COMMISSIONER OF INCOME TAX Vs. RABINDRANATH BHOL

JUDGEMENT

(1.) ON an application being filed by the Department under Section 256(1) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following questions for the opinion of this court and a statement of the case has been made. The two questions referred are :

(2.) THE assessee, an individual, is also a partner of a partnership firm. THE said assessee had allowed some rooms in his building where the partnership business was being carried on. No rent was being charged from the said partnership firm. During the assessment year 1983-84, the assessee contended that the rooms wherein the business was being carried on by the partnership-firm of which the assessee himself is a partner should be excluded while computing the income from house property under Section 22 of the Income-tax Act. THE Income-tax Officer, however, rejected the said claim and on the basis of the rent which the assessee was receiving from other tenants computed the notional income in respect of the rooms under the occupation of the partnership firm and then determined the tax liability. THE assessee carried the matter in appeal, but the appellate authority dismissed the appeal as the business of the partnership-firm cannot be said to be the business of the assessee himself. THE assessee then carried the matter in second appeal to the Tribunal. THE Tribunal came to the conclusion that the portion of the building which is utilised by the partnership firm should be treated as being used by the assessee for the purpose of business and, therefore, the income from such property would not be taxable under Section 22. It accordingly directed deletion of the income in respect of that portion of the property which was being occupied by the partnership firm. In respect of the claim of the assessee for deduction under Section 23(2) for a portion of the building which was under the occupation of the bank, the Tribunal took into account the fact that the Income-tax Officer had allowed such deduction in respect of the assessee for the assessment year 1987-88 and, therefore, there was no reason why the same should not be allowed in respect of the year under consideration. Accordingly, the Tribunal directed the Income-tax Officer to allow necessary deduction under Section 23. THE appeal of the assessee thus having been allowed, the Department moved the Tribunal under Section 256(1) of the Income-tax Act, 1961, and the Tribunal on being satisfied had referred the two questions as already stated for the opinion of this court.