Supreme Court Dismisses Revenue's Appeal in Income Tax House Property Matter. Co-owner with definite and ascertainable share entitled to separate statutory allowance under Section 23(2) of Income-tax Act, 1961, as each co-owner's share in income from property is to be computed individually under Sections 22 to 25 and not as association of persons.

Appeal by Revenue against Calcutta High Court judgment answering a reference under Section 256(1) of the Income-tax Act, 1961 in favour of the assessee regarding separate deduction under Section 23(2) for co-owners of a self-occupied house property.

The Revenue sought reversal of the High Court's decision and contended that the deduction under Section 23(2) should be allowed only once from the total annual letting value before apportionment among co-owners; the assessee sought to uphold the separate deduction for each co-owner.

Dispute arose because the Income Tax Officer deducted the statutory allowance under Section 23(2) from the total annual letting value of a jointly owned self-occupied house and then apportioned the balance among co-owners, whereas the assessee, holding a definite one-third share, claimed the allowance should be given separately to each co-owner.

The Income Tax Appellate Tribunal held in favour of the assessee that Section 23(2) allowance should be allowed separately to each co-owner. On reference under Section 256(1), the Calcutta High Court affirmed the Tribunal's view and answered the question in favour of the assessee.

Whether, 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?

Revenue contended that the deduction under Section 23(2) operates on the property as a whole and should be deducted once from the total annual letting value before apportioning the balance among co-owners, and that before the 1975 amendment separate deductions were not contemplated. Assessee contended that as a co-owner with a definite and ascertainable share, he is not to be assessed as an association of persons; his share in income from the property must be computed under Sections 22 to 25 individually, which includes applying Section 23(2) to his share, thereby entitling him to a separate deduction.

Section 26 of the Income-tax Act, 1961, even without the explanation inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 1.4.1976, requires that co-owners with definite and ascertainable shares be assessed individually and their share in income from property be computed under Sections 22 to 25; therefore each co-owner is entitled to the statutory allowance under Section 23(2) separately from his share of annual letting value.

In our opinion, the language of Section 26, even without taking into account the explanation, is clear enough. the respondent was justified 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. The appeal accordingly fails and is dismissed. No costs.

For assessment year 1962-63, the Income Tax Officer deducted Section 23(2) allowance from the total annual letting value of the jointly owned self-occupied house and apportioned the balance among co-owners. The assessee objected, claiming separate deduction per co-owner. The Income Tax Appellate Tribunal held in favour of the assessee. On reference under Section 256(1), the Calcutta High Court answered the question in favour of the assessee and against the Revenue. The Revenue appealed to the Supreme Court, which dismissed the appeal on 4 April 1995.

• Income-tax Act, 1961: 22, 23(2), 25, 26, 256(1)
• Taxation Laws (Amendment) Act, 1975: Section 26 Explanation