MADHABI PURI BUCH,MUMBAI vs. CIT (APPEALS) 55, MUMBAI

The only issue urged in the appeals of both the assessees is related to the assessment of rental income from a let out property, which remained vacant during whole of the year.

The facts relating to the above said issue are set out in brief. Both the assessees herein are “non-resident” under the Income tax Act. The AO initially completed the assessment u/s 143(3) of the Act. Later he noticed that both the assessees herein jointly own a house property located at Ghorpadi, Koregaon Park, Pune. He noticed that they did not offer any income under the head “Income from House Property” in respect of above said property. Accordingly, the AO passed a rectification order u/s 154 of the Act assessing rental income, which was arrived at on estimated basis.

Before Ld CIT(A), the assessee’s submitted that the above said property had been let out in the preceding years and it has remained vacant during the whole of the year under consideration. It was submitted that the assessees proposed to sell the house property and accordingly did not let out the same during the year under consideration. Accordingly, it was submitted that no rental income is assessable in respect of this property, since it remained vacant for whole of the year.Accordingly, it was contended that the AO was not correct in estimating rental income. The Ld CIT(A) did not accept the contentions of the assessee. By placing reliance on the decision rendered by Hon’ble Punjab & Haryana High Court in the case of Susham Singlavs. CIT (2016)(76 taxmann.com 349), the Ld CIT(A) took the view that the assessee is not entitled for vacancy allowance and the rental income is required to be assessed u/s 23(1)(a) of the Act. Accordingly, he dismissed the appeals filed by both the assessees herein. Aggrieved, the assessees have filed these appeals before the Tribunal.

Before us, the Ld A.R furnished copies of returns of income filed by both the assessees herein for AY 2011-12 and 2012-13 and submitted that 3 Dhaval J. Buch & Madhabi P. Buch both of them have declared rental income from the above said house property in AY 2011-12 and 2012-13. Accordingly, he submitted that the impugned property qualifies as “rented property”. Since it remained vacant for whole of the year, the Ld A.R submitted that the Annual letting value should be determined as NIL as per sec. 23(1)(c) of the Act. On the contrary, the Ld D.R supported the orders passed by Ld CIT(A).

We heard the parties and perused the record. The determination of Annual letting value is governed by the provisions of sec. 23 of the Act, which reads as under:- "23. Annual value how determined.— (1) For the purposes of section 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 or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable:

Since this property has been let out during the earlier years, which fact is evidenced by the returns of income filed by the assessees for AY 2011-12 and 2012-13, it qualifies as “let out property”. Hence the Annual Letting Value has to be determined in terms of sec.23(1)(c) of the Act, as per which the actual rent received or receivable is to be taken as Annual letting value. Since the impugned property has remained vacant for whole of the year, the assessee has not received any rent and hence the Annual letting value should be taken as NIL.

We notice that the Ld CIT(A) has taken support of the decision rendered by Hon’ble Punjab and Haryana High Court in the case of Susham Singla (supra). We notice that the said decision has been rendered in the context of self occupied properties and not in the context of let out properties. Accordingly, we are of the view that the above said decision is not applicable to the facts of the present cases.

In view of the foregoing discussions, we are of the view that the Annual letting value of the impugned property is to taken as NIL for the year under consideration, since it remained vacant during whole of the year.

In the result, the appeals filed by both the assessees are allowed.