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Second provisoto section 23(1) of the Income-tax Act, 1961 - Income from house property - Annual value - Assessment year 1982-83 - Whether deduction for new construction is admissible even where a building is let out for commercial purpose and is not being used for residential purpose - Held, no FACTS The assessee claimed deduction of Rs. 6,000 out of the annual value of a property under second proviso to section 23(1). The ITO rejected the claim on the ground that four floors of the building stood let out to bank and were not utilised for 'residential purposes'. The Commissioner (Appeals) confirmed the action of the ITO, but the Tribunal held that the assessee was entitled to deduction as the said provision does not refer to the purpose for which the occupant actually uses the building. On reference : HELD The benefit conferred by clause (b) of the second proviso to section 23( 1) could only be availed of if the building was actually used for residential purposes and not otherwise. The nature of the building let out determines the grant or denial of relief. Had the object of the Legislature been to allow this concession irrespective of the user of the building, it was not necessary to qualify the word 'unit' by the expression 'residential'. An owner may construct a building with self-contained floors with the object of letting out the same to the tenants, but such letting out has to be for the purpose of residence of the tenants and not otherwise. A residential unit is that which is used as a residence. Admittedly in this case the units which were let out to 'the bank were not constructed as residential units. The assessee was, therefore, not entitled to the benefit. CASES REFERRED TO CIT v. Mrs. Elizabeth Varghese [1981] 132 ITR 605 (Ker.), C.H. Kesava Rao v. CIT [1985] 156 ITR 369 (Mad.) and Dr. J.V. Desai v.CIT [1985] 154 ITR 828/ 20 Taxman 179 (AP). JUDGMENT Sengupta, J. - In this reference under section 256(1) of the Income-tax Act, 1961 ('the Act') the following question of law has been referred to this Court for the assessment year 1982-83 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the…

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