ORDER
T.N.C. Rangarajan, Judicial Member
1. These appeals reiterate the claim of the assessee for relief under Section 23(3)(b) of the Income-tax Act, 1961 (‘the Act’).
2. The assessee is an individual. The assessee was ordinarily residing at Kathmandu, Nepal. However, he constructed a house at Udupi in which he actually resided in the previous year ended 31-3-1977, corresponding to the assessment year 1977-78, only for a month. For the rest of the period, the house was occupied by his son who was a student of MIT Manipal, along with a servant. The assessee, therefore, claimed that since he could not actually occupy the property by reason of his employment elsewhere, there should be remission of the annual letting value proportionately to the period not occupied by him. This was denied by the authorities below. In the further appeal before us, it was contended on behalf of the assessee that the provisions of Sub-section (3) of Section 23 was designed only to meet a contingency such as this where the assessee could not himself occupy the residential premises and, therefore, he was entitled to the relief. On the other hand, it was contended on behalf of the revenue that the scheme of Section 23 was to assess the notional income from the house property and if it were let out there would be a remission of annual value depending upon the actual rent received. It was submitted that a concession was provided where the assessee occupied it himself and, therefore, when he did not occupy it himself but allowed the house to be occupied by someone else, then either it should be treated as a let out property or the notional income therefrom has to be assessed under the provisions of the main section. According to the revenue the relief under Sub-section (3) of Section 23 was available only when the house was kept entirely vacant and locked up.
3. On a consideration of the rival submissions we are of the opinion that the assessee is entitled to succeed. Section 22 provides that the annual value of a property of which the assessee is the owner shall be chargeable to Income-tax under the head ‘Income from house property’. Section 23(1) provides that the annual value shall be determined to be the reasonable letting value provided where it is actually let out, the actual rental income shall be taken. Sub-section (2) of Section 23 provides that where the owner himself resides in that residential property there shall be a remission of 50 per cent from the annual value as determined under Sub-section (1) of Section 23. We now come to Sub-section (3) of Section 23 which provides that where the property referred to in Sub-section (2) of Section 23 consists of one residential house only and it cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on any other place, he has to reside at that other place in a building not belonging to him, the annual value of that house shall be taken at nil and in case it was partly occupied by him for a fraction of the previous year a proportionate of the annual value shall be taxed. The AAC had referred to the decision of the Allahabad High Court in the case of CIT v. Rani Kaniz Abid 1972 Tax LR 587 which was a case under Sub-section (2) of Section 23. In that case it was held that though the assessee did not actually reside in the house but only her daughter and son-in-law resided therein it should be deemed to be a house in the occupation of the owner for the purpose of his own residence so that the assessee was entitled to the concession thereunder. But we have here a different situation, viz., the provisions of Sub-section (3) of Section 23 which states that the assessee is entitled to a further remission where the house was not actually occupied by the owner. The contention of the assessee is that the phrase ‘actually occupied’ must be given significance so that the occupation by the son would not be sufficient to deprive the assessee of the relief under Sub-section (3) of Section 23. On the other hand, the contention of the revenue is that the assessee had derived some benefit by reason of the occupation by the son and it should be deemed to have occupied the property himself. The justification for taxing the notional income from house property itself was given in the case of Governors of the Rotunda Hospital v. Coman [1920] 7 TC 517 as:
…If the owner of such properties as these should be himself in occupation of them, it by no means follows that he will, in fact, derive from them an income equal to this annual value; but, as he has the use and enjoyment of the properties, it is, for the purposes of the statute, presumed that he does derive from then an income equal in amount to this annual value, and tax is accordingly, under Schedule A, assessed upon this presumed income. (p. 586)
This passage was emphasised by the Supreme Court in the case of Bhagwan Dass Jain v. Union of India [1981] 128 ITR 315. But where the assessee is not actually in occupation of the house, this benefit would no longer be available and that is, perhaps, the reason why Sub-section (3) of Section 23 has been enacted to give relief where the assessee is not actually in occupation. The meaning of the phrase ‘actually occupied’ can be clearly understood by the acceptable reason given in the section itself, viz., ‘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’. This shows that where the assessee is required to have a double establishment the statute intended to give the assessee relief in respect of the house in which he himself was not residing. This is further strengthened by the opening words of the Sub-section (3) of Section 23 which grants this remission only in respect of a house referred to in Sub-section (2) of Section 23 which is itself a house in the occupation of the owner for the purpose of his own residence. This shows that even if the house could be deemed to be in the occupation of the owner for the purpose of his own residence by reason of his family continuing to reside in that premises, it would be a house in respect of which relief under Sub-section (3) of Section 23 will be available where the assessee himself is not able to reside by reason of his occupation elsewhere. From this situation we can easily see that the occupation by the son or other relative has to be disregarded because the statute was concerned with the actual occupation by the assessee himself and not a deemed or derivative occupation through the benefit given to any relative. We are, therefore, convinced that in terms of Section 23(3) the assessee, who was not himself actually in occupation of the premises, was entitled to the relief granted by that sub-section. We, accordingly, set aside the orders of the authorities below on this point and direct the ITO to recompute the total income for the assessment year 1977-78 and correspondingly for the other two assessment years 1978-79 and 1979-80 also depending upon the actual occupation by the assessee.
4. In the result, the appeals are allowed.
