COMMISSIONER OF INCOME TAX Vs. JAGANNATHAN K M

JUDGEMENT

(1.) AT the instance of the Revenue, under S. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), the following questions of law have been referred to this Court for its opinion :

(2.) THE assessee is an individual having income from property, business in money lending, share income from K. M. K. Jaggannathan and Co. and other sources. In relation to the asst. year 1972 - 73, the assessee admitted an annual letting value of Rs. 360 in respect of a house property owned by the assessee. This property was occupied by K. M. K.Jagannathan and Co., a firm, in which the assessee was also a partner, and under cl. 8 of the deed of partnership, the entire premises owned by the assessee, except a small portion in the occupation of another partner of the firm, was to be used for the purpose of carrying on the business of the firm and the monthly rent was fixed at Rs. 30. In the course of the assessment proceedings, the ITO found that the monthly rent of Rs. 30 was only a nominal amount and on the basis of the municipal tax value, he estimated the annual letting value at Rs. 4,800 and completed the assessment on that footing. Aggrieved by this, the assessee preferred an appeal before the AAC and it was contended that under the terms of the deed of partnership, which was binding on the assessee as well as the other partner, the property cannot reasonably be expected to the let out at a higher rent and that in all the prior years also, the income from the property had been assessed on the basis of the annual letting value at Rs. 360. This was accepted by the AAC, who directed the ITO to recompute the income from the property by adopting the annual letting value at Rs. 360, instead of Rs. 4,800. On further appeal, at the instance of the Revenue, before the Tribunal, the assessee took the stand that as he was carrying on business through his partnership firm in the premises, the income in respect of the property was not chargeable to tax in 3 3 his hands under S. 22 of the Act. The Tribunal took the view that the assessee carried on the business in a major portion of the premises in question through the firm, K.M.K. Jagannathan and Co., and as only room in the premises was used as residence by the other partner, in respect of which a rent of Rs. 30 per mensem was paid by the firm to the assessee and the share income from this firm is also assessed in the hands of the assessee, the income in respect of the property is not chargeable to tax under S. 22 of the Act. Ultimately, the Tribunal dismissed the appeal and that is how the two questions of law have come up before us.

(3.) ON the other hand, learned counsel for the assessee contended that the assessee is the owner of the property in question and excepting a small portion reserved for the residential accommodation of the other partner, the remaining portions are in the occupation of the firm which is carrying on business therein and the carrying on of the business by the assessee, though as a partner in the firm, would be sufficient to enable the assessee to claim the benefit of S. 22 of the Act. Our attention in this connection was drawn to the decision reported in CIT vs. Rasiklal Balabhai (1979) 9 CTR (Guj) 116 : (1979) 119 ITR 303 (Guj) : TC40R.220 and Addl. CIT vs. N. Vaidyanathan (Tax Case No. 307 of 1977, judgment dt. 17th Jan., 1983) reported as (1989) 180 ITR 198 (Mad) : TC40R.214 (Appendix). With reference to the reliance placed on Smt. Sharada Bai's case (1987) 165 ITR (St) 338, learned counsel drew our attention to Nawab Sir Mir Osman Ali Khan vs. CWT (1986) 57 CTR (SC) 89 : (1986) 162 ITR 888 (SC) to contend that the dismissal of a special leave petition does not clothe that decision with the authority of the Supreme Court and that such dismissal cannot also be construed as the affirmation by the Supreme Court of the decision against which special leave to appeal was sought.