BHAGWAN DASS JAIN versus UNION OF INDIA

Citation: [1981] 2 S.C.R. 808 · Decided: 11-02-1981 · Supreme Court of India · Bench: A.P. SEN · Disposal: Dismissed

Cited by 5 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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808 
BHAGWAN DASS JAIN 
v. 
UNION OF INDIA 
February 11, 1981 
[A. P. SEN AND E. S. VENKATARAMIAH, JJ.] 
Income-tax Act, 1961, S. 23(2)(i) & Constitution of India 1950, Seventh 
Schedule List I, Entry 82 and List II, Entry 49-Income-Incorne froni hou.~e 
property-Self-occupied property-Whether on1ounts to income-Legislative 
practice-Interpretation of entries in Lists. 
fYords and Phrases-'lncome'-Meaning of-Constitution of India, 1950. 
Seventh Schedule List I, Entry 82. 
Section 22 tn 27 of the Income-tax Act, 1961 relate to the levy and com-
putation of tax on income from house property. 
Section 23(2) (i) states that 
where the property consists of a house in the occupation of the owner for the 
purposes of his residence, the annual value of such house shall first be deter-
mined in the same manner as if the property had been let and further be re~ 
duced to one half of the amount so <let.ermined or one thousand eight hundred 
rupees whichever is less. 
Where the property consists of more than one house 
in the occupation of the owner for the purposes of his own residence. Section 
23(2)(ii) provides that the provisions of clause (i) shall apply only in respect 
of one of such houses which the assessee may at his option specify in that 
behalf. 
The petitioner, an assessee under the Act, contended before the High Court 
in a petition under Article 226 of the Constitution, that inclusion of any 
amount under section 23(2) of the Act in his income was unconstitutional as 
there could be no income at all in such a case accruing to him in 
a true 
sense of that term and that the liability that was sought to be imposed under 
the Act in respect of his residential house was in its pith and substance a tax 
on building falling under Entry 49 of List II of the Seventh Schedule to the 
Constitution and hence Parliament could not impose the said liability under 
a law made in exercise of its legislative power under Entry 82 of List I of the 
Seventh Schedule which authorised it only to levy 'taxes on income other than 
agricultural income'. The High Court rejected the plea and dismissed the Writ 
Petition. 
In the Special Leave Petition. to this Court it was contended on behalf of 
the petitioner that as he was not deriving any monetary benefit by residing in 
his own house, no tax could be levied on him, on the ground that he is deriv~ 
ing income from that house, and that the word 'income' only means realisation 
of monetary benefit and that 
in 
the 
absence 
of 
any 
such realisation. 
the inclusion of any amount by way of notional income under section 23(2) 
of the Act in the chargeable incon1e was impermissible as it was outside the 
scope of Entry 82 of List I of the Seventh Schedule to the Constitution. 
Dismissing the Special Leave Petition, 
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BHAGWANDASS V. UNION 
809 
HELD ; 1. The tax levied under the Income-tax Act is on the income 
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~ough computed in an artificial way) from house property and not on house 
property. Entry 49 of List II of the Seventh Schedule to the Constitution is 
not, therefore, attracted. 
The levy in question squarely falls under Entry 82 
of Li't I of the Seventh Schedule to the Constitution. [816 C-Dl 
2. The expression 'income' means 'a thing that comes in'. 
Income is also 
define.d. as the gain derived from land capital or labour or any two or more 
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of them. 
Even in its ordinary economic sense, the expression 'income' include 
not merely what is received or what comes in by exploiting the use of a pro-
perty but al&o what one saves by using it oneself. That which can be converted 
into income can be reasonably regarded as giving rise to income. 
[812 B, 816 BJ 
3. (i) The Government of In<lia Act, 1935 was enacted when the Indian 
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Income-tax Act, 1922 was in force. 
Section 9 of the Indian Income-tax Act, 
1922 provided for levy of income tax on the basis of the bona fide annual 
value of th1! property even when it was in the occupation of the assessee for 
the purposes of his own residence. While enacting Entry 54 of List I of the 
Seventh Schedule to the Government of India Act, 1935 the British Parliament 
must have had in its view the Indian Income-tax Act, 1922 which was probably 
the only law relating to tax: on incomes in force in British India. 
Similarly 
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the Constituent Assembly while enacting Entry 82 of List I of the Seventh 
Schedule to the Constitution must have understood that the \Vord 'incun1e' us;:d 
in that Entry

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