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Income Tax Appellate Tribunal, MUMBAI BENCHES “G” MUMBAI
Before: SHRI RAJESH KUMAR, HON. & SHRI AMARJIT SINGH, HON.
PER RAJESH KUMAR, ACCOUNTANT MEMBER
This is an appeal filed by the assessee against the order of Commissioner of Income Tax (Appeals)-22, Mumbai, dated 21/06/2018 for A.Y. 2013-14.
The only issue raised by the assessee in this appeal is against the confirmation of the action of the AO by the ld.CIT(A) in computing the ALV of the office premises at Balaji Bhavan at Rs.99,21,226/- when the premises were as lying vacant.
(M/s. Sonu Realtors Pvt. Ltd.)
Facts are in brief that the AO during the course of assessment proceedings observed that the assessee has made huge investments in house properties of Rs. 3,43,36,083/-, which were not categorized as stock-in-trade. Accordingly, a show- cause notice was issued to the assessee as to why the provisions of section 23 should not be invoked, which was replied by the assessee by submitting that impugned properties were lying vacant for the entire year as the tenant-M/s. Sterling Construction System Pvt. Ltd. has left the premises and no rent whatsoever was received. The assessee further stated before the AO that the case of the assessee is covered by section 23(1)(a) of the Act and therefore the annual value should be taken as NIL as it was vacant throughout the year. The reply of the assessee did not find favour with the AO and he calculated the deemed rent of Rs.90,19,296/- and made the addition accordingly.
In the appellate proceedings, the ld.CIT(A) dismissed the appeal of the assessee by observing that in respect of earlier years i.e. A.Y. 2011-12 & 2012-13 the same issue was decided against the assessee by following the decision of the Hon'ble Andhra Pradesh High Court in the case of Vivek Jain vs. ACIT [(2011) 337 ITR 74 (AP)].
(M/s. Sonu Realtors Pvt. Ltd.) ITA No. 402/MUM/2015
At the outset, ld.AR submitted that the present issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case in and ITA No. 66/MUM/2017 for the A.Ys. 2011-12 & 2012-13 by order dated 19/09/2018 wherein the issue has been decided in favour of the assessee. Therefore, ld.AR submitted that the same may kindly be decided in favour of the assessee by allowing the appeal of the assessee.
Ld.DR, on the other hand, fairly agreed with the contention of the ld.AR that in the earlier years i.e. A.Ys. 2011-12 & 2012-13 the issue has been adjudicated in favour of the assessee.
7. After hearing both the parties and perusing the material on record, we observe that the issue under identical facts has been decided in favour of the assessee and against the Revenue. The operative part of the said decision has been reproduced as under:-
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
(M/s. Sonu Realtors Pvt. Ltd.) 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 Vs. ITO, Ward 1(2), Nashik (2016) 160 ITD 7 (Pune) (ii). ACIT, Circle-47(1), New Delhi Vs. Dr. Prabha Sanghi (2012) 139 ITD 504 (Del); (iii). Premsudha Exports (P) Ltd. Vs. ACIT, Central Circle 10, Mumbai (2008) 110 ITD 158 (Mum); and (iv). Informed Technologies India Ltd. Vs. DCIT3(2), Mumbai (2017) 162 ITD 153 (Mum). 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. Vs.
(M/s. Sonu Realtors Pvt. Ltd.)
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 selfoccupation 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.
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 (M/s. Sonu Realtors Pvt. Ltd.)
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 oneself 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 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 (M/s. Sonu Realtors Pvt. Ltd.) 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 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 further 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 (M/s. Sonu Realtors Pvt. Ltd.) 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 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.
9. That in light of our aforesaid observations the Ground of appeal No. 1 and 2 of the assessee are allowed and the determination of the „annual value‟ of the property under consideration viz. Unit No. 401 & 425 of project Balaji Bhavan at Rs. 81,99,360/- by the A.O by taking recourse to Sec. 23(1)(a), which thereafter was sustained by the CIT(A), is vacated. The order of the CIT(A) is set aside in terms of our aforesaid observations.
The appeal of the assessee is allowed.”
Since the facts in the instant case are identical to ones as decided in favour of the assessee by the Coordinate Bench vide order dated 19/09/2018 as reproduced above, we therefore set aside the order of the ld.CIT(A) and direct the AO to delete the (M/s. Sonu Realtors Pvt. Ltd.) addition resulting from estimation of deemed annual letting value in respect of vacant properties. Thus, this appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order Pronounced in the open Court on 6th December, 2019