Residential unit requirement controls relief under section 23(1); non-residential letting cannot claim the deduction.

Relief under clause (c) of the second proviso to section 23(1) of the Income-tax Act, 1961 is confined to a residential building comprising one or more residential units. The decisive test is the residential character of the unit and its actual use; where the property is let out from the outset for commercial or other non-residential purposes, the relief is unavailable. On the stated facts, the building was let to a company for non-residential use, and the assessee was therefore not entitled to the deduction.

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Issues: Whether the assessee was entitled to relief under clause (c) of the second proviso to section 23(1) of the Income-tax Act, 1961 in respect of a building let out for non-residential use.

Analysis: The relief under clause (c) of the second proviso to section 23(1) is available only where the building is a residential building comprising one or more residential units. The decisive factor is that the unit must be a residential unit and the benefit is not available where the property is, from the outset, let out for commercial or other non-residential purposes. On the facts found, the property was let out to a company for non-residential use, and that finding was not challenged. The earlier authorities relied on by the assessee did not assist because the present controversy turned on the residential character of the unit itself and the nature of its actual use.

Conclusion: The assessee was not entitled to the deduction under clause (c) of the second proviso to section 23(1) of the Income-tax Act, 1961. The question was answered in the negative and against the assessee.

Ratio Decidendi: Relief under clause (c) of the second proviso to section 23(1) is confined to residential units and is unavailable where the building is let out for non-residential use.

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