TaxTMI 
TaxTMI 
1992 (6) TMI 69
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....come of the appellant. It is essential to mention that this computation of property income from the self-occupied residential house was submitted by the appellant which was also accepted by the Revenue. The appellant, for the purpose of section 23(2) of the Income-tax Act, has taken 1/10th of the property income only. The ITO, however, discovered that there was a mistake of law inasmuch as, as per the provisions of section 23(2), the amount required to be included as income from self-occupied property should have been 1/10th of the other income excluding income from property and, therefore, he issued a notice under section 154 and invited objections of the assessee. The assessee supported its computation and requested the ITO to drop the rectification proceedings. The ITO was, however, of the view that there was a mistake apparent from record and, therefore, he rectified the assessment. The appellant also did not succeed before the Commissioner of Income-tax (Appeals). 3. Before us, the learned counsel for the appellant Sri K. Ranganathachari, argued that the appellant had been following a consistent method of computing the income from self-occupied dwelling house which had been a....
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....rty is 9,652 sq. ft. out of which 6,854 sq. ft. is self-occupied and 2,798 sq. ft. is let out for which the rent has been received. In the opinion of the learned counsel, the proviso to section 23(2) does not apply to cases where part of the house has been let out and only part has been used for self-occupation. The learned counsel points out that if the whole house was occupied by an assessee, then the proviso to section 23(2) was applicable. Since that is not the case and the property has been occupied partly by the appellant, the proviso to section 23(2) has no application and consequently no addition of any amount should be made under the provisions of section 23(2). He, therefore, contends that the addition made by the Revenue is not justified. 5. The learned counsel has also brought to our notice the amendment to section 23(2) with effect from 1-4-1987. The said amendment to section 23(2) speaks of a house and part of a house. The amendment should be taken as clarificatory and, therefore, it should be assumed that prior to 1-4-1987, the same position was obtainable. In the year under appeal, since the property was partly occupied and partly rented out, the provisions of sect....
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....erefore, rightly been rectified by the ITO. The learned departmental representative, therefore, prays that the orders of the Revenue should be maintained. 10. We have heard the rival submissions. The provisions of section 23(2) have undergone change from time to time. Up to assessment year 1986-87, determination of the annual value of owner occupied dwelling house involved three steps. Firstly, the annual value is determined in the manner as if the property were let out to tenants. The amendment to section 23(2) by Taxation Laws (Amendment) Act, 1970, effective for and from assessment year 1971-72, assures that full municipal taxes payable are to be deducted in such computation. Secondly, the amount of annual value so determined is reduced by one-half of such value or Rs. 3,600 (up to assessment year 1982-83 Rs. 1,800), whichever is less. Thirdly, if such balance exceeds 10% of total income other than the income from such self-occupied property but without deductions allowable under Chapter VIA, the excess is to be disregarded. However, as a result of substitution with effect from 1-4-1987 of section 23(2) by Finance Act, 1986, the method of determining the annual value of a self-....
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....t of section 23(2) is to provide relief to the owner when he, in his capacity as owner, occupied the property for his own residence. In other words, section 23(2) provides for the mode of computation of income from property which is in the occupation of the owner for the purpose of his residence and under the proviso to section 23(2) operative up to 31-3-1987, the maximum value of income from house property which is occupied by the owner himself is limited to 10% of his total income. The total income for this purpose is to be computed without including therein any income from such self-occupied property and before making any deductions under Chapter VIA of the Income-tax Act. 12. It is, therefore, clear from the provisions of section 23(2) that the maximum value of the income from house property which is under the occupation of the owner himself is limited to 10% of the other income. The property income has been specifically excluded by the section and it has also been laid down that 10% income should be computed before making any deduction under Chapter VIA of the Income-tax Act. In the case before us, the appellant had taken the value of income from house property at 10% of the ....