JUDGMENT
G.G. Sohani, C.J.
1. As directed by this court under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), the Income-tax Appellate Tribunal, Patna Bench, has referred the following questions of law to this court for its opinion :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that a portion of the house property owned by the assessee and occupied by the firm for running a business is entitled to exemption under Section 22 of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in setting aside the order of the Income-tax Officer and the Appellate Assistant Commissioner holding that the income from the house property has to be taxed in the hands of the assessee as the same has not been legally transferred to the wife and remanding the case to the Income-tax Officer for making a fresh assessment ?”
The material facts giving rise to this reference, briefly, are as follows : The assessee is assessed in the status of an individual and derives income from property and hotel business. The assessee is a co-owner of a building known as “Sikandar Manzil”. During the assessment years 1974-75 and 1975-76, a firm, of which the assessee was a partner commenced a hotel business in a portion of Sikandar Manzil. While framing the assessment for the assessment years in question, the Income-tax Officer rejected the contention of the assessee that income from the portion of Sikandar Manzil in the possession of the firm for the purpose of the hotel business was not chargeable to tax. The Income-tax Officer also rejected the claim of the assessee that income from the other portion of “Sikandar Manzil”, alleged to have been transferred by him to his wife for satisfaction of the dower debt, was not includible in his taxable income. The Income-tax Officer held that the transfer of the property in question to the wife of the assessee was not valid in law for want of a registered document. Aggrieved by the order of assessment, the assessee preferred appeals which were dismissed by the Appellate Assistant Commissioner. On further appeal before the Tribunal, the Tribunal upheld the contention of the assessee that income from the property occupied by the firm for carrying on business was not chargeable to tax. The Tribunal also set aside the finding of the Income-tax Officer rejecting the claim of the assessee that income from property, transferred by him to his wife, was not includible in the taxable income of the assessee. The Tribunal remanded the case to the Income-tax Officer for examining witnesses to prove the dower debt. Aggrieved by the order passed by the Tribunal, the Revenue sought reference but the applications made by the Revenue in that behalf were rejected. The Revenue, therefore, submitted applications before this court under Section 256(2) of the Act. Those applications were allowed and the Tribunal was directed to state the case and to refer the aforesaid questions of law to this court for its opinion.
2. Now as, regards question No. 1, learned counsel for the Revenue, Shri Rajgarhia, contended that income from the property of the assessee used by a partnership business in which the assessee is also a partner is includible in the taxable income of the assessee. The decision in CIT v. K. N. Guruswamy [1984] 146 ITR 34 (Kar) does support the contention
advanced on behalf of the Revenue. To appreciate this contention, it is
necessary to refer to the provisions of Section 22 of the Act which read as follows :
“The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head ‘Income from house property’.”
The question for consideration is whether occupation of property for the purpose of business by a firm of which an assessee is a partner can be held to be occupation of the property by the assessee for the purpose of the business carried on by the assessee. Now, when a partnership carries on business, each partner thereof carries on that business. In CIT v. Rasiklal Balabhai [1979] 119 ITR 303, the Gujarat High Court has held that the exemption under Section 22 of the Act would apply to a case where the property is in occupation of the firm of which the assessee is a partner for carrying on the business of the firm. The decision of the Gujarat High Court has been followed by the Madras High Court in CIT v. K. M. Jagan-nathan [1989] 180 ITR 191 and by the Kerala High Court in CIT v. P. M. Thomas [1990] 181 ITR 256. I respectfully agree with that view. Agreeing with these decisions, it must be held that the Tribunal was right in holding that income from the property occupied by the firm of which the assessee was a partner for carrying on the business of the firm was exempt under Section 22 of the Act.
3. With regard to question No. 2, it is difficult to appreciate as to why the Tribunal remanded the case to the Income-tax Officer for examining witnesses to prove the dower debt. No registered deed was executed by the assessee to transfer the property in question valued at over one hundred rupees to his wife in satisfaction of the dower debt. In CIT v. Syed Saddique Imam [1978] 111 ITR 475, a Full Bench of “this Court has held that a gift by a Moliammedan to his wife in lieu of the dower debt is not a true “hibab-il-iwaz” but is really a sale of property and if there is no registered deed evidencing the transfer, there is no valid transfer of the property and the income from such property would be assessable in the hands of the transferor. Following this decision, therefore, it must be held that the Tribunal was not justified in setting aside the finding of the Income-tax Officer that income from the property alleged to have been transferred by the assessee to his wife was includible in the taxable income of the assessee.
4. For all these reasons, my answer to question No. 1 is in the affirmative and in favour of the assessee, while my answer to question No. 2 is in the negative and in favour of the Revenue. In the circumstances of the case, parties shall bear their own costs of this reference.
5. Let a copy of this order be communicated by the office of this court to the Assistant Registrar, Income-tax Appellate Tribunal, Patna Bench, Patna.
G. C. Bharuka, J.
6. I agree.