Balakrishna Eradi, C.J:— By these three connected references made by the Income Tax Appellate Tribunal, Cochin Bench (hereinafter called the Tribunal) under S. 256(1) of the Income Tax Act, 1961 — for short, the Act—the following common question of law has been referred to this court as arising out of the order dated 9th December 1977 passed by the Tribunal in I.T.A Nos. 939 to 941.Cochin/1976-1977 dismissing the appeals filed by the department and upholding the view taken by the Appellate Assistant Commissioner that the respondent-assessee is entitled to the benefit of S. 23(1)(b) of the Act in respect of 14 rooms contained in a building treating them as 14 separate, residential units:

“Whether on the facts and circumstances of the case the building in question can be said to consist 14 residential units and hence the assessee is entitled to deduction permissible under the second proviso to S. 23(1) of the Income Tax Act, 1961 in respect of each unit?”

2. The assessment years with which we are concerned in these cases are 1973-1974, 1974-1975 and 1975-1976. During the year ending 31st March 1973 the assessee completed the construction of a building bearing door No. XXXVI/1206-C consisting of 14 rooms, 4 on the ground floor and 5 each on the first and second floors with a bath room-cum-lavatory attached to each room. The assessee had let out the rooms to different tenants on a monthly rent of Rs. 125 per room. For the purposes of the Kerala Municipal Corporations Act the entire building had been assigned only a single door number and for purposes of property tax assessment the entire building was treated as one unit. There was only one meter for the whole building for registering the electricity consumed and, likewise, only a Single water connection from the corporation with one meter for measuring the quantity of water consumed.

3. For the assessment years aforementioned the assessee claimed before the Income Tax Officer that the building comprises 14 residential units and each of those units was entitled to the benefit of S. 23(i)(b) of the Act. The Income Tax Officer rejected the said contention and observed as follows:

“The lodge consists of 14 rooms, and in respect of each room the assessee has claimed allowance under S. 23(1)(b) taking each room as a residential unit. This is not correct. The entire construction is one building and it is not a residential unit but a commercial building. The Municipal Corporation has also given only one number XXXVI/1206-C. There is only one meter for the entire building for electric consumption and another meter for water consumption. The municipal taxes are being levied in one demand notice. Hence the entire block is one commercial unit and hence the assessee's claim for allowance for each room under S. 23(1)(b) is disallowed.”

4. However, notwithstanding the aforesaid finding entered by him, while actually computing the tax liability of the assessee the Income Tax Officer appears to have allowed to the assessee the benefit of S. 23(1)(b) in respect of one unit (apparently treating the whole building as a single unit).

5. The matter having been taken up by the assessee in appeal before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner upheld the assessee's claim for the grant of the benefit under S. 23(1)(b) in respect of the 14 rooms by treating them as distinct residential units. The said view was confirmed by the Tribunal, before which the department carried the matter in second appeal. Thereafter, the aforesaid question has been referred to this Court by the Tribunal at the instance of the Revenue.

6. At the outset we may extract the material portions of S. 23(1) of the Act as it stood at the relevant time:

“23.(1) For the purposes of S. 22, the annual value of any property shall be deemed to be—

(a) the sum for which the property might reasonably be expected to let from year to year; or

(b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in the excess of the sum referred to in clause (a), the amount so received or receivable:

Provided that where the property is in the occupation of a tenant, the taxes levied by any local authority in respect of the property shall, to the extent such taxes are borne by the owner, be deducted in determining the annual value of the property:

Provided further that the annual value as determined under this sub-section shall,—

(a) ……………………

(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—

(i) in respect of any residential unit whose annual value as so determined does not exceed one thousand two hundred rupees, the amount of such annual value;

(ii) in respect of any residential unit whose annual value as so determined exceeds one thousand two hundred rupees, an amount of one thousand two hundred rupees;

7. so however, that the income in respect of any residential unit referred to in clause (a) or clause (b) is in no case a loss.

Explanation… … … … … … … … … … …”

8. A somewhat similar provision was introduced in the Income Tax Act, 1922 by S. 5 of the Finance Act, 1961 with effect from 1st April 1961 whereby a proviso was added to Clause (a) of sub-section (2) of S. 9 of that Act. That proviso was in the following terms:

“Provided further that in respect of a building the erection of which is begun and completed after the 1st day of April, 1961, the annual value for a period of three years from the date of such completion shall be reduced by a sum equal to the aggregate of—

(a) in respect of any residential unit (comprised in the building) whose annual value does not exceed six hundred rupees, the amount thereof; and

(b) in respect of any residential unit (comprised in the building) whose annual annual value exceed six hundred rupees, an amount of six hundred rupees,

9. so, however, that the income in respect of any residential unit shall in no case be a loss.” The object and purpose underlying the introduction of the said proviso was explained by the then Finance Minister in his Budget Speech while introducing the Finance Bill, 1961 in the following terms:

“In order to stimulate construction of housing for the use of persons in low income group, I propose to provide for a deduction of Rs. 600 per annum from the annual value of new residential units completed after 31st March, 1961. This concession will be available for a period of three years only from the date of completion.”

10. It appears to us manifest that it was the same legislative intent that motivated the incorporation of the corresponding provision now contained in the second proviso to section 53(1) of the Act. Hence we are of opinion that the expression “building comprising one or more residential units” occurring in clause (b) has to be understood as signifying composite structures containing a plurality of residential or dwelling units, such as flats. The mere fact that a building has several rooms with attached bath room facility, will not render it a “building comprising as many residential units as there are such rooms”. Clauses (a) and (b) of the proviso will, in our opinion, take within their ambit only buildings comprising a plurality of dwelling units like flats, which by themselves will constitute houses or homes Each such dwelling unit will ordinarily be a separate house in itself with its own electric meter and water supply connection. Sub-clauses (i) and (ii) of the proviso also furnish a clear indication that in order to constitute a residential unit for the purposes of the section, it must have a separate annual value. In the present case the finding of fact recorded by the tax authorities is that the entire building has been registered with the Municipal Corporation as a single unit for taxation purposes and there is only a single demand for tax. We may refer with advantage, in this connection to the following observations made by Lindley M.R in Kimber v. Admans 1900 (1) Chancery Division, 412 at page 415:

“I have no hesitation in saying that the judgment of the learned Judge is right. The ingenious argument of the counsel for the appellant is utterly unconvincing. A property was sold in lots according to a plan for building purposes, and each lot was subject to a covenant that not more than one house should be built upon it. What does that mean? Does it refer to the mode in which the building to be erected is to be subdivided or let, or does it refer to the aggregate of the rooms or whatever the contents of the building may consist of? I think that the latter is the meaning. The house is the whole amalgamation. We know, of course, that a portion of a house may for some purposes, such, for example, as rating and franchise, be a house; but when the word is used in connection with a covenant of this description. I cannot agree that is the meaning. It applies, not to the interior portions of the building, but to the whole building.”

11. Even of greater assistance are the following observations made by Cozens-Bardy, J. in the same case in the original judgment rendered by the learned Judge:

“It is after all nothing more nor less than a question of the construction of this particular document and one has to consider what is the meaning of the word ‘house’ in a deed or document where there is no context to cut it down or to alter its popular interpretation. On that point I have the authority of Sir George Jessel in Attorney-General v. Mutual Tontine Westminister Chambers Association where he said that a building of this nature is, both in ordinary parlance and in legal meaning, a dweling-house, although it may also be for certain purposes regarded as a number of separate messages. He illustrated the proposition by saying that any one of the buildings in the Temple or Lincoln's Inn, which, as we all know, are divided into separate chambers, is nevertheless one house.”

12. The reasons stated by the Tribunal for concluding that the assessee is entitled to the benefit of S. 23(1)(b) in respect of all the 14 rooms treating them as separate residential units is that “they are built independently and they are self-sufficient for the residence of one person or family”. We do not find it possible to uphold this reasoning as correct. It is difficult to understand on what basis the Tribunal has said that the rooms are “built independently.” They are rooms situated on different floors of the same single structure. There is only one common entrance to the whole building and one common staircase. The mere fact that the rooms have been let out on rent to different lodgers on a monthly basis is not sufficient to constitute those rooms into separate residential units for the purposes of the grant of the benefit under clause (b) of the second proviso to S. 23(1) of the Act. As already indicated, we are clearly of opinion that the operation of the said proviso is to be restricted to buildings comprising a plurality of dwelling units, which by themselves constitute independent residential houses or homes Accordingly, we hold that the view taken by the Tribunal and by the Appellate Assistant Commissioner that the assessee was entitled to the benefit of the second proviso to S. 23(1) of the Act is illegal and erroneous. We answer the question referred in this case in the negative, i.e, against the assessee and in favour of the Department. The parties will bear their respective costs.