BHAGWAN DASS JAIN Vs. UNION OF INDIA

JUDGEMENT

(1.) The short question which arises for consideration in this petition for special leave to appeal filed under Article 136 of the Constitution is whether it is open to the Income-tax Officer while computing the liability of an assessee to tax under the Income Tax Act, 1961 (hereinafter referred to as 'the Act') to include in the income of the assessee any amount calculated in accordance with Section 23 (2) of the Act in respect of a house in the occupation of the assessee for the purposes of his own residence. The petitioner who is an assessee under the Act contended before the High Court of Madhya Pradesh in a petition filed under Art. 226 of the Constitution that inclusion of any amount under, Section 23 (2) of the Act in his income was unconstitutional as there could be no income at all in such a case accruing to him in the true sense of that term, the liability that was sought to be imposed under the Act in respect of his residential house was, therefore, in its pith and substance a tax on building falling under Entry 49 of List II of the Seventh Schedule to the Constitution and hence Parliament could not impose the said liability under a law made in exercise of its legislative power under Entry 82 of List I of the Seventh Schedule to the Constitution which authorised it only to levy taxes on income other than agricultural income. The High Court rejected the plea of the petitioner and dismissed the writ petition. The petitioner has now applied to this Court for special leave to appeal against the decision of the High Court.

(2.) When the petition came up for hearing on February 5, 1981 before us, we did not find that there was any ground to grant special leave to appeal but since the case was argued with some persistence, we decided to give reasons for rejecting the prayer of the petitioner which we proceed to give hereunder:

(3.) Section 4 of the Act lays down that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of the Act in respect of the total income of the previous year or previous years, as the case may be, of every person. Section 14 of the Act mentions 'income from house property' as one of the heads of income liable to charge. Sections 22 to 27 of the Act relate specifically to the levy and computation of tax on income from house property. Section 22 provides that 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". Section 23 (2) (i) of the Act states 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. Section 23 (2) (ii) of the Act provides that where the property consists of more than one house in the occupation of the owner for the purposes of his own residence, the provisions of clause (1) of Section 23 (2) shall apply only in respect of one of such houses, which the assessee may, at his option, specify in that behalf. There are some other ancillary and incidental provisions in the Act dealing with the computation of the annual value of such property with which we are not concerned in the present petition.