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Income Tax Appellate Tribunal, H BENCH, MUMBAI
order : 20.05.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 30.10.2019, passed by Ld. the Commissioner of Income Tax (Appeals)–4, Mumbai [hereinafter referred to as „the CIT(A)‟] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟] in appeal [CIT(A)-4/IT- 292/ACIT 16(1)/2016-17] for the Assessment Year 2014-15, whereby the CIT(A) had partly allowed the appeal filed by the Appellant against the Assessment Order, dated 28.12.2016, passed under Section 143(3) of the Act.
Appellant has raised the following grounds of appeal: “On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the income from Assessment Year: 2014-15 residential flat at „Hicon‟ in Bandra be assessed at annual value of Rs. 11,83,723/- although admittedly the residential flat was vacant throughout the year and consequently your appellant was entitled to benefit of vacancy allowance u/s. 23(1)(c) of the Income Tax Act.”
Brief facts of the case are that the Appellant e-filed the return of income for the Assessment Year 2014-15 on 27.09.2014 declaring total income of INR 50,03,46,220/-, which was processed under Section 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice, dated 28.08.2015, under Section 143(2) was issued. During the assessment proceedings the Assessing Officer noticed that the Appellant had offered to tax Income from House Property amounting to INR 16,31,871/-. The Assessing Officer passed Assessment Order under Section 143(3) of the Act on 28.12.2016 wherein the annual value of the property at Hicons Residency Co-operative Housing Society Ltd. (hereinafter referred to as „the House Property‟) was computed at INR 81,08,802/- as per provisions of Section 23(4)(b) read with Section 23(1) of the Act taking 7% of the value of the House Property (i.e. INR 11,58,40,022/-). In paragraph 5.9 the Assessing Officer observed as under: “5.9 Accordingly, as determined in earlier years assessment orders i.e. A.Y. 2011-12, 2012-13 and 2013-14, and relying on the decision of Gujarat High Court in the case of Shri Bipinbhai Vadilal Family Trust vs. CIT (1194) 2018 ITR 1005, I estimate the fair market value of the amount at which the deemed rent in the case of assessee is assessed for property at Hicons is expected to be let out at Rs. 81,08,802/- being 7% of the value of the flat amounting Rs. 11,58,40,022/-. Therefore, annual value of the property is taken at Rs. 81,08,802/- as per section 23(4)(b) r.w.s. 23(1) of the I.T. Act, 1961.”
Assessment Year: 2014-15 4. Being aggrieved, the Appellant carried this issue in appeal before the CIT(A). The CIT(A) confirmed the order passed by the Assessing Officer on this issue holding as under:
“9. Ground No. 4: Vide this, ground appellant has agitated against estimating the annual value of the property known as “Hicon” at the rate of 7% of total investment of Rs. 11,58,40,022/-. In para 5.3 and 5.4 of the assessment order, the Ld. AO had mentioned that the Annual Ratable Value of the property was estimated at the rate 7% of the investment shown in the balance sheet for A.Yrs. 2011-12 and 2012-13. After relying upon the findings in appellant‟s own case for A.Yrs 2011-12, 2012-13 and 2013-14, the Ld. A.O. estimated the Annual Ratable Value @ 7% and determined a sum of Rs. 81,08,802/- as annual value of the property.
9.1 During the course of appellate proceedings, it was submitted that the Ld. A.O. had relied upon the findings in Appellant‟s own case for the earlier years. There is neither any factual change nor any legal change. Appellant further submitted that appeal of the assessee for the earlier A.Yrs. has been decided by Ld. CIT(A)-4. The relevant part of the appeal No. CIT(A)-4/Tr-263A-3/ACIT 11(1)(1)/2014-15 for A.Y. 2011-12 dated 28.05.2019 is reproduced as under:
“6.1 Ground No. 1 & 2: Vide these grounds appellant has agitated against determination of ……………….”
There is neither any factual change nor any legal change, therefore, I have no reason to deviate from the finding given in the Appellant‟s own case for A.Yr. 2011-12. Hence, AO is directed to follow the directions given by Ld. CIT(A)-4/Tr- 263/A-3/ACIT 11(1)(1)/2014-15 for A.Yr. 2011-12 dated 28.05.2019 vide which A.O has been directed to follow the decision of Hon‟ble ITAT „G‟ Bench, Mumbai in Appellant‟s own case.” (Emphasis Supplied)
Being aggrieved by the order dated 30.10.2019 passed by the CIT(A), the Appellant has preferred the present appeal.
The Ld. Authorised Representative of the Appellant submitted that the Appellant is entitled to vacancy allowance in terms of Section 23(1)(c) of the Act as the House Property was lying vacant during the Assessment Year 2014-15. He submitted that Hicons Residency Co-operative Housing Society Ltd. levies additional charges known as „Non-Occupancy Charges‟ in case a property in the society is rented out to a non-member. In order to show that the House Property was lying vacant, he relied upon copies of bills issued by Hicons Residency Co-operative Housing Society Ltd. pertaining to the relevant previous year wherein „Nil‟ „ Non-Occupancy Charges‟ were levied upon the Appellant. Ld. Authorised Representative submitted that despite making efforts, the Appellant was not able to rent out the House Property during the relevant previous year. In this regard, he placed reliance upon letter dated 18.03.2014 and 25.03.2014 issued by real estate agents. He further submitted that the claim for vacancy allowance, though not made in the return of income, was certainly made before the CIT(A) in the submissions dated 13.01.2017 filed before the CIT(A) and that the Tribunal has in Appellant‟s own case for the Assessment Year 2012-13 (ITA No. 5811/Mum/2016) held that the Appellant is entitled to vacancy allowance in respect of the House Property in terms of Section 23(1)(c) of the Act.
In response, the Ld. Departmental Representative, relying upon the concluding para No. 13 of the decision of the Tribunal in Appellant‟s own case for the Assessment Year 2012-13 (ITA No. 5811/Mum/2016) submitted that income from house property should be brought to tax in the hands of the Appellant in terms of the same.
In rejoinder, the Ld. Authorised Representative of the Appellant, who had also represented the Appellant in the appellate
Assessment Year: 2014-15 proceedings before the Tribunal for the Assessment Year 2011-12, submitted that the Appellant had, as a conciliatory measure adopted to put an end to the proceedings, agreed to accept the valuation as per Appellant‟s own valuer. However, in the present case such a situation does not arise in view of the fact that in the identical facts and circumstances the Tribunal has, in the aforesaid decision, clearly held that the Appellant is entitled to vacancy allowance in respect of the House Property.
We have considered the rival submissions and perused the material on record. The facts and circumstances pertaining to Assessment Year 2014-15 before us are identical to that of Assessment Year 2012-13. We note that the Assessing Officer had while passing the Assessment Order relied upon the assessment orders of earlier years including assessment year 2012-13. The CIT(A) has also followed the order passed in appeal for the Assessment Year 2011- 12 where in reliance was placed upon the order, dated 21.08.2018, passed by the Tribunal in Appellant own case for the Assessment Year 2011-12 (ITA No.5811/Mum/2016). In appellate proceedings before us, both the sides have relied upon the aforesaid order of the Tribunal for Assessment Year 2011-2012 the relevant extract of which read as under:
“ 12. From the above provision of law, it can be construed that in case the property or part thereof was vacant during the period, the proportion deduction should be allowed from the sum on which the property might reasonably be let out from year to year. We find that it is the plea of the assessee that due to inherent defects, the flat could not be let out. Hence, the flat remained vacant. Hence, the assessee has claimed benefit of section 23(1)(c) which duly permits deduction in this regard. We find that the ITAT in the case of Premsudha Exports (P) Ltd. (supra) had the occasion to deliberate on the identical issue. The tribunal had expounded as under:
Assessment Year: 2014-15 From a reading of the provisions of sub-section (3) of section 23, it appears that the Legislatures in their wisdom have used the words „house is actually let‟. This shows that the words „property is let‟ cannot mean actual letting out of the property because had it been so, there was be no need to use the word „actually‟ in sub-section (3) of section 23. Regarding the scope of referring to actual letting out in preceding period, there was no force in the contention of the revenue, as the Legislature has used the present tense. Even if it is interpreted so, it may lead to undesirable result because in some cases, if the owner has let out a property for one month or for even one day, that property would acquire the status of „let out property‟ for the purpose of clause (c) of section 23(1) for the entire life of the property, even without any intention to let it out in the relevant year. Not only that, even if the property was let out at any point of time even by any previous owner, it could be claimed that the property is let out property because the clause talks about the property and not about the present owner and since the property was let out in past, it is a let out property, although the present owner never intended to let out the same. Therefore, it is not at all relevant as to whether the property was let out in past or not. These words do not talk of actual let out also but talk about the intention to let out. If the property is held by the owner for letting out and efforts are made to let it out, that property is covered by clause (c) and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year. Above discussion shows that meaning and interpretation of the words „property is let‟ cannot be „property actually let out‟. Thus, if a property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of clause (c) of section 23(1). [Para 16]
On the touchstone of the above proposition of law and case law, in our considered opinion, the assessee should be granted vacancy allowance. However, as conceded by the ld. Counsel of the assessee and also accepted in the grounds of appeal, the assessee is agreeable to offer a sum of Rs.11,83,723/- for taxation in this regard. We accept this proposal and modify the order of the ld. Commissioner of Income Tax (Appeals) accordingly.” (Emphasis Supplied)
Assessment Year: 2014-15 10. On the perusal of records, it is clear that the House Property was lying vacancy during the previous year relevant to the Assessment Year 2014-15 and that the Appellant was not able to let out the same despite making efforts, as was the case in previous year relevant to the Assessment Year 2012-13. On perusal of the relevant extract of the Tribunal reproduced para 12 (above), it is clear that the Tribunal has, in the identical facts and circumstances, held that for the Assessment Year 2012-13, the Appellant was entitled to claim the benefit of vacancy allowance in terms of Section 23(1)(c) of the Act in respect of the House Property. We find merit in the contentions of the Authorised Representative of the Appellant that the valuation determined by the Tribunal in the order for the Assessment Year 2013-14 was on account of concession made by the Authorised Representative of the Appellant for the Assessment Year 2012-13 and the same cannot form the basis of determination of the value of the House Property for the Assessment Year 2014-15 since by the same order the Appellant has been held to be entitled to vacancy allowance in terms of Section 23(1)(c) of the Act. Accordingly, respectfully following the decision of the Tribunal in Appellant‟s own case for the Assessment Year 2012-13 (ITA No. 5811/Mum/2016), we hold that Appellant is entitled to vacancy allowance in terms of Section 23(1)(c) of the Act in respect of the House Property.
In the result, the present appeal is allowed. Order pronounced on 20.05.2022.