J V DESAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The following question is referred to this court by the Income-tax Appellate Tribunal at Hyderabad under s. 256(1) of the I.T. Act, 1961 (the Act) :

(2.) The assessee owns a two-storeyed residential building. The entire building was let out to the National Textile Corporation during the assessment years 1974-75 and 1975-76. While the first floor of the building was used for housing the office of the National Textile Corporation, the ground floor of the building was used as a guest house. The building was constructed between 1/04/1970, and A 1/04/1978. The assessee claimed deduction of a sum of Rs. 2,400 from the annual rent received from the building consisting of two units relying upon clause (b) of the second proviso to s. 23(1) of the Act. The claim was rejected by the ITO as also by the AAC on appeal. The appeal preferred before the Income-tax Appellate Tribunal at Hyderabad also met with the same fate. The Tribunal held that the benefit conferred under clause (b) of the second proviso to s. 23(1) of the Act could only be availed of if the building was actually used for residential purposes and not otherwise. In other words, the nature of user of the building let out, according to the Income-tax Appellate Tribunal, determines grant or denial of relief envisaged by clause (b) of the second proviso to s. 23(1) of the Act.

(3.) It is not denied that the building of the assessee let out was constructed after 1/04/1970, and before 1/04/1978. The building consists of two units. Both the units are residential when the building was let out.