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Income Tax Appellate Tribunal, [ DELHI BENCH “C” NEW DELHI ]
Before: SHRI G.S. PANNU & SHRI KULDIP SINGH
Appellant - Smt. Janak Kumari (hereinafter referred to “as the assessee” by filing the present appeal sought to set aside the impugned order dated 26.07.2017 passed by the Commissioner of Income Tax (Appeals)-19, New Delhi [hereinafter referred to CIT (Appeals)] for assessment year 2014-15 on the grounds, inter alia, that: “1. That the Id. CIT(A) has erred in confirming the addition of Rs. 15,12,000/-, which was arbitrarily and illegally made by the Id. A.O. under the head "House Property".
2. That the Id. CIT(A) had erred in not appreciating that on the peculiar facts & circumstances of the case, the income under the head "House Property" was not assessable in respect of the basement of property no. G-83, Preet Vihar, Delhi-110092, particularly when the tenant NUT Limited had vacated the same in the month of January 2013 and no other tenant had agreed to take the same on rent throughout the previous year relevant to A.Y. 2014-15, because the basement was permitted to be used only for storage purposes.
3. That the Id. CIT(A)'s action of (a) relying upon the decision of Hon'ble ITAT Mumbai in the case of Sharan Hospitality Pvt. Ltd. (I.T.A. No. 6717/Mum/2012), to upheld the order of the Id. AO is unjustified; and (ii) not giving the benefit of the decision of Hon'ble ITAT Pune in the case ot Vikas Keshav Garud (I.T.A. No. 747/PN/2014) to the assessee, simply on the ground that the decision of Hon’ble ITAT Mumbai in the case of Sharan Hospitality Pvt. Ltd. (supra) was a subsequent decision, is unjustified. In doing so, the Id. CIT(A) had overlooked the fact that the Hon'ble ITAT Pune, while deciding the case of Vikas Keshav Garud (supra) had taken into consideration the decision of High Court in the case of Vivek Jain [337 ITR 74], and also the settled law that the decision favourable to the assessee should be followed. WITHOUT PREJUDICE
4. That the Id. CIT(A) has erred in rejecting the assessee's ground that "In any case, the deemed rental income should not had been estimated in excess of the rental value, as per the municipal corporation of Delhi", with the remarks "Thus, rent of Rs. 1,80,000/- per month is the expected realizable rent as per section 23(1 )(a). Therefore, realizable rent adopted by the A.O. is sustained ".
Briefly stated facts necessary for adjudication of the controversy at hand are : assessee filed her return of income declaring income at Rs.40,46,860/- which was subjected to scrutiny. Assessing Officer noticed that there is a fall in the income of the assessee from house property in comparison to the earlier years. Assessee claimed that her property situated in basement of 83, Block G, Preet Vihar, remained vacant during assessment year 2014-15, hence, fall in her income. Assessing Officer after getting the facts verified from the Inspector reached the conclusion that since the property in question was let out to a Pvt. Ltd. company in the previous year and assessee was taking rent on commercial rates, the said property squarely falls under Section 23(1)(a) of the Income Tax Act, 1961 (hereinafter referred to the Act) and has an annual value greater than zero and thereby assessed the income from house property by determining the annual value at Rs. 15,12,000/- and framed the assessment at the total income of Rs.55,58,860/-.
Assessee carried matter before the Id. CIT (Appeals), who has confirmed the addition by dismissing the appeal. Feeling aggrieved from the impugned order, assessee has come up before the Tribunal by filing present appeal.
We have heard the Id. ARs of the parties to the appeal, perused the order passed by the lower Revenue authorities in the light of the facts and circumstances of the case and law applicable thereto.
Ld. AR for the assessee challenging the impugned order contended, inter alia, that the property in question was let out in the previous year to NUT Pvt. Ltd. with effect from 1.08.2009 for a period of 9 years at a rent of Rs. 1,50,000/- per month, but they have vacated the basement floor with effect from January, 2013 and since then the same was lying vacant and as such deemed income from house property cannot be assessed; that when no new tenant come forward to take the property on rent assessee started using the basement for personal use as parking space and as such deemed rent cannot be assessed and relied upon order passed by the co-ordinate bench of Tribunal, Pune Bench, in the case of Vikas Keshev Garud Vs. ITO (in Mrs. Neelam Sanjay Arya Vs. ITO (in ITA. No. 3588/Ahd./2015) and Empire Capital Pvt. Ltd. Vs. ACIT (in ITA. No.
6204/Mum./2018). However, on the other hand, Id. DR for the Revenue, relied upon the order passed by the Id. CIT (Appeals).
From the facts and circumstances of the case the sole question arises for the determination in this case is, “as to whether Id. CIT (Appeals) has erred in confirming the addition made by Assessing Officer in computing the annual letting value (for short ALV) of the property in question whereas it ought to be taken at ‘NIL’ under Section 23(l)(c) of the Act.”
Undisputedly, the property was let out by the assessee to NUT Pvt. Ltd. by virtue of the agreement dated 1.08.2009 for a period of 9 years at the rent of Rs. 1,50,000/- per month. It is also not in dispute that NUT Pvt. Ltd. has vacated the property in question with effect from 31.01.2003. It is also not in dispute that Ld. CIT (Appeals) upheld the order passed by the Assessing Officer by applying the provisions contained under Section 23 (l)(a) of the Act whereas when the property remained vacant for the entire previous years under assessment, provisions contained under Section 23(l)(a) of the Act are not attracted which are extracted for ready perusal as under:-
"[Annual value how determined. 23. (1) For the purposes of section 22, the annual value of any properly shall be deemed to be — (a) the sum for which the property might reasonably be expected to let from year to year; or (b) xxxxx (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 ana owingto 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: Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.
5 Explanation.— For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules74 as may be made in this behalf, the amount of rent which the owner cannot realise. (2) Where the property consists of a house or part of a house which— (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil.”
Crux of the provisions, contained under Sections 23(l)(a) & (c) of the. Act are; when the property remained on rent in the previous years and thereafter remained vacant in the next entire year under consideration and assessee made frantic efforts to let out the same, but failed, in that situation the actual rent received from it has to be considered as zero being less than the amount referred in Section 23(l)(a) of the Act. When Revenue has not brought on record any evidence if property has not remained vacant for the entire year under consideration or was self-occupied in some other manner, the rental value as per Section 23(1)(c) of the Act has to be ‘NIL’.
Ld. CIT (Appeals) in deciding the issue in controversy relied upon the decision rendered by Hon’ble Andhra Pradesh High Court in the case of Vivek Jain Vs. ACIT 337 ITR 74 (A.P.) which is distinct on facts because property involved in said case was let out for some part of the assessment year, so the said decision is not applicable to the facts and circumstances of the case.
Identical issue has already been decided by the co-ordinate bench of the Tribunal in the case cited as Vikas Keshev Garud Vs. ITO (in and Mrs. Neelam Sanjay Arya Vs. ITO (in ITA. No. 3588/Ahd./2015) in favour of the assessee “that when the property under consideration remained vacant for the whole year, the ALV of the same has to be assigned nil”.
6 11. In view of what has been discussed above, we are of the considered view that when property in question though remained on rent in the earlier years, but remained vacant during the entire year under assessment and as such no rent ^vas received by the assessee and consequently assessee has not offered any income to tax, the provisions contained under Section 23(1)(c) of the Act are applicable to the facts and circumstances of the case. We are further of the considered view that Id. CIT (Appeals) has erred in confirming the addition made by the Assessing Officer by applying the provisions contained under Section 23(l)(a) of the Act, hence impugned order is set aside and rental value of the property in question for the year under assessment ordered to be treated as ‘NIL’ and addition made by the Assessing Officer and confirmed by the CIT (Appeals) is ordered to be deleted. Resultantly, the appeal filed by the assessee is allowed.