COMMISSIONER OF INCOME-TAX v. J. V. GUPTA & SONS (HUF).
IT Ref. No. 33 of 1985 & 334 of 1988, decided on December 7, 1999
HIGH COURT OF DELHI
R. C. Pandey with Ms. Prem Lata Bansal & Sanjeev Khanna with Amit Andley, for the Petitioner : None, for the Respondent
D. K. JAIN, J. :
These are two references under section 256 (1) of the IT Act, 1961 (for short “the Act”), at the instance of the Revenue, pertaining to the asst. yrs. 1978-79 and 1979-80. Since one of the questions referred is common, both the references are being answered by this judgment. The questions referred are Questions referred for the asst. yr. 1978-79.
“1. Whether, on the facts and in the circumstances of the case, the assessee under the head “income from salary”, is entitled against that income to the deduction admissible under section 16 (1) of the IT Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the deduction on account of repair under section 24 should be worked out on the gross annual letting value before deduction of allowance for occupation under section 23 (2)(i) of the IT Act ?”.
Question referred for the asst. yr. 1979-80
“1. Whether, on the facts and in the circumstances of the case, the assessee HUF, when its income has been assessed under the head “income from salary”, is entitled against that income to the deduction admissible under section 16 (1) of the IT Act, 1961 ?”
2. The assessee is assessed to income-tax in the status of ‘Hindu Undivided Family’ (for short the ‘HUF’). During the relevant previous years, the HUF received salary from the concerns namely, M/s Gupta Trading Corporation and M/s Siyaram Kumar Engineering Works (P) Ltd. In its return of income for the relevant assessment years, the assessee claimed standard deduction under section 16 (i) of the Act. While framing assessment, the AO disallowed the said deduction on the ground that the assessee was a non-living person though the income declared by the assessee as salary was assessed under the head “salaries”. Aggrieved, the assessee preferred an appeal to the CIT(A), who affirmed the view taken by the AO. Being dissatisfied with the decision of the CIT(A), the assessee took the matter in further appeal to the Tribunal. In its order for the asst. yr. 1978-79, the Tribunal, while observing that the pronoun ‘him’ and ‘he’ covers both an individual and a non-living person, held that standard deduction was admissible to the HUF. In respect of the asst. yr. 1979-80, the Tribunal followed its earlier order for the asst. yr. 1978-79. However, while doing so, the Tribunal also observed that the ITO having himself determined the head of income under which the income declared was assessable namely “salaries”, the Revenue could not raise any objection with regard to the head of income having been wrongly taken specially when there was no cross-objection filed by it.
3. The second question in respect of asst. yr. 1978-79 relates to the deduction for repairs under section 24 of the Act, while computing income from the self-occupied property. The assessee had computed its income under the said head by first claiming deduction under section 24 (1)(i)(a) of the Act on account of repairs against the gross letting value of the property and then claiming relief under section 23 (2)(i). However, the AO allowed the said deduction against annual value of the property, determined in terms of section 23 of the Act. After determining the gross annual value of the self-occupied property at Rs. 6,000, he deducted the relief of Rs. 1,800 due to the assessee under section 23 (2)(i) and then granted deduction for repairs under section 24 of the Act. This action of the AO was upheld by the CIT(A). However, in assessee’s further appeal to the Tribunal, without any discussion on the issue, the Tribunal held that the deduction under section 23 (2) had to be made after net annual value has been determined.
4. Despite service the assessee remains unrepresented. We have heard Mr. Sanjiv Khanna, learned senior standing counsel for the Revenue.
5. Insofar as the first question is concerned, the answer can be found in the question itself. The question whether a particular income is from “salaries” assessable under section 15 or is “income from business” assessable under section 28 or “income from other sources” assessable under section 56 is a complex question to be determined on the facts of each case having regard to the nature of relationship between the assessee and the person from whom the money is received; the nature of activities and functions performed, etc. But once an appropriate head, mentioned in cls. A to F of section 14 of the Act, for chargeability of the income received is determined, then the total income under that head has to be computed as per the procedure prescribed under the specific head. Sec. 16 of the Act provides that the income chargeable under the head “salaries” shall be computed after making deductions prescribed there under. Standard deduction is one of the deductions prescribed under section 16 (i) of the Act. In the instant case, having himself brought to tax the money received by the assessee under the head “salaries”, it is axiomatic that the income chargeable under the said head has to be computed after allowing deductions under section 16 of the Act.
6. It is, however, submitted by Mr. Sanjiv Khanna that the issue before the Tribunal was whether the salary received by the HUF could be taxed under the head “salaries” or under the head” income from other sources” and, therefore, this Court should expand the scope of this reference and examine the real issue after reframing the question. We are unable to agree with learned counsel for the Revenue.
7. Though, it is true that in a reference under section 256 (1), the High Court is invested with a power to reframe the question in order to bring out the real controversy arising out of the order of the Tribunal and answer the same, but there is a significant limitation to the said power, viz., that it is not open in the advisory jurisdiction to bring out a new issue which the Tribunal did (sic-not) have the occasion to consider. As noted above, in the instant case, the Tribunal has recorded that the issue whether the salary received by the assessee-HUF could be taxed as income from salaries or not was never before it, inasmuch as the AO had himself brought it to tax under the head “salaries”. In the light of the facts found by the Tribunal, we cannot go into the question as to which is the appropriate head for chargeability of the income, in question, to tax. In this view of the matter, the question proposed is answered in the affirmative i.e., in favour of the assessee and against the Revenue.
8. This brings us to the second question. Sec. 22 to section 27 of the Act relate to the levy and computation of tax on income from house property. Sec. 22 provides for charging the annual value of the property, of which the assessee is the owner, under the head “income from house property”. The annual value of the property is to be determined in terms of section 23 of the Act. Sec. 23 (2)(i) of the Act postulates that where the property consists of a house in the occupation of the owner for the purposes of his own residence, the annual value of such house shall first be determined in the same manner as if the property had been let and further be reduced by one-half of the amount so determined or one thousand and eight hundred rupees, whichever is less.
9. From a conjoint reading of section 22 and section 23, it is clear. that all deductions for the purpose of computing income from house property have to be made after the annual value has been determined under section 23 of the Act. Therefore, we are is of the opinion that the Tribunal was not right in holding that deduction under section 24 on account of repairs has to be is made without taking into consideration the rebate under section 23 (2)(i) of the Act. Accordingly, the second question for the asst. yr. 1978-79 is answered in the negative i.e., in favour of the Revenue and against the assessee.
Both the references are answered accordingly with no order as to costs.