SUMAN P KHURANA,MUMBAI vs. ACIT CENTRAL CIRCLE-3(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. No. 2415/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2012-13) Suman P. Khurana बिधम/ ACIT, Central Circle-3(2) Room No.402, 4th Floor, 501, Raheja Centre, Free Press Vs. Journal Marg, Nariman Point, Aayakar Bhawan, Maharshi Mumbai-400021. Karve Road, Churchgate, Mumbai-400020.s स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAHPK0190Q (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. Assessee by: Shri Shekhar Gupta Revenue by: Shri Hoshang B. Irani सुनवाई की तारीख / Date of Hearing: 24/01/2022 घोषणा की तारीख /Date of Pronouncement: 18/04/2022 आदेश / O R D E R PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 21.02.2019 passed by the Commissioner of Income Tax (Appeals) -51, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2012- 13. 2. The assessee has raised the following grounds: - “1. The learned CIT(A) has erred in law and on the facts of the case in estimating the annual value of the property at Maker Chambers IV, Nariman Point, Mumbai at Rs.82,86,301/- as against nil declared by the assessee and denying the exemption claimed u/s 23(1)(c) by the assessee.

ITA No. 2415/Mum/2019 A.Y. 2012-13 2. The learned CIT(A) has erred in law and on the facts of the case in estimating the value of the property at Gujranwala Town, Delhi at Rs.6,60,000/- as against nil declared by the assessee and denying the exemption claimed u/s 23(1)(c) by the assessee.

Sr. No Nature of property Situated at Area of the Annual Income property offered for tax 1 Office Premises 56, Maker 1590 sq.ft Nil Chamber IV, Nariman Point, Mumbai 2 Office Premises A/12, Not submitted Nil Gujranwala Town, Delhi The explanation was called. The reply was found non-satisfactory. The Annual Letting Value (ALV) of property situated at Nariman Point at

ITA No. 2415/Mum/2019 A.Y. 2012-13 Mumbai was assessed to the tune of Rs.82,86,301/- and the Annual Letting Value of the property No. A/12 Gujranwala Town, Delhi was assessed to the tune of Rs.6,60,000/-. After allowing the deduction @ 30%, the income of the assessee was assessed to the tune of Rs.62,62,411/-. After some disallowance u/s 14A of the Act, the total income of the assessee was assessed to the tune of Rs.(-)1,26,05,175/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied on the above mentioned grounds, therefore, the assessee has filed the present appeal before us.

ISSUE NO.1 4. Under this issue the assessee has challenged the addition in sum of Rs.82,86,301/- with regard to Annual Rental Value of the property at Maker Chambers IV, Nariman Point, Mumbai. The contention of the assessee is that the property was vacant and the assessee tried to rent the property but the property was not rented out, therefore, the assessee declared the rental income from the said property at nil and claimed exemption u/s 23(1)(a) but the CIT(A) has wrongly denied the claim of the assessee, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. In support of these contention, the Ld. Representative of the assessee has placed reliance upon the decision in the case of Premsudha Exports P. Ltd. Vs. ACIT (2007) 295 ITR (AT) 341 & Sonu Realtors P. Ltd. Vs. DCIT (2018) 97 taxmann.com 534. However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by the CIT(A) in question. The assessee filed the rent statement for the period w.e.f A.Ys.2007-08 to 2018-19. In the year 2012- 13, the property was not shown rented out. The contention of the assessee is

ITA No. 2415/Mum/2019 A.Y. 2012-13 that the property was vacant and was not rented out despite due effort, therefore, the rental income is required to be treated as nil and exemption is liable to be allowable u/s 23(1)(c) of the Act. The statement speaks that no rent was received during the relevant assessment year. The assessee has shown his rental income as nil and claimed exemption u/s 23(1)(c) of the Ac t. In the case of Premsudha Exports P. Ltd. (supra) and Sonu Realtors P. Ltd. (supra). The Hon’ble ITAT has held as under: -

“Held accordingly, the assessee company could hold property either to use if for its own business or to let. Since there was no business activity and there was no intention to use the properties in question for its own business, the other possible use was to let it. The memorandum of association of the assessee entitled it to purchase property for letting and to earn rental income. One of the directors was authorized to take necessary steps to let the property in question. The monthly rent and the security deposits of both properties were fixed by resolutions. Consequent to the resolutions, the assessee approached various estate and finance consultants for letting the properties but unfortunately during the year under appeal, the assessee could not get a suitable tenant. Since the property was held to be let, its annual letting value could only be worked out under sub- clause (c) of section 23(1) of the Act and according to this clause, the rent received during the year was nil and that had to be taken as the annual value of the property in order to compute the income from house property.”

ITA No. 2415/Mum/2019 A.Y. 2012-13 “7. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought for adjudicating as to whether the 'annual value' of the property owned by the assessee viz. Unit No. 401 & 425 of project Balaji Bhavan, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the 'Act' at Rs. Nil, or the same was liable to be determined u/s 23(1)(a) as held by the lower authorities. We find that it is an admitted fact that though the assessee had vide agreement dated April, 2007 let out the Unit No. 401 & 425 of project Balaji Bhavan to M/s Sterling Construction Pvt. Ltd. for a period of 36 months, and had offered the rental income received therefrom as its "Income from house property" in the preceding years, but after the expiry of the license period of 36 months the licensee had vacated the property and conveyed its intention of not getting the license agreement renewed any further. We further find from a perusal of the records before us that it is not the case of the department that after the property was vacated, the same thereafter had remained under the self-occupation of the assessee. In light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us is squarely covered by the orders of the coordinate benches of the Tribunal in the case of viz. (i). Vikas Keshav Garud's case (supra) (ii). Dr. Prabha Sanghi's case (supra) (iii). Premsudha Exports (P) Ltd.'s case (supra) (iv). Informed Technologies India Ltd. (supra). We find that in the case of Informed Technologies India Ltd. (supra) the Tribunal after deliberating at length on the issue as regards the scope and gamut of Sec. 23(1)(c) of the Act, had observed as under :

ITA No. 2415/Mum/2019 A.Y. 2012-13 "7.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The issue under consideration for adjudication before us is as to whether the 'ALV' of the property owned by the assessee in Darshan Aparments, Malabar Hills, Mumbai, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the 'Act', or the same was liable to be determined u/s 23(1)(a) as so held by the lower authorities. We find that it is matter of undisputed fact that the property of the assessee remained let out upto 04.12.2008, and thereafter the same remained vacant. We further find from the perusal of the records before us that it is not the case of the department that after the property was vacated as on 04.12.2008, the same thereafter remained under the self occupation of the assessee. That in light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us for adjudication is squarely covered by the order of the coordinate bench of the Tribunal in the case of : Premsudha Exports (P) Ltd. v. ACIT (2008) 110 ITD 158 (Mum), wherein the Tribunal had therein held : "If the property is held by the owner for letting out and efforts were made to let it out that property is covered by this clause 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. We feel that the words 'property is let' are used in this clause to take out those properties from the ambit of the clause in which properties are held by the owner for self-occupation i.e self occupied property (i.e SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per Clause (a) of Section 23(1) if we

ITA No. 2415/Mum/2019 A.Y. 2012-13 see the combined reading of Sub-section (2) and (4) of Section 23. One thing is more important because we find that where the legislature have considered that actual letting out is required, they have used the words 'house is actually let'. This can be seen in Sub- section (3) of same Section 23. But in Clause (c) above, 'actually let' words are not used and this also shows that meaning and interpretation of the words 'property is let' cannot be 'property actually let out'. In our opinion, it talks of properties which are held to letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that property is let and the same will fall within the purview of this clause." We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which analyzing the scope and gamut of Sec. 23(1)(c) of the 'Act', had therein concluded that in light of the words 'Property is let' used in clause (c) of Sec. 23(1) of the 'Act', unlike the term 'house is actually let' as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term 'Property is let' in Sec. 23(1)(c) of the 'Act', cannot be substituted by the term 'house is actually let' as used by the legislature in all its wisdom in sub-section (3) of Sec. 23. Thus it can safely be concluded that the requirement 'house is actually let' during the year is not a prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the 'Act', as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee, who continues to hold the said property for the purpose

ITA No. 2415/Mum/2019 A.Y. 2012-13 of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term 'Property is let' in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the 'ALV' of one self occupied property so chosen by the assessee is taken at Nil, however the 'ALV' of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the 'Act'. Thus to our understanding the term 'Property is let' used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the 'ALV' of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however the same cannot be stretched beyond that and the 'ALV' of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the 'Act'. Thus in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the 'ALV' of the property at Rs. Nil by taking recourse to Sec. 23(1)(c) of the 'Act'. In this regard we are further of the view that the CIT(A) had misconceived the judgment of the Hon'ble High Court of Andhra Pradesh in the case of Vikas Jain (supra), and on a perusal of the said judgment therein find that the Hon'ble High Court in the concluding Para 14 & 15 had though concluded that 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, would however duly encompass and take within its sweep cases where the property had remained let out for two or more years, but

ITA No. 2415/Mum/2019 A.Y. 2012-13 had remained vacant for the whole of the previous year. Thus we are of the view that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but also had never remained under the self occupation of the assessee, the computation of the 'ALV u/s 23(1)(c) of the 'Act', had rightly been carried out in light of the aforesaid judgment of the Hon'ble High Court. 7.2 That in light of our aforesaid observations the Ground of appeal No. 2 of the assessee is allowed and the addition of Rs. 8,40,000/- made by the A.O and as such sustained by the CIT(A) is herein vacated." We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which we find, had while analyzing the scope and gamut of Sec. 23(1)(c) of the 'Act', concluded that in light of the words 'Property is let' used in clause (c) of Sec. 23(1) of the 'Act', unlike the term 'house is actually let' as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and rather inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term 'Property is let' in Sec. 23(1)(c) of the 'Act', cannot be substituted by the term 'house is actually let' as used by the legislature in all its wisdom in sub-section (3) of Sec. 23. Thus, it can safely be concluded that the requirement that the 'house is actually let' during the year is not to be taken as a prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the 'Act', as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee who continues to hold the

ITA No. 2415/Mum/2019 A.Y. 2012-13 same for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term 'Property is let' in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the 'annual value' of oneself occupied property so chosen by the assessee is taken at Nil, however the 'annual value' of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the 'Act'. Thus, to our understanding, though the term 'Property is let' used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the 'annual value' of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however, the same cannot be stretched beyond that and the 'annual value' of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the 'Act'. Thus, in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the 'annual value' of the property at Nil by taking recourse to Sec. 23(1)(c) of the 'Act'. 8. 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 v. Asstt. CIT [2011] 14 taxmann.com 146/202 Taxman 499/337 ITR 74. 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

ITA No. 2415/Mum/2019 A.Y. 2012-13 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.” 6. Since the matter of controversy has already been adjudicated by Hon’ble ITAT on the issue under controversy, therefore, taking into account of all the facts and circumstances, we are of the view that the Annual Letting Value of the premises in question i.e. Maker Chambers IV, Nariman Point, Mumbai is liable to be treated as nil and accordingly the assessee is entitled to raise the claim u/s 23(1)(C) of the Act.

ISSUE NO. 2 7. Under this issue the assessee has challenged the estimation of the rent of the property at Gujranwala Town, Delhi at Rs.6,60,000/- as against nil declared by assessee. The Ld. Representative of the assessee has argued that the property Plot No. A/13, Gujranwala Town, Delhi was vacated till its sale on 18.08.2011, therefore, the rental value of the said property is not liable to be estimated. The Ld. Representative of the assessee has argued that the assessee was the owner in possession of the property plot no. A-12 and not the property of plot no.A-13 which has wrongly been taking into consideration by the AO as well as CIT(A),therefore, the finding of the CIT(A) is not justifiable, hence the estimation of the rent is wrong and

ITA No. 2415/Mum/2019 A.Y. 2012-13 liable to be set aside. However, on the other hand, the Ld. Representative of the revenue has strongly relied upon the order passed by the CIT(A) in question. The assessee filed an affidavit dated 13.03.2018 on record in which the assessee specifically speaks that the owner of the plot no. A/12 which was sold by virtue of agreement dated 18.08.2011 on record. The property was vacant till it alienation. The property was vacant and was sold on 18.08.201. Rent of the earlier year has been shown and taxed. In this year, the rent was not shown and the property was sold. There is nothing on record to which it can be assumed that the assessee did not try to let out his property. Rather, subsequently alianating the property speaks that the property was not on rent hence was sold. We relied in case of Premsudha Exports P. Ltd. (supra) and Sonu Realtors P. Ltd. (supra). The Hon’ble ITAT has held as under: -

“Held accordingly, the assessee company could hold property either to use if for its own business or to let. Since there was no business activity and there was no intention to use the properties in question for its own business, the other possible use was to let it. The memorandum of association of the assessee entitled it to purchase property for letting and to earn rental income. One of the directors was authorized to take necessary steps to let the property in question. The monthly rent and the security deposits of both properties were fixed by resolutions. Consequent to the resolutions, the assessee approached various estate and finance consultants for letting the properties but unfortunately during the year under appeal, the assessee could not get a suitable tenant. Since the property was held to be let, its annual letting value could only be worked out under sub- clause (c) of section 23(1) of the Act and according to this clause, the rent received during the year was nil and that had to be taken as the

ITA No. 2415/Mum/2019 A.Y. 2012-13 annual value of the property in order to compute the income from house property.”

“7. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought for adjudicating as to whether the 'annual value' of the property owned by the assessee viz. Unit No. 401 & 425 of project Balaji Bhavan, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the 'Act' at Rs. Nil, or the same was liable to be determined u/s 23(1)(a) as held by the lower authorities. We find that it is an admitted fact that though the assessee had vide agreement dated April, 2007 let out the Unit No. 401 & 425 of project Balaji Bhavan to M/s Sterling Construction Pvt. Ltd. for a period of 36 months, and had offered the rental income received therefrom as its "Income from house property" in the preceding years, but after the expiry of the license period of 36 months the licensee had vacated the property and conveyed its intention of not getting the license agreement renewed any further. We further find from a perusal of the records before us that it is not the case of the department that after the property was vacated, the same thereafter had remained under the self occupation of the assessee. In light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us is squarely covered by the orders of the coordinate benches of the Tribunal in the case of viz. (i). Vikas Keshav Garud's case (supra) (ii). Dr. Prabha Sanghi's case (supra) (iii). Premsudha

ITA No. 2415/Mum/2019 A.Y. 2012-13 Exports (P) Ltd.'s case (supra) (iv). Informed Technologies India Ltd. (supra). We find that in the case of Informed Technologies India Ltd. (supra) the Tribunal after deliberating at length on the issue as regards the scope and gamut of Sec. 23(1)(c) of the Act, had observed as under : "7.1 We have considered the rival submissions of either side and perused the relevant material on record, including the orders of the authorities below. The issue under consideration for adjudication before us is as to whether the 'ALV' of the property owned by the assessee in Darshan Aparments, Malabar Hills, Mumbai, had rightly been determined by the assessee by taking recourse to Sec. 23(1)(c) of the 'Act', or the same was liable to be determined u/s 23(1)(a) as so held by the lower authorities. We find that it is matter of undisputed fact that the property of the assessee remained let out upto 04.12.2008, and thereafter the same remained vacant. We further find from the perusal of the records before us that it is not the case of the department that after the property was vacated as on 04.12.2008, the same thereafter remained under the self occupation of the assessee. That in light of the aforesaid factual position in the case of the present assessee, we find ourselves to be in agreement with the submissions of the Ld. A.R. that the issue raised before us for adjudication is squarely covered by the order of the coordinate bench of the Tribunal in the case of : Premsudha Exports (P) Ltd. v. ACIT (2008) 110 ITD 158 (Mum), wherein the Tribunal had therein held : "If the property is held by the owner for letting out and efforts were made to let it out , that property is covered by this clause 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. We feel that the words 'property is let' are used in this clause to

ITA No. 2415/Mum/2019 A.Y. 2012-13 take out those properties from the ambit of the clause in which properties are held by the owner for self-occupation i.e self occupied property (i.e SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil, is also to be computed under this head as per Clause (a) of Section 23(1) if we see the combined reading of Sub-section (2) and (4) of Section 23. One thing is more important because we find that where the legislature have considered that actual letting out is required, they have used the words 'house is actually let'. This can be seen in Sub- section (3) of same Section 23. But in Clause (c) above, 'actually let' words are not used and this also shows that meaning and interpretation of the words 'property is let' cannot be 'property actually let out'. In our opinion, it talks of properties which are held to letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that property is let and the same will fall within the purview of this clause." We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which analyzing the scope and gamut of Sec. 23(1)(c) of the 'Act', had therein concluded that in light of the words 'Property is let' used in clause (c) of Sec. 23(1) of the 'Act', unlike the term 'house is actually let' as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term 'Property is let' in Sec. 23(1)(c) of the 'Act', cannot be substituted by the term 'house is actually let' as used by the legislature in all its wisdom in sub-section (3) of Sec. 23. Thus it can safely be concluded that the requirement 'house is actually let' during the year is not a prerequisite for bringing

ITA No. 2415/Mum/2019 A.Y. 2012-13 the case of an assessee within the sweep of Sec. 23(1)(c) of the 'Act', as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee, who continues to hold the said property for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term 'Property is let' in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the 'ALV' of one self occupied property so chosen by the assessee is taken at Nil, however the 'ALV' of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the 'Act'. Thus to our understanding the term 'Property is let' used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the 'ALV' of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however the same cannot be stretched beyond that and the 'ALV' of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the 'Act'. Thus in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the 'ALV' of the property at Rs. Nil by taking recourse to Sec. 23(1)(c) of the 'Act'. In this regard we are further of the view that the CIT(A) had misconceived the judgment of the Hon'ble High Court of Andhra Pradesh in the case of Vikas Jain (supra), and on a perusal of the said judgment therein find

ITA No. 2415/Mum/2019 A.Y. 2012-13 that the Hon'ble High Court in the concluding Para 14 & 15 had though concluded that 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, would however 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 view that now when in the case of the present assessee the property under consideration had remained let out upto 04.12.2008, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but also had never remained under the self occupation of the assessee, the computation of the 'ALV u/s 23(1)(c) of the 'Act', had rightly been carried out in light of the aforesaid judgment of the Hon'ble High Court. 7.2 That in light of our aforesaid observations the Ground of appeal No. 2 of the assessee is allowed and the addition of Rs. 8,40,000/- made by the A.O and as such sustained by the CIT(A) is herein vacated." We find ourselves to be in agreement with the aforesaid observations of the coordinate bench of the Tribunal, which we find, had while analyzing the scope and gamut of Sec. 23(1)(c) of the 'Act', concluded that in light of the words 'Property is let' used in clause (c) of Sec. 23(1) of the 'Act', unlike the term 'house is actually let' as stands gathered from a conjoint reading of sub-section (2) to (4) of Sec. 23, it can safely and rather inescapably be gathered that the conscious, purposive and intentional usage of the aforesaid term 'Property is let' in Sec. 23(1)(c) of the 'Act', cannot be substituted by the term 'house is actually let' as used by the legislature in all its wisdom in sub-section (3) of Sec. 23. Thus, it can safely be concluded that the requirement that the 'house is actually let' during the year is not to be taken as a

ITA No. 2415/Mum/2019 A.Y. 2012-13 prerequisite for bringing the case of an assessee within the sweep of Sec. 23(1)(c) of the 'Act', as long as the property is let in the earlier period and is found vacant for the whole year under consideration, subject to the condition that such vacancy of the property is not for self occupation of the same by the assessee who continues to hold the same for the purpose of letting out. We are in agreement with the aforesaid observations of the coordinate bench that the usage of the term 'Property is let' in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the 'annual value' of oneself occupied property so chosen by the assessee is taken at Nil, however the 'annual value' of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the 'Act'. Thus, to our understanding, though the term 'Property is let' used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the 'annual value' of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however, the same cannot be stretched beyond that and the 'annual value' of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c) of the 'Act'. Thus, in light of the aforesaid order of the coordinate bench of the Tribunal and the reasonings flowing there from, we are of the considered view that the assessee in the present case had rightly determined the 'annual value' of the property at Nil by taking recourse to Sec. 23(1)(c) of the 'Act'. 8. We may further observe that the CIT(A) had misconceived the judgment of the Hon'ble High Court of Andhra Pradesh in the case

ITA No. 2415/Mum/2019 A.Y. 2012-13 of Vivek Jain v. Asstt. CIT [2011] 14 taxmann.com 146/202 Taxman 499/337 ITR 74. 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.” 9. Since the matter of controversy has already been adjudicated by Hon’ble ITAT on the issue under controversy, therefore, taking into account of all the facts and circumstances, we are of the view that the Annual Letting Value of the premises in question i.e. the property Plot No. A/13, Gujranwala Town, Delhi is liable to be treated as nil and accordingly the claim of the assessee is allowed.

ISSUE NO.3 10. Under this issue the assessee has challenged the addition of Rs.9,37,252/- u/s 14A of the I. T. Act. The assessee has shown the bifurcation of his investment in shares in two parts i,e an amount of Rs.12,85,36,336/- in the investment in shares as investments and an amount of Rs.2,93,79,124/- as closing stock (inventory). The AO considered the

ITA No. 2415/Mum/2019 A.Y. 2012-13 closing stock in sum of Rs.2,93,79,124/- for the purpose of u/s 14A r.w.r 8D(2)(iii). The Ld. Representative of the assessee has argued that the same is not liable to be considered in view of the decision in the case of Nice Bombay Transport (P.) Ltd. Vs. ACIT (OSD) (2019) 103 taxmann.com 338 (Delhi). The relevant finding is hereby reproduced as under: -

“6. We have carefully considered the submissions and perused the records. There is no denial of the assertions by the assessee that the assessee is engaged in the business of trading in share and all the shares are held by the assessee company as part of its stock-in-trade and not as an investment as is evidenced by the balance sheet of the company. However, Ld. AO recorded that a profit making company pays dividend to its shareholders who have invested some money to its shares, whether the Shareholder is a trader of share or not. Ld. AO further noted that the assessee company has purchased units from the mutual funds under the Dividend Reinvestment Plan and earned day to day dividend in the shape of units and value of the purchase account had increased by such units and the motive of the assessee company is clear to earn the dividend income. Ld. AO further observed that for a trader of shares, two types of gains are available, simultaneously. Firstly, earning profit from the settling of shares at higher prices from its cost price and secondly is the dividend income and without making investments, the assessee could not have earned dividend income. 7. Thus, as per Ld. AO the investments and dividend are integral part of financial transactions, and they are inseparable. One cannot claim that investment in shares is made only for earning trading benefits or for having dividend income only, because both the gains are existing simultaneously. Ld. AO further noted that in the same way, the expenditure incurred by way of interest on the money taken on loan

ITA No. 2415/Mum/2019 A.Y. 2012-13 for investment/purchase of shares cannot be segregated as the expenditure incurred exclusively for investment/purchase of shares. Actually, the expenditure has been incurred for having both the benefits. Thus, it is amply clear that the expenditure incurred by way of payment of interest has direct link with the dividend income and hence, disallowance as per section 14A of the I.T. Act. 8. Assessee placed reliance on the decision reported in the case of Vora Financial Services (P.) Ltd. v. Asstt. CIT, Mumbai by the ITAT, Mumbai Bench [2018] 96 taxmann.com 88/171 ITD 646 wherein, it was held that where a major portion of dividend income had been received as shares held as stock-in-trade, it cannot be appropriate to apply the provisions of Rule 8D. It is further argued by the Ld. Autherized Representative that whatever the expenses that are debited to the profit and loss account are the business expenses relating to trading of the shares and not additional expense whatsoever made. 9. Further reliance is placed on the decision of the Hon'ble Kerala High Court in the case of CIT v. Smt. Leena Ramachandran [2011] 10 taxmann.com 109/199 Taxman 122/339 ITR 296 for the principle that the assessee would be entitled to deduction of interest under section 36(1)(iii) of the Act on borrowed funds utilized for the acquisition of shares, when the shares held as stock-in-trade which arise if the assessee is engaged in the trading of shares. 10. In fact, this question had fallen for consideration in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154/254 Taxman 325/402 ITR 640 (SC), wherein the Hon'ble Apex Court considered two cases wherein the question of apportionment of expenditure had arisen and predominant intent of investment in

ITA No. 2415/Mum/2019 A.Y. 2012-13 shares was pleaded, though an different facts, on the ground that the objective of investing in shares was not to the dividend income, but to either retain controlling interest over the company in which the investment was made or to earn the profit from trading in shares. The question was whether the disallowance under section 14 A of the Act could be invoked in the cases where exempt income was earned from shares held as "trading assets" or "stock in trade". The first case relates to Maxopp investment Ltd and the second case relates to the case of State Bank of Patiala. In the case of Maxopp investment Ltd the assessee company is in the business of finance, investment and was dealing in shares and securities; that they held the shares and securities, partly as investments on the "capital account" and partly as "trading assets" for the purpose of acquiring and retaining control over its group companies, primarily Max India Ltd.; and that the profits resulting on the sale of shares held as trading assets were duly offered to tax as business income of the assessee. In the case of State Bank of Patiala the assessee the exempt income in the form of dividend was earned by the bank from securities held by an stock in trade. 11. The Hon'ble Supreme Court was considering the question that has arisen under varied circumstances where the shares/stocks were purchased of a company for the purpose of gaining control over the said company or as "stock in trade", though incidentally income is also generated in the form of dividends as well. 12. It was argued before the Hon'ble Apex Court that though incidentally income was also generated in the form of dividends, the dominant intention for purchasing the shares was not to earn the dividend income but to acquire and retain the controlling the business

ITA No. 2415/Mum/2019 A.Y. 2012-13 in the company in which shares were invested, or for the purpose of trading in the shares as business activity. 13. After considering the entire case law on this aspect in the light of the peculiar facts involved in both the matters, the Hon'ble Apex Court vide paragraph No. 39 and 40 held as follows:— (39) In those cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers PLtd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. (40) We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT (A) disallowed the entire deduction of expenditure. That view of the CIT (A) was clearly untenable and rightly set aside by the ITAT.

ITA No. 2415/Mum/2019 A.Y. 2012-13 Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court. It is to be kept in mind that in those cases where shares are held as 'stock-in-trade', it becomes a business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. 14. It is, therefore, clear from the above observations of the Hon'ble Apex Court that depending upon the facts of each case, the expenditure incurred in acquiring the shares will have to be apportioned. Hon'ble Apex Court held that the tribunal and the Hon'ble High Court of Punjab and Haryana arrived at a correct

ITA No. 2415/Mum/2019 A.Y. 2012-13 conclusion by setting aside the disallowance under section 14 A of the Act in respect of the dividend earned on the shares held as stock in trade, because such shares were held during the business activity of the assessee and it is only by a quirk of fate that when the investee company declared dividend, those shares were held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. 15. Hon'ble Apex Court made a clear distinction of this case from the case of Maxopp investment Ltd were the assessee knew that whenever dividend would be declared by the investee company such dividend would necessarily be earned by the assessee and assessee alone, and it would be in the common knowledge of the assessee that such shares would generate dividend income as well as and when such dividend income is generated that would be earned by the assessee only. Hon'ble Apex Court in unequivocal terms held that in contrast, where the shares are held as stock in trade, this may not be necessarily a situation and the main purpose was to liquidate those shares whenever the share price goes up in order to earn profits. In the words of the Hon'ble Apex Court, the situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. 16. Hon'ble Apex Court, therefore, while rejecting the theory of dominant purpose in making investment in shares-whether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares - clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares

ITA No. 2415/Mum/2019 A.Y. 2012-13 that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company. 17. In the circumstances and respectfully following the aforesaid binding precedent, we are of the considered opinion that Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is hereby directed to be deleted.” 11. In view of the said decision, we are of the view that the finding of the CIT(A) is not liable to be sustainable and is hereby ordered to be set aside. Accordingly, we direct the AO to re-assess the expenditure to earn the exempt income in accordance with law. Accordingly, this issue is decided in favour of the assessee. 12. In the result, the appeal filed by the assessee is hereby allowed accordingly. Order pronounced in the open court on 18/04/2022. Sd/- Sd/- (SHAMIM YAHYA) (AMARJIT SINGH) न्यधनिक सदस्य/JUDICIAL MEMBER लेखध सदस्य / ACCOUNTANT MEMBER मुंबई Mumbai; ददनांक Dated : 18/04/2022. Vijay Pal Singh (Sr. P.S.)

ITA No. 2415/Mum/2019 A.Y. 2012-13 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant प्रत्यथी / The Respondent. 2. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधिक िंजीकधर /(Dy./Asstt. Registrar) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai