1981 (7) TMI 122 - AT - Income Tax

Assessee's Appeal Dismissed, Income Calculation Ruled per Income-tax Act. Deductions Denied under section 64(2)

The tribunal dismissed the assessee's appeal, ruling that income derived from the converted property should be calculated as per the provisions of the ... Transfer Of Assets Issues:1. Interpretation of section 64(2) of the Income-tax Act, 1961 regarding the treatment of income derived from converted property.2. Allowability of expenditure incurred by the assessee in executing a new lease agreement with tenants before applying provisions of section 64(2).Detailed Analysis:1. The case involved an appeal by an individual assessee regarding the treatment of income derived from a house property that was converted into a joint family property after a specific date. The key issue was the interpretation of section 64(2) of the Income-tax Act, 1961, which deals with the inclusion of income in the hands of an individual. The assessee argued that only the real income accruing to him should be included, not the notional income. Reference was made to various court decisions emphasizing the inclusion of actual income rather than notional income. The departmental representative contended that section 64(2) does not allow for a change in the computation of income and does not authorize deductions not otherwise allowable under the Act.2. The tribunal carefully considered the arguments presented by both sides. It referred to a Bombay High Court case where the court held that deemed income under a specific section did not cover such income for taxation purposes. The tribunal noted that the computation of income under each head should be done first, followed by the application of section 64(2). The tribunal emphasized that the word 'income' in section 64(2) should be interpreted consistently with other sections of the Act. It rejected the assessee's argument that capital expenditure should be deducted before applying section 64(2) as it would distort the language of the section. Additionally, a Madras High Court decision was referenced, supporting the calculation of net wealth in the hands of the transferee before inclusion in the transferor's hands under a different section.In conclusion, the tribunal dismissed the assessee's appeal, ruling that the income derived from the converted property should be calculated in accordance with the provisions of the Income-tax Act, and the deductions claimed by the assessee could not be allowed before applying section 64(2).