, as the case may be, part of the property was used for the residence of the owner precedes or follows the period during which it is let;
THE SAID SECTION HAS UNDERGONE AMENDMENT BY FINANCE ACT, 2001 WHICH NOW READS AS UNDER: -
23. Annual value how determined. -
(2) Where the property consists of a house or part of a house which -
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil.
Please Note That: From above the aforesaid provisions makes it clear that the benefits of the relief in respect of self-occupied property is available only to the owner who can reside in his own residence, that means, the benefit of relief is available to self-occupied property only to an individual assesses and not to an imaginary assessable entity.
The question arises as to, whether a Hindu Undivided Family can be held to be a fictional entity?
The answer will be in the negative. A Hindu Undivided Family is nothing but a group of individuals related to each other by blood relations, or in a certain manner. A Hindu Undivided Family can be seen being a family of a group of natural persons. There is no dispute that the said family can reside in the house, which belongs to Hindu Undivided Family. A family cannot consist of artificial persons.
The Income Tax Appellate Tribunal, Delhi Bench in the case of Tarlock Singh (supra) noticed that under Section 13 of General Clauses Act, while the words in masculine gender shall be taken to include females and words in singular shall include plural and vice versa. Therefore, it rightly held that the word owner would include owners and the words his own would include their own. There is nothing, therefore, in the words used in Section 23(2), which excludes application of such provision to HUF, which is a group of individuals related to each other.
DECISION: It is not a question whether it is Section 23(2) of the Income Tax Act, the provisions being similar, the interpretation will be the same. The Division Bench of this Court having held that similar benefit is available to HUF, irrespective of decision of other High Court with regard to partnership firm, it was open to the Division Bench to follow its earlier decision even without referring the matter to a Larger Bench. The question referred to this Court is, therefore, answered in the affirmative i.e., in favour of the assesses, but against the revenue.
CONCLUSION: from above decision of Gujarat High Court, it is clear that a HUF is a group of natural persons, who are related to each other with blood relations. A HUF consisting of natural persons cannot be considered as fictional entity and can be considered as owner of a house property and enjoy benefits of the provisions of Section 23(2) of the Income Tax Act, 1961.
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