SHETKARI SAHAKARI SANGH LTD,KOLHAPUR vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1, KOLHAPUR

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ITA 234/PUN/2018Status: DisposedITAT Pune20 July 2022AY 2010-114 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that income from house property is taxed on an accrual basis under the mercantile system, irrespective of actual receipt. Unrealized rent cannot be allowed as a deduction when computing income from house property.

What were the facts?

The assessee, a co-operative society, declared Nil income after set off of losses. The Assessing Officer added Rs. 22 lakhs representing unrealized rent from a leased property, as the assessee followed the mercantile system of accounting. The CIT(A) confirmed this addition.

What were the issues?

Whether unrealized rent is taxable under the head 'Income from house property' when the assessee follows the mercantile system of accounting.

Which sections of the Income-tax Act were involved?

Section 22,Section 23,Section 2(24),Section 14,Section 20

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI

This is an appeal filed by the assessee directed against the order of Ld. Commissioner of Income Tax (Appeals)-1, Kolhapur, dated 16.11.2017 for the assessment year 2010-11.

2.

Briefly, the facts of the case are as under:

The appellant is a co-operative society engaged in the business of purchase & sale of household material like wheat, rice, etc. and sale of petroleum products. The return of income for the assessment year 2010- 11 was filed on 15.10.2010 declaring Nil income after set off of brought forward business losses, etc. Against the said return of income, assessment was completed by the Assessing Officer (AO) after making addition of Rs.22 lakhs under the head „Income from house property‟.

The factual matrix of the case is as under:

The appellant society owns a building at Kolhapur which was given on lease to M/s. Home Care Retail Marts Pvt. Ltd. at Rs.2,00,000/- per month w.e.f. August, 2008. However, during the previous year under consideration, the appellant society received rent of only Rs.2,00,000/- and the balance rent was unrealized by the appellant and the same was not offered to tax on the ground that the rented premises was locked and tenant was not traceable and the appellant could not recover the rent from the tenant. It was claimed that Arbitrator was appointed by the Hon‟ble Bombay High Court in the above circumstances of unrealized rent of Rs.22 lakhs was not offered to tax. However, the AO was of the view that since the appellant was following mercantile system of accounting, the accrued rent should be offered to tax irrespective of the fact that the rent was realized or not, accordingly, brought to tax the unrealized rent of Rs.22 lakhs. Being aggrieved by the above addition, an appeal was filed before the CIT(A), who on due consideration of the submissions made on behalf of the appellant, had confirmed the findings of AO and accordingly, dismissed the appeal.

3.

Being aggrieved by the order of CIT(A), the assessee is in appeal before us in the present appeal. When the matter was called on, none appeared on behalf of the appellant society, despite due service of notice of hearing.

4.

On the other hand, ld. Sr.DR supported the orders of lower authorities and submitted that no interference is called for.

5.

We have heard the learned Sr.DR and perused the material on record. The issue in the present appeal relates to the assessability of unrealized rent while computing the income under “house property”. On conjoint reading of sections 2(24), 14, 20 and 23 of the Income-tax Act, 1961, it makes clear that what is to be taxed under the provisions of section 22 under the head „Income from house property‟ is deemed income of the assessee from the property owned by him as held by Hon'ble Supreme Court in the case of Chelmsford Club vs. CIT 243 ITR 89 (SC) and what is charged to tax under section 22 is that the annual value of the property irrespective of the fact whether income was actually received or had accrued to the assessee. There is no provision for allowing unrealized rent while computing the income under the head „Income from house property‟. Therefore, we are of the considered opinion that the AO had rightly brought to tax the unrealized rent of Rs.22 lakhs. We do not find any reason to interfere in the orders of authorities below. Accordingly, the appeal filed by the assessee stands dismissed.

6.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court on 20th July, 2022.

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