Law:

Section:

Section 22 of the Income-tax Act, 1961 - Income from house property - Chargeable as - Whether, where assessee-company provided houses owned by it free of rent for occupation by its directors and senior executives, notional income therefrom could be determined and included in its total income - Held, no Facts-I The assessee-company owning certain buildings, allotted them for the occupation of its directors and other senior executives free of rent, and claimed that since these buildings were its business assets and were being used for its business purposes, any notional income arising therefrom could not be determined, The ITO, however, determined the national income of these properties and included it in the assessee's income under the head 'Income from house property'. On appeal, the AAC and the Tribunal upheld the assessee's claim. On reference : Held-I The assessee was a corporate body and the occupation of the building by its employees as licencees was undoubtedly occupation by the assessee for the purpose of section 22. It must also be said that occupation by its employees was for the purpose of the assessee's business. For example, an assessee builds a number of houses for the purpose of accommodating its workers so that they should be nearer to the factory or housed in hygienic and proper conditions so as to improve their productivity, health and their commitment to the employer. No rent is collected from such workers, though according to the terms of employment, the assessee is under no obligation to provide such houses. In such a case the purpose of such allotment is undoubtedly a business purpose for it ultimately goes to promote the assessee's business. In view thereof, it should not make any difference if a similar arrangement was made for the directors or senior executive, who are also necessary for a proper and successful running of an organisation. Therefore, the occupation of the house by its employees was for the assessee's business purpose, and consequently, the income from such house could not be treated as income from house property and included in the assessee's total income. Section 40A(5) of the Income-tax Act, 1961 - Business disallowance…

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