Bhawanji Kunverji Haria vs. DCIT Income-tax Appellate Tribunal Mumbai Bench “F”, Mumbai Before Vijay Pal Rao (J. M.) and N. K. Billaiya (A. M.) ITA No. 4032/Mum/2009 A Y. 2006-07. Decided on 25.05.2012 Counsel for Assessee/Revenue: G. C. Lalka/M. Rajan

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Sections 22 and 23—(i) Where on account of interior work being carried out during the year the property could only be leased out from the next financial year, no notional rent could be added as the income of the assessee in the current year; (ii) Income from house property which is used in the business carried out in the partnership firm in which the assessee was a partner eligible for exemption u/s. 22.

Facts:
The assessee owned two commercial properties. In his return of income filed, he had not offered income from house property. According to him, the possession of one of the properties was received in December 2005. He took three months to complete the furniture work and the property was let out from April 2006. The other property was used by the partnership firm in which he was the partner. As regards the first property, the AO held that as the property was in possession of the assessee, the provisions of section 23(1) were attracted and the annual value of the property was deemed to be the income of the assessee. As regards the second property, he held that the individual and partnership firm are two different entities, hence, the exemption claimed in respect of the same u/s. 22 was not available. On appeal, the CIT (A) confirmed the order of the AO.

Held:
In respect of the first property, the tribunal noted that the facts regarding the date of its possession and the time the assessee took to furnish the premises were not in dispute and that immediately thereafter, the premises was let out in April 2006. Therefore, it accepted the assessee’s submission and held that no notional rent could be added as the income of the assessee qua the said property.

As regards the second property which was let out to a partnership firm where the assessee was a partner, the tribunal relying on the decision of the Orissa High Court in the case of Commissioner of Income-tax v. Rabindranath Bhol (211 ITR 299) held that the income from the house property which is used in the business carried out in the partnership firm in which the assessee was a partner would qualify for the exemption provided u/s. 22.