Delhi High Court

Commissioner Of Income Tax vs Purshottam Dass on 24 July, 2000

Equivalent citations: 2000 112 TAXMAN 122 Delhi

Author: Pasayat

JUDGMENT

Pasayat, C.J.

At the instance of the revenue, following question has been referred for the opinion of this court under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), by the Tribunal, Delhi Bench C:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing exemption to the assessee in respect of the property in Green Park Extension, New Delhi, under section 23(1)(b)(ii) of the Income-tax Act, 1961 ?"

2. Factual position in a nutshell is as follows:

For the assessment year 1973-74, the assessee claimed exemption of Rs. 6,000 (Rs. 1,200 per unit) under section 23(1)(b)(ii) of the Act. Claim was in respect of a house property in Green Park Extension, New Delhi, let out to Cabinet Secretariat, Government of India, on a monthly rent of Rs. 4,000. Claim was rejected by the assessing officer on the ground that the property was not being utilised for residential purposes as it was used by the Cabinet Secretariat. The assessee preferred an appeal before the AAC. The said authority allowed exemption on the ground that the property was constructed as a residential unit and was situated in a residential area. A temporary use by the Cabinet Secretariat for office work did not change the position. Said order of the AAC was challenged by the revenue before the Tribunal. According to the revenue, house having not been used for residential purposes, the exemption under section 23(1)(b)(ii) was not allowable. The Tribunal upheld the conclusions of the AAC. It was noted that the notice had been sent by the Delhi Development Authority (hereinafter referred to as `the DDA') to the assessee wherein it was indicated that the building is residential, but was being used for office purposes. It was the view of the DDA that there was contravention. Cabinet Secretariat indicated that due to special circumstances this had to be done and it sought permission to do so. The Tribunal concluded that the building consists of 5 residential units and temporary user for office purposes will not alter its basic nature. On being moved by the revenue, as aforesaid, reference has been made.

3. Heard the counsel for the revenue. There is no appearance for the assessee when the matter is called. Strong reliance was placed by the learned counsel for the revenue on a decision of the Calcutta High Court in CIT v. Smt. Shyama Devi Dalmia (1992) 194 ITR 114 (Cal), where it was held that the expression 'residential unit in the context used in the relevant provision necessarily denotes a dwelling unit for residence. We may note here that a different view has been expressed by the Andhra Pradesh High Court in Dr. J. V. Desai v. CIT (1985) 154 ITR 828 (AP). Section 23(1)(b)(ii), so far as is relevant, reads as follows :

"Provided further that the annual value as determined under this subsection shall :

(b) in the case of a building comprising one or more residential units, the erection of which is begun after the 1st day of April, 1961 and completed after the 31st day of March, 1970 for a period of five years from the date of completion of the building, be reduced by, a sum equal to the aggregate of-

(ii) in respect of any residential unit whose annual value as so determined exceed one thousand two hundred rupees."

4. Bare perusal of the provision indicates that the exemption is granted in case of a residential building comprising one or more residential units where erection was made during a particular period. Question whether a particular unit is residential or not is to be determined by taking into account various factors, like, the intention of the constructor at the time of construction, intended user, actual user, potentiality for a different user and several other related factual aspects. The provision only stresses on erection of a building comprising of resident(s) during a particular period.

5. In a given case, the constructor may have constructed a particular unit as the residential unit, but to avoid deterioration on account of non-user, may have temporarily let out for office purposes. There may be a case where for some period of a particular assessment year, the building has been used for residential purposes and for the residual period for office purposes. There may be another case when during the period of five years referred to in the provision for three years building is used for residential purposes and for balance period for office purposes. Can it be said in the above three contingencies, the unit ceases to be a residential unit for some periods? These factual aspects have great relevance while adjudicating the question whether the exemption is to be allowed. We may state that user is one of several relevant factors and not the conclusive or determinative one. The intention of constructor at the time of erection is one of the relevant factors, as stated above. If intention at the time of erection was used for residential purposes, it is of great relevance and significance.

6. The learned counsel for the revenue submitted that in case of an exemption, the provision has to be construed strictly and onus is on a person who claims exemption to establish that he is entitled to an exemption. There can be no quarrel with the proposition. In fact, in Novopan India Ltd. v. CCE JT 1994 (6) SC 80, it was observed that the principle that where there is ambiguity of a taxing statute should be constructed in favour of the taxpayer does not apply to provision giving a taxpayer relief in certain cases from a section clearly imposing liability. Exemption provisions or exception provisions have to be constructed strictly and onus is on the taxpayer to prove that he is covered by the said provision. In CCE v. Parle Exports (P) Ltd. 1989 (1) SCC 345, it was held that exemptions from taxation have a tendency to increase the burden on the other class of taxpayers and should be construed against the subject in case of ambiguity. It is equally a well-known principle that a person who claims an exemption has to establish his case. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided. The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the Legislature manifest in the statutory language. Indeed, the need of resorting to interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clearly and directly convey meaning, there is no need for any interpretation. The position was also elaborately dealt with in Union of India v. Wood Papers Ltd. 1990 (4) SCC 246. Lord Halsbury, L.C. observed in IRC v. Jamesh Forrest (1890) 15 AC 334 that all exemptions from taxation to some extent increase the burden on other members of the community In Littman v. Barron (Inspector of Taxes) 1951 (2) AER 393, (a decision of the Court of Appeal), it was observed that in case of ambiguity, a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving taxpayer relief in certain cases from a section clearly imposing liability.

7. The language with which the case at hand is concerned is clear and is unambiguous, and, therefore, there is no need for seeking into the intention and going into the question whether a strict or liberal interpretation is called for. It has to be noted that several relevant aspects have been taken note of by the AAC and the Tribunal. Letter dated 24-6-1972 issued by the Delhi Development Authority, Vigilance Cell, wherein it was stated that construction of the building was permitted as residential and there was user contrary to its permission was referred to. It was clearly indicated in the said letter that there was non-conforming use of the premises from residential to non-residential purposes. The Government of India, Cabinet Secretariat, Research and Analysis Wing, in its letter dated 13-7-1972, indicated that due to non-availability of accommodation, this building had to be hired by the Cabinet Secretariat for office use, the Tribunal noted that the building was constructed as a residential unit and for that purpose, a permission was obtained from DDA. The said position is not in dispute. The revenue in fact does not dispute the factual position that the building is located in residential area. Above being the factual conclusions recorded by the Tribunal, which have not been challenged by the revenue to be contrary to evidence, they stand concluded as conclusions on factual aspects. The Calcutta High Court decision referred to above is distinguishable factually because of some factual aspects noted therein. In Smt. Shyama Devi Dalmia's case (supra), it has been recorded as follows :

"... Admittedly, in this case, the units which were let out to the bank were not constructed as residential units...."

Factual position is different in the case at hand where clinching materials go to show that the construction was made for residential purpose and in a residential area. There was temporary non-user as residence and, consequently, temporary user for office purposes.

8. On the factual position as highlighted above, the Tribunal was justified in holding that exemption as claimed under section 23(1)(b)(ii) was allowable. Our answer to the question, therefore, is in the affirmative in favour of the assessee and against the revenue.

The reference stands disposed of in the above terms.