Self-occupied house property loss set-off remains available where section 23(2) excludes the second proviso to section 23(1).

Section 23(2) and its Explanation were construed to mean that the second proviso to section 23(1) does not apply when computing the annual value of a self-occupied residential unit. On that reading, the statutory treatment of self-occupied house property is not diluted by the proviso, and loss from such house property may be set off against income from other sources. The effect of the Explanation is to exclude the proviso's operation for this purpose, so the set-off remains available in favour of the assessee.

---

---

Issues: Whether loss from self-occupied house property could be set off against income from other sources in view of section 23(2) of the Income-tax Act, 1961, and whether the second proviso to section 23(1) remained applicable for that purpose.

Analysis: The question depended on the proper construction of section 23(2) and its Explanation. The Explanation made it clear that nothing in the second proviso to section 23(1) would apply in computing the annual value of the relevant residential unit. On a plain reading, the exclusion was not confined only to the computation of annual value in isolation but governed the operation of the proviso in the context of the self-occupied house contemplated by section 23(2).

Conclusion: The question was answered in the affirmative. The set-off was held allowable, in favour of the assessee and against the Revenue.

Ratio Decidendi: Where the Explanation to section 23(2) expressly excludes the second proviso to section 23(1), that proviso cannot be applied to deny the statutory treatment of a self-occupied residential unit for the purpose of set-off of house property loss.

---