Holding

Section 26 (with its explanation) requires that each co‑owner be treated as individually entitled to the relief of Section 23(2), so the deduction is to be allowed separately to each co‑owner.

Summary

The respondent owned an undivided one‑third share in a house occupied as his own residence along with his brother and other co‑owners. For assessment year 1962‑63 the Assessing Officer deducted the amount prescribed under Section 23(2) of the Income‑Tax Act from the total annual letting value of the house and then apportioned the balance among the co‑owners. The respondent contended that the deduction under Section 23(2) should be allowed separately to each co‑owner on the basis of his share. The Tribunal and the Calcutta High Court upheld his claim. The Revenue appealed to the Supreme Court. The Court held that Section 26, together with its explanation, mandates that where co‑owners have definite and ascertainable shares, each co‑owner’s share of income from house property is computed as if he were individually entitled to the relief of Section 23(2). Consequently, the deduction must be allowed separately to each co‑owner. The appeal was dismissed.

Issues considered

Whether the deduction provided under Section 23(2) of the Income‑Tax Act must be allowed separately to each co‑owner of a house property having definite and ascertainable shares.

Legislation cited

Income Tax Act, 1961s. 22, s. 23(2), s. 24, s. 25, s. 26
Taxation Laws (Amendment) Act, 1975

Subjects

Income TaxHouse PropertySection 23(2) deductionCo‑ownersSection 26Definite and ascertainable shareTaxation Law Amendment

Judgment

A COMMISSIONER OF INCOME TAX, CALCUTIA
v.
BIJOY KUMAR ALMAL

APRIL 4, 1995

B [B.P. JEEVAN REDDY AND G.T. NANA VAT!, JJ.)

Income-Tax Act, 1961: Sections 23 and 26 Explanation (As inserted by
Taxation Laws (Amendment) Act, 1975) Income from House Proper-
ty-Computation of-Property owned by two or more ownerr-Deduction
C provided under Section 23(2)---Hold should be given separately to each co-
owners from out of his shares in annual value of the property of house.
'•
The respondent wa_s the owner or an undivided one-third share in a
house which he was occupying for his own residence alongwith his brother
and other co-shares. In the respondent's assessment, for the assessment
D Year 1962-<i3, the I.T.O. deducted the amount specified in Section 23(2)
from out of the annual letting value of the house and then apportioned the
balance annual letting value among the co-owners. The respondent claimed
that the deduction provided for by Section 23(2) should be given separately
to each co-owner. The Tribunal and the High Court decided in his favour.
E Revenue preferred appeal to this Court.

Dismissing the appeal, this Court

HELD : The language of Section 26, even without taking into account
the explanation, is clear enough. It provides that where property consisting
F of buildings or buildings and lands appurtenant thereto is owned by two
or more persons and their respective shares are definite and ascertainable,
they shall not, in respect of such property, be assessed as Association of
persons, and that the share of each such person in the Income from the
property as computed in accordance with Sections 22 to 25 shall be
included in his total income. Sections 22 to 25 prescribe the manner in
G which the income from house property has to be determined. Therefore,
the respondent was jnstified in claiming that the deduction provided for
by Section 23(2) be allowed to him separately from out of his share in the
annual value of the said house property, inasmuch as he had a definite
and ascertainable share therein. Indeed, this very idea is made clear
H beyond any doubt by the Explanation appended to Section 26 by the
170
. \ . . . . .

i .. C.I.T.v. B.K.ALMAL(JEEVANREDDY,J.)
. I .
., Taxation Laws Amendment Act, 1975. [172-G, H, 173-A) A
C/T~.Shyam Sunder, 122 I.T.R.541;Tulsi Das v. CIT, (1983) 63 CTR
'."'. 324 and ClTv.-shanti Devi Iatan, 139 ITR 152 & 106 ITR 743, approved.
; '.~ ;•·· ·~· ·. ·'. J :· ./
,, · ·' CIVIL 'APPELLATE JURISDICTION : Ci'11 Appeal No. 2298
(NT) of 1977. B
. l . ,. •;, .2: ___'_, - - .
·. :; :: •·.:From the Judgment and Order dated 24.11.75 of the Calcutta High
Court in I.T.R. No. 274 of 1968.

K.N. Shukla, B.S. Ahuja and Ms. A. Subhashini for the Appellant.
c
The Judgment of the Court was delivered by

B.P. JEEYAN REDDY, J. This appeal is preferred by the Revenue
against the judgment of the Calcutta High Court answering the question
referred to ii in favour of the assessee and agaiiist the revenue. The D
1
·question referred under Section 256(1) of the Income-Tax Act was
"(W)hether, on the facts and in the circumstances of the case, the Tribunal
..._ was right in holding that the statutory allowance mentioned in Section 23(2)
of the Income- tax Act; 1961 should be allowed every time separately in
.. computing the income from house property falling to the share of each of
the co-owners. including the assessee?"
E
- \
The assessment year relevant herein is 1962-63..The respondent was
the Owiier of an undi'1ded one-third share in a house property during the
relevant period. He alongwith his brother and other co-sharers was occupy·
'-.... mg the house for his own residence. In the respondent's assessment, the F
. •. J.T.O. deducted the amount specified in sob-section (2) of Section 23 from
' o;tt'of. the annual
letting value of the house and then apportioned the
· balance.AL.V, among the co-owners. The respondent's case ~as that the
dednction pr~Vided for by Section 23(2) should be given separately to each
co-owner. It is the said dispute which is re!]ected in the question referred · G
~or the opinion of the High Court. . · ·

. . ' . We may state imnlediately that such a .dispute would not really arise
. ..__after from the assessment year 1976·77 and onwards because of the inser·
lion of explanatio~ in Section 26. ·Disputes had arisen' before _the said
-.
·explanation was
inserted by Taxation Laws (Amendment) Act; 1975. .H
•
.. . ~ - . .

/. .
. ·""1111111
\ I
•
172 SUPREME COURT REPORTS [1995)3 S.C.R.

A Section 22 provides that the annual value of property consisting of
any buildings and lands appurtenant thereto of which the assessee is the
owner, shall be chargeable to income-taic under the head 'Income from
house property'. Section 23 prescribes the manner in which the annual
value has to be determined. Sub- section (2), which is relevant for our
B purposes, provided 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 ia the same manner as if the
property had been let and shall further be reduced by one-half of the
amount rn determined or one t)lousand and eight hundred Rupees,
whichever is less. Section 26, which is the other section relevant for our
C purpose, alongwith its explanation inserted with effect from 1.4.1976, reads
thus:

"Property owned by co-owners.

26. Where property consisting of buildings or buildings and lands
D appurtenant thereto is owned by two or more persons and their
respective shares are definite and ascertainable, such persons shall
not in respect of such property be assessed as an association of
persons, but the share of each such person in the income from the
property as computed in accordance with sections 22 to·25 shall
E be included in his total income.

Explanation: For the purposes of this section, in applying the
provisions of sub-section (2) of Section 23 for computing the share
of each such person as is referred to in this section, such share
shall be computed, as if each such person is individually entitled
F to the relief provided in that sub- section."

In our opinion, the language of Section 26, even without taking into
account the explanation, is clear enough. It provides that where property
consisting of buildings (or buildings and lands appurtenant thereto) is
owned by two or more persons and there respective shares are definite
G and ascertainable, they shall not, in respect of such property, be assessed
a• Association of persons, and that the share of each such person in the
inc0me from the property as computed in accordance with Sections 22 to
25 shall be included in his total income. Sections 22 to 25 prescribe the ·-"
manner in which the income from house property has to be determined.
H We are, therefore, of the opinion that the respondent was justified in
C.I.t. v. B.K. ALMAL [JEEVAN REDDY, J.] 173
: claiming that the deduction provided for by Section 23(2) be allowed to A
him separately from out of his share in the annual value of the said house
property, inasmuch as he had a definite and ascertainable share therein.
Indeed, this very idea is made clear beyond may doubt by the explanation
appended to Section 26 by the Amendment Act aforesaid.

It is brought to our notice that apart from the judgment under appeal B
(reported in 106 !TR 743), Delhi and Bombay High Courts have also taken
a similar view in CIT v. Shyam Sunder, 122 !TR 541 and Tu/si Das v. CIT,
(1983) CTR 324. The Calcutta High Court itself appears to have followed
the judgment under appeal in CIT v. Shanti Devi !a/an, 139 !TR 152.

The appeal accordingly fails and is dismissed. No costs. c
T.N.A. Appeal dismissed .

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