1979 (1) TMI 87 - HC - Income Tax

Court affirms income assessment from flat as 'Property', rejects 'Other sources' argument

The High Court upheld the Tribunal's decision to assess the notional income from a flat under the head 'Property' for the assessment years 1960-61 and ... Income From House Property, Income From Other Sources Issues:Assessment of notional income from a flat under the head 'property' or 'other sources' for the assessment years 1960-61 and 1961-62.Analysis:The case involved the assessment of an assessee for the years 1960-61 and 1961-62 regarding the notional income from a flat allotted to the assessee by a company. The Commissioner, invoking powers under s. 33B of the Indian I.T. Act, contended that the income should be assessed under 'Other sources' instead of 'Property' and determined the correct amount as Rs. 6,167, differing from the amount disclosed by the assessee. The Commissioner argued that the benefit of free use of the flat constituted income, even though the assessee had invested in the company and was allotted the flat in return. The Commissioner's reasoning was found flawed as there was no concession made that the amount returned was income, and the use of the flat was not entirely free but a return for the investment made by the assessee.The Tribunal, in its order, rejected the Commissioner's inclusion of notional income under 'Other sources' and upheld the income being assessed under 'Property'. The Tribunal reasoned that the assessee, by personally occupying the flat, did not deny himself income that would have been earned if the flat was leased out. Additionally, the Tribunal dismissed the argument that the income should be taxed as dividend, as the normal sense of dividend implies distribution from company profits. The Tribunal applied the doctrine of piercing the corporate veil to establish that the assessee was the owner of the flat, supporting the inclusion of income under the head 'Property'. Consequently, the Tribunal set aside the Commissioner's orders and restored the ITO's assessment under the head 'Property'.The High Court concurred with the Tribunal's decision, emphasizing that the Commissioner's jurisdiction under s. 33B was based on the erroneous assumption that the assessee enjoyed free use of the flat. The Court highlighted that the assessee had already paid consideration by investing in the company, making the free use argument invalid. Therefore, the Court upheld the Tribunal's decision, ruling in favor of the assessee and awarding costs. The Court concluded that no further discussion was necessary, as the Tribunal's decision to set aside the Commissioner's orders was justified based on the facts of the case.