Loading judgment…
Facts
The assessee, engaged in mall development, reported rental income. Eight units in the mall remained vacant during the year. The Assessing Officer (AO) treated the annual value of these vacant units as income under Section 23(1)(a) of the Income Tax Act, making an addition. The assessee contended that these units were eligible for vacancy allowance under Section 23(1)(c).
Held
The Tribunal held that Section 23(1)(c) is applicable to properties vacant for the whole year, even if they were let out in previous or subsequent years, provided there was an intent to let. The Tribunal found that the assessee demonstrated such intent through letters of intent and subsequent lettings. Therefore, the annual value of the vacant units should be taken as 'Nil'.
Key Issues
Whether vacant units in a commercial mall, intended for letting but unlet during the year, are taxable under Section 23(1)(a) as deemed rent or eligible for vacancy allowance under Section 23(1)(c).
Sections Cited
23(1)(a), 23(1)(c), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), Mysore, vide order No. ITBA/APL/S/250/2024-25/1067612303(1), dated 13.08.2024, passed against the assessment order by Asst. Commissioner of Income-tax, Circle-6(2)(1), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 24.12.2018 for Assessment Year 2016-17.
The sole issue involved in the present appeal is in respect of addition of Rs.56,26,656/- under the head “income from house property” in respect of vacant units of a commercial mall during the year pursuant to provisions contained in section 23(1) of the Act.
2.1. Brief facts of the case are that assessee filed its return of income on 28.03.2018 reporting total income at Rs.9,70,79,650/-. Assessee is engaged in development of malls, entertainment centres, multiplexes, etc. Assessee completed construction of mall in Financial Year 2012-13 and started its mall operation from the month of January 2013. Assessee earned rental income by letting out units in the mall which is offered under the head “income from house property”. Main objects as contained in Memorandum of Association of the assessee is reproduced hereunder which specifies objects for which the assessee is set up and includes letting out premises to tenants.
"To acquire, develop, improve, build, sell, lease, manage, commercially exploit and otherwise deal in real estate, properties of all nature and description or any rights therein including land, buildings and other estate and realty including shopping malls, commercial and residential complexes."
2.2. In the year under consideration, out of 261 units of the mall, assessee had let out 253 units. For the let-out units, assessee offered rental income under the head “income from house property” which is not in dispute. Ld. Assessing Officer noted that assessee did not offer any income on the units which were not let out, i.e., the eight units, as required u/s. 23(1)(a) at expected reasonable rate. The details of these eight units is tabulated below:
Unit No. Area Current Trading Brand UG-15 789 Kryolan UG-25, 26, 27 6122 GAP UG-28 2658 Chianti UG-47A 702 The Chocolate Room SF -50 2878 Wire Room UG-22 419 Zodiac Old
SP-48 300 Vacant 2.3. In respect of these eight units, the total area comprised is 16,746 sq feet. According to the assessee, it had been constantly on a look out for prospective tenants for its premises but owing to lack of competitive customers, these eight units could not be let out during the year under consideration. However, these eight units were leased out by the assessee in subsequent financial year, when the competitive tenants were found. Thus, assessee claimed that it is eligible for vacancy allowance on these eight units which remained vacant in the year.
2.4. In order to charge the assessee with deemed rent on these units, ld. Assessing Officer called for details regarding per square feet rent charged by the assessee. Assessee submitted that in the line of its business, differential rates are charged to different parties based on location of the unit in the mall. Further, there are numerous factors depending upon the visibility of the unit from the main entrance, distance from the elevator, floor on which it is located, etc. which has a bearing on the per square feet rent charges and therefore there cannot be a blanket rate for all the units to be charged from all the tenants.
However, assessee submitted that the base rent for all the units is Rs.60/- per square feet.
2.5. Assessee also provided a summary of occupancy status of these eight units in the preceding as well as the subsequent assessment years to demonstrate the intent of the assessee of letting out these units which remained vacant in the year under consideration. The summary is tabulated as under:
Units/ 2013-14 2014-15 2015-16 2016-17 2017-18 2018- 2020-21 2021-22 Assessme 19 nt years UG 15 Let out Let cut Vacant Vacant Let out Let out Let out Let out UG 25 Vacant Let out Vacant Vacant Let out Let out Let out Let out UG 26 Let out Let out Let out Vacant Let out Let out Let out Let out UG 27 Let out Let out Let out Vacant Let out Let out Let out Let out UG 28 Let out Let out Let out Vacant Vacant Vacant Let out Let out UG 47A Let out Let cut Vacant Vacant Let out Let out Let out Let out S 50 Vacant Let out Vacant Vacant Let out Let out Let out Let out UG 22 Let out Let out Let out Vacant Let out Let out Let out Let out SF 48 Let out Let out Let out Vacant Let out Vacant Let out Let out 2.3. Despite elaborate submissions made by the assessee, ld. Assessing Officer proceeded to compute deemed rent for these eight units for the year under consideration and made an addition thereon by applying provisions u/s.23(1)(a). The details of deemed rent for each of these units charged by the ld. Assessing Officer and added to the total income for the year, is tabulated below:
Name of the unit Area of the unit Addition of Deemed Rent (Rs.) UG 15 789 2,65,104 UG 25 UG 26 6,122 20,56,992 UG27 UG 28 2,658 8,93,088 UG 47A 702 2,35,872 S 50 2,878 9,67,008 UG 22 419 1,40,784 SF48 300 1,00,800 S 50 2,878 9,67,008 Total 16,746 56,26,656
Aggrieved, assessee went in appeal before the ld. CIT(A). Ld. CIT(A) observed in para-7 that there is no dispute on the fact of vacancy of eight units during the year. There is also no dispute in calculation of quantum of net annual value of the vacant units. The only issue involved is whether these vacant eight units were eligible for vacancy allowance, as per section 23(1)(c) or are to be taxed u/s.23(1)(a). While adjudicating the issue, ld. CIT(A) laid sole emphasis on requirement of property to be “actually let out”. According to him, in the case of assessee, these eight units were not let out even for a single day in the whole year. Provisions contained in sections 23(1)(b) and 23(1)(c) would apply only to those properties which were actually let out and for which rent was actually received or receivable. According to him, these provisions deal with concept of real income and not notional income. He thus, rejected the claim of assessee for vacancy allowance u/s.23(1)(c) which according to him is not applicable in the present case. Appeal of the assessee was thus dismissed confirming the addition made by the ld. Assessing Officer. Aggrieved, assessee is in appeal before the Tribunal.
Before us, ld. Counsel for the assessee reiterated factual position as narrated in the above paragraphs. The sole thrust of the ld. Counsel on the issue is that the annual let out value for these eight units for the year under consideration is to be determined at “Nil” u/s. 23(1)(c).
Before delving on the issue, we first apprise ourselves with the provisions contained in section 23(1) which is reproduced as under:
“23. (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: 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. 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 rules 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.
(3) The provisions of sub-section (2) shall not apply if— (a) the house or part of the house is actually let during the whole or any part of the previous year; or (b) any other benefit therefrom is derived by the owner. (4) Where the property referred to in sub-section (2) consists of more than two houses— (a) the provisions of that sub-section shall apply only in respect of two of such houses, which the assessee may, at his option, specify in this behalf; (b) the annual value of the house or houses, other than the house or houses in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.
(5) Where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to two years from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.
[emphasis supplied by us by underline] 5.1. Finance Act, 2001 w.e.f. 01.04.2002 inserted clause (c) in section 23(1). Under the amended section 23(1)(c), where the property, or any part thereof 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 shall be the annual value of the property. The notes on clauses relating to the amendment to section 23(1) reads thus, (2001) 248 ITR (St.) 35, 118:
"Clause 14 seeks to substitute new section for section 23 of the Income-tax Act relating to determination of annual value of house property The existing provision of the said section provides for the determination of annual value of a property in certain circumstances including where the property is let, or is self-occupied, or is vacant, or is partially let, or is let for part of the year. The annual value so determined is subject to the deductions allowable under section 24, including deductions on account of vacancy for any part of the year in respect of the property let, and on account of rent which cannot be realized. It is proposed to substitute the said section so as to provide for determination of annual value in certain circumstances specified in the proposed new section after allowing deductions in computing the annual value on account of vacancy and unrealized rent. This amendment will take effect from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years."
[emphasis supplied by us by underline] 5.2. The effect of substitution of section 23 has been elaborately dealt with in CBDT Circular No. 14 of 2001, the relevant portion of which reads as under [2001] 252 ITR (St.) 65, 89.:
"29.2. The substituted section 23 retains the existing concept of annual value as being the sum for which the property might reasonably be expected to let from year to year, i.e., annual letting value (ALV). However, in case of let out property, the concept of annual rent has been removed. The new section provides that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is higher than the ALV. 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 is less than the ALV, the sum so received or receivable shall be the annual value. In case the actual rent received or receivable during the year is less than the ALV, but not because of vacancy, it is, the ALV which shall be taken to be the annual value."
[emphasis supplied by us by underline] 5.3. Section 22 charges the income to tax under the head ‘Income from House property’. Section 23 provides the mechanism to compute the annual letting value (ALV) of the property. Section 23(1)(a) provides for determining the ALV at a sum for which the property might reasonably be expected to let from year to year. The sum so referred is a fair estimate which the property might fetch when let. Aforesaid CBDT circular mentions that in case of let out property, the concept of annual rent has been removed.
5.3.1. Clause (b) deals with the situation where the property is let. Thus, in a case where letting of property exists, annual value has to be deemed as per condition given in the said clause (b). For this, actual rent, whether received or receivable by the owner is compared with the sum referred to in clause (a) and higher of the two is adopted to bring the deeming provision to a logical conclusion to arrive at the annual value of the property. Sum referred to in clause (a) is the ‘fair estimate’ for the year which is compared with the ‘actual rent’. In this clause, the condition is in reference to ‘excess’ for adopting the actual rent vis-à-vis sum referred in clause (a).
5.3.2. Clause (c) deals with the situation where the property is let and remains vacant during the year. Vacancy referred in the clause envisages two scenarios, viz. ‘vacant during the whole of the year’ or vacant during any part of the year’. Thus, this clause by referring to the said two scenarios addresses the requirement of allowing deduction in computing the annual value on account of vacancy and unrealized rent as mentioned in the notes on clauses relating to the amendment brought in to section 23(1) by the Finance Act, 2001 (already reproduced above). For this, actual rent, whether received or receivable by the owner is compared with the sum referred to in clause (a) and lesser of the two is adopted to bring the deeming provision to a logical conclusion to arrive at the annual value of the property. Sum referred to in clause (a) is the ‘fair estimate’ for the year which is compared with the ‘actual rent’. In this clause, the condition is in reference to ‘less’ for adopting the actual rent vis-à-vis sum referred in clause (a). By having reference to ‘less’ in this clause while comparing it with sum referred in clause (a), the period for which rent is ‘actually’ not received or receivable on account of vacancy is factored in to arrive at the annual value. In a scenario where the property is ‘vacant for part of the year’, since ‘actual rent’ is to be taken into account, it will be only for that part of the year for which it is let. In comparison to this, the sum referred to in clause (a) shall be for the entire year. Further, in a scenario where the property is ‘vacant for whole of the year’, since ‘actual rent’ is to be taken into account, it will be ‘Nil’, there being no tenant. However, the sum referred to in clause (a) shall continue to be for the entire year. Hence, by having reference to ‘less’ for comparison, aspect of vacancy is factored in to arrive at the annual value of the property in this clause (c) which will be ‘Nil’ in the scenario where property is ‘vacant for whole of the year’.
5.3.3. Furthermore, for the purpose of clause (b) and clause (c), Explanation to section 23(1) mentions that amount of rent which the owner cannot realise shall not be included in the ‘actual rent’. In a case where the property is vacant, owner cannot realise actual rent owing to such vacancy. Where the property is vacant for whole of the year as envisaged in clause (c), there is no occasion for the owner to realise actual rent of the property, there being no tenant. Even the notes on clauses while explaining the proposed substitution to section 23(1) by Finance Act, 2001 mentions about allowing deduction on account of ‘vacancy’ and ‘unrealized rent’ in computing the annual value.
5.3.4. It is also evident that clause (c) has been inserted as a protection to the assessee in cases where, on account of vacancy, the rent received or receivable on a property which has been let out is less than the sum referred to in clause (a). Prior to its amendment, even in such cases, it was the sum referred to in clause (a) which was to be taken as the annual value of the property.
In the factual matrix of the present case, on reading of section 23(1)(c), it is noted that it covers a situation where a property is let and is vacant for the whole of the previous year. Literal reading conveys coverage of property which is vacant for the whole of the year. Thus, phrase “vacant for the whole year” cannot be allowed to be rendered nugatory or redundant. In such a situation, the question which arises is, as to what determines “vacancy”. Literally, it denotes a temporary break for a period a property is let out. In the present case, factual position demonstrates that these eight units were let out in the immediately preceding assessment year or in the one before immediately preceding year. In other words, some of these eight units were let out in Assessment Year 2015-16, some of which remained vacant in Assessment Year 2015-16 continuing to be vacant in Assessment Year 2016-17. For certain units, they continued to be let out in Assessment Year 2015-16 but became vacant in Assessment Year 2016-17. The factual position also states that these units were let out in the subsequent Assessment Years, more particularly, with Assessment Year 2020-21 and thereafter when all the eight units were let out. This entire factual position is already tabulated above for ready reference.
6.1. To effectively apply the situation of “vacant for the whole year” as envisaged in section 23(1)(c), intent of letting is of vital importance which needs to be considered, at the end of the assessee. In order to understand the phrase “where the property is let” as occurring in section 23(1)(c), it is important to understand the existence of intent of letting which is evident from the main objects contained in its Memorandum of Association as reproduced above. Further, assessee has placed on record, letter of intent in the form of proposed offer cum terms of condition sheets of certain prospective tenants in respect of few of these eight units. Details of these are reproduced by ld. CIT(A) at page No.38 of his order. The same are extracted below for ready reference.
Name of the Brand Unit No. Date of Issue Remarks
Rado Food and UG-47A 07.01.2017 Copy of Beverages Pvt Ltd Agreement enclosed as Annexure 2A.
Arvind Lifestyle UG-25,26 11.04.2016 Copy of Brands Limited & Agreement enclosed 27 as Annexure 2B.
Zodiac UG-22 01.03.2013 Copy of Letter of Intent enclosed as Annexure 2C.
6.2. From the above, assessee demonstrated that it had issued letter of intent for the vacant units reflecting its intention to let out these units. Based on these letters of intent, units were given on rent in subsequent years, when the lease arrangement materialised.
6.3. It is important to bear in mind, notes on clauses when the amendment was brought into section 23(1) by the Finance Act, 2001, as well as CBDT circular (supra), where legislative intention always existed to factor in vacancy and unrealised rent from the house property, while computing annual value. Prior to the amendment, there was an explicit allowance u/s.24(2)(ix) which gave vacancy allowance though it was only in a situation when a property was let and remained vacant for a part of year. There was no provision in the erstwhile section to grant vacancy allowance to a property which was vacant for the whole of the year. In order to continue to grant vacancy benefit and also include a property which remained vacant for whole of the year, appropriate amendment was brought in by way of section 23(1)(c) reflecting the legislative intent. This amendment has factored in the vacancy aspect of a property for whole of the year for the purpose of computing annual value from bringing it to charge under the head “income from house property”. There can never be a situation where a property is let out and at the same time “vacant for the whole year”. Thus, by applying the principles of purposive interpretation to section 23(1)(c) and not to render the words “vacant for the whole year” infructuous, the word “let” used in the said section has to be interpreted as intended to be let or available to let. To put it differently, the requirement that “house is actually let” during the year is not to be taken as a pre-requisite for bringing the case of assessee within the sweep of section 23(2)(c), as long as property is let in the earlier period and remains vacant for the whole year under consideration which assessee continues to hold the same for the purpose of letting out.
6.4. At this juncture, it is also important to note that provisions contained in section 23(1)(c) are a deeming provision and hence to be interpreted strictly in terms of legislative intent. Deeming provision contained in section 23(1)(c) has created a legal fiction to tax annual value of a property. In the present case of the assessee, it has neither received or accrued income either real or notional on the eight units which remained vacant for whole of the year. Taking into consideration the notes to clauses relating to amendment by Finance Act, 2001 and CBDT Circular (supra), it is culled out that legislative intent is to allow benefits of vacancy to the assessee for house property remaining vacant for whole of the year, unlike provisions contained in erstwhile section 24(2)(ix). This intent is factored in the provisions contained in section 23(1)(c).
From the perusal of page 13 of the impugned assessment order, we note that ld. Assessing Officer observed that case of the assessee is covered under the provisions of section 23(1)(a) as the incidence of taxation is on inherent capacity of the building. According to him, case of the assessee squarely falls in section 23(1)(a), as the units are not let out at all, during the year. According to him, question of vacancy allowance arises only if unit is let out as mentioned in section 23(1)(c). He placed reliance on the decision of Hon’ble High Court of Andhra Pradesh in the case of Vivek Jain vs. ACIT [2011] 337 ITR 74 (AP). According to him, in the said decision, it is held that if property is not let out then notional income has to be shown. He thus, rejected the submissions of the assessee and proceeded to compute the notional rent. For this, he stated that assessee is not covered by any Rent Control Act and therefore question of standard rent does not apply. According to him, the expected reasonable rent is to be determined as the higher of fair rent and municipal value. According to him, for the assessee, municipal value is the fair rent. For the purpose of making addition of notional rent, he applied the base rent of Rs.60/- square feet per month on the total area of 16,746 sq. feet of the non-let out eight units for the year and arrived at gross annual value of Rs.80,30,080/-. On this, he made a deduction at the rate of 30% to arrive at net annual value of Rs.56,26,656/- which was added to the total income of the assessee.
On the judgement of Hon’ble High Court of Andhra Pradesh, ld. Counsel for the assessee pointed out that Hon’ble High Court considered the vacancy in physical form, while arriving at its decision, as noted in placitum 15. It is stated that “under section 23(1)(c), the period for which the let out property may remain vacant cannot exceed the period for which the property has been let out. If the property has been let out for part of the previous year, it can be vacant for the part of the previous year, for which the property was let out and not beyond”.
8.1. Ld. Counsel also pointed about the rejection of contention as contained in placitum 14, whereby it is stated that “clause (c) encompasses cases where a property is let out for more than a year in which event alone, would the question of it being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for whole of a previous year, bringing it within the ambit of clause (c) of Section 23(1) of the Act”. Ld. Counsel on this, pointed out that Hon’ble Court envisioned the situation of only letting out for more than a year in clause (c) of the section 23(1) which is in contrast to the fact of the present case, where these units remained vacant for whole of the year though were let out in the preceding Assessment Years as well as in the subsequent years.
8.2. Ld. Counsel also submitted by referring to an article published in Ahmedabad Chartered Accountants Journal (March 2018 edition, page 646) wherein the author commented that “….the word 'let' and 'vacant, is mutually exclusive for owner. If it is vacant, no one can say it is let and if it is let, no one can say it is vacant. Since, vacancy and letting of property has to be seen from standpoint of the owner. Twin conditions as enumerated in judgement cannot be satisfied together. Why should owner bother for occupancy of tenant for the purpose which it is taken on rent. Once property is let out, owner is concerned with rent and not with occupancy.”
8.3. Furthermore, he pointed out that on the conclusion by the Hon’ble High Court that the benefit u/s. 23(1)(c) cannot be extended to a case where the property was not let out at all, makes the phrase “vacant for the whole year” nugatory and redundant. It is also assertively submitted that the said decision is of a non jurisdictional High Court and therefore does not carry a force of binding nature but has only a persuasive effect. According to him, it is a settled law that decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its jurisdiction. He placed strong reliance on the decision of Hon’ble Jurisdictional High Court of Bombay which carried a force of binding nature in the case of CIT vs. Thane Electricity Supply Ltd. [1994] 206 ITR 727 (Bom) and Consolidated Numatic Tools Co. (India) Ltd. vs. CIT [1994] 209 ITR 277 (Bom), wherein it is held that decisions of a non Jurisdictional High Court is not binding on Courts or the Tribunals which are outside its jurisdiction. This decision of Hon’ble Jurisdictional High Court of Bombay has been followed by Hon’ble Special Bench of ITAT, Mumbai in the case of Mahindra and Mahindra Ltd. vs. DCIT [2009] 30 SOT 374 (Mum). The relevant extracts from the decision of Hon’ble Special Bench, dealing in both the decisions of Hon’ble Jurisdictional High Court of Bombay (supra) are reproduced as under:
“From this discussion it follows that there is no unison in the opinion of the Hon'ble High Courts or the different Benches of the Tribunal on this aspect of the matter. In such a situation to argue that a particular High Court judgment of the non-jurisdictional High Court is binding on the Tribunal is not acceptable. The Hon'ble Bombay High Court Thana Electricity Supply Ltd. (supra) has discussed the binding nature of the judicial precedents. The position has been summarized in para 17 of the case by laying down that the law declared by the Supreme Court is binding on all the Courts in India. The decision of the High Court is binding on the subordinate Courts and Authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises its jurisdiction. It has further been held that the decision of the High Court does not extend beyond its territorial jurisdiction. The relevant discussion on the binding nature or otherwise of the judgment of non-jurisdictional High Court has been made in para (d) as under:-
"(d) The decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only a persuasive effect. By no amount of stretching of the doctrine of stare decisis judgments of one High Court can be given the statues of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate Courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all Courts in the country by virtue of Art. 141 of the Constitution."
17.13 Similar position has been reiterated again by the Hon'ble jurisdictional High Court in the case of Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT [1994] 209 ITR 277/[1995] 79 Taxman 458 (Bom.) by holding that the decision of other High Court is not a binding precedent for Courts, Authorities or Tribunals outside its territorial jurisdiction. Again the Hon'ble Bombay High Court in Geoffrey Manners & Co. Ltd v CIT (1996) 221 ITR 695/89 Taxman 287 has followed the earlier two afore-noted judgments for holding that the decisions of a High Court are not binding precedents either for other High Courts or Tribunals outside the territorial jurisdiction of that High Court. From the above judgments of the Hon'ble jurisdictional High Court, It is apparent that only the judgments rendered by the Hon'ble Supreme Court or the jurisdictional High Court are binding on the Tribunal. The judgments of the other Hon'ble High Courts, though have persuasive value, but cannot have a binding force.
8.4. In reference to the decision of Hon’ble High Court of Andhra Pradesh (supra), ld. Counsel also pointed to the decision of Coordinate Bench of ITAT Mumbai in the case of Sonu Realtors Pvt. Ltd. Vs. DCIT in dated 19.09.2018 wherein the said decision of Hon’ble High Court of Andhra Pradesh has been dealt with, distinguishing the peculiar facts of the same, to hold that when the property had remained vacant for whole of the year under consideration, the annual value of the said property is to be computed u/s.23(1)(c). Relevant extract in this respect as contained in para – 8 is reproduced as under:
“We may further observe that the CIT(A) had misconceived the judgment of the Hon’ble High Court of Andhra Pradesh in the case of Vivek Jain Vs. ACIT (2011) 337 ITR 74 (AP). We find that in the said judgment the Hon’ble High Court in the concluding Para 14 & 15 had observed that though the benefit of computing the ‘ALV’ u/s 23(1)(c) could not be extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant for the whole of the previous year. Thus, we are of the considered view that now when in the case of the present assessee the property under consideration had remained let out for a period of 36 months, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but had never remained under the self occupation of the assessee, thus, no infirmity emerges from the computation of the ‘annual value’ of the said property under Sec. 23(1)(c) of the ‘Act’ by the assessee.”
Similar issue had come up before the Coordinate Bench of ITAT, Mumbai, in and 242/Mum/2015, in the case of holding company of the assessee, i.e., Phoenix Mills Ltd. who is also engaged in the activity of operating and managing the commercial complex. In this case also, ld. Assessing Officer had made addition in respect of deemed rent on vacant units for Assessment Year 2009-10 and 2010-11. On this issue, the Coordinate Bench held that assessee is into the business of running commercial premises, i.e., a mall, units of which are provided on lease to various tenants. It is obvious that the assessee would have taken sufficient efforts to let out the property. No reasonable business person would not want to let out its premise at the loss of revenue, if any opportunity exists. Accordingly, Assessing Officer’s assumption that the properties were not intended to be let out was held to be erroneous one. It was also noted that the vacant premises were let out in the subsequent year thus, concluded that the premises were intended to be let out. It was also concluded that since the property were vacant for the whole year, in view of the provisions contained in section 23(1)(c), assessee is entitled to vacancy allowance and thus, the addition made by the ld. Assessing Officer was deleted.
After giving thoughtful considerations as discussed above elaborately, both on applicable provisions of the Act and judicial precedents, we find force in the submissions made by the ld. Counsel for the assessee and are in agreement with the same, not repeated here for the sake of brevity. Accordingly, in the present case, the actual rent received or receivable by the assessee is Nil on account of vacancy, there being no tenant for the property. Thus, based on elaborate discussion made in the above paragraphs and in accordance with the conditions prescribed in clause (c) to section 23(1), this ‘Nil’ when compared with sum referred to in clause (a), leads to the annual value of eight units at ‘Nil’ for the year. Accordingly, under the deeming provision of section 23(1)(c), in the case of a property which is vacant for whole of the year, its annual value is taken at ‘Nil’.
Under the given factual matrix and circumstances and elaborate discussions made, both on facts and applicable law, coupled with judicial precedents, claim of the assessee to determine annual value of eight units which remained vacant for whole of the year is held to be computed by taking recourse to section 23(1)(c) as ‘Nil’. Accordingly, addition made by the ld. Assessing Officer is deleted. Ground raised by the assessee is allowed.
In the result, appeal of the assessee is allowed.