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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SH. BHAVNESH SAINI
PER BHAVNESH SAINI, JUDICIAL MEMBER
This appeal by the assessee has been directed against the order of CIT(A)-13, New Delhi dated 20.03.2015 for A.Y. 2011-12, challenging the addition of Rs.2,25,000/- (Actual Rs.2,52,000/-).
I have heard the Ld. Representatives of both the parties and perused the material available on record. The AO observe that the assessee has not declared rent for Godown No.3 at Samaypur, Delhi which was lying vacant. Applying section 23(1) of the Act, the AO computing the annual letting value for the property at Rs.3,60,000/- and after giving deduction u/s 24(1), the balance amount of Rs.2,52,000/- is added. It was explained that in A.Y. 2010-11 assessee earned rent of Rs.2,52,000/- and in A.Y. 2011-12, in appeal, the assessee has earned/received Rs.31,200/- as rent from the Godown No.3 at Samaypur, Delhi for the Page 2 of 4 period of one month and some days during which the same was let out and occupied by the tenant. Thereafter, the tenant vacated the aforesaid godown of the assessee and it was lying vacant for the remaining period.
The assessee tried his best to let out the godown but unfortunately he was not able o let it out. The AO made addition on account of hypothetical income in the hands of the assessee. The AO had not applied section 23(1)(c) of the Act because during the vacancy period, no rent could be charged. The Ld.CIT(A) however, dismiss the appeal of the assessee holding that the annual rental value was computed on the basis of rent received in preceding A.Y. 2010-11.
The counsel for the assessee reiterated the submissions made before the authorities below. He has relied upon the order of the ITAT, Delhi Bench in the case of ACIT vs Dr. Prabha Sanghi in dated 18.09.2012 in which in para 17 held as under:-
“Undoubtedly, it was to cure the inequity of taxing vacant properties under a notional charge, that section 23(1)(c) was brought on the statute book by virtue of the Finance Act of 2001 w.e.f. 01.04.2002, as rightly contended on behalf of the assessee, in order to provide simplified determination of annual value of property on allowing deductions in computing the ALV itself on account of vacancy and unrealized rent.”
3.1. He has also relied upon the order of the ITAT, Banglore Bench in the case of Dr.A.C.Sreeram vs. Additional CIT in dated 21.03.2012 in para 11.1 held as under:-
Page 3 of 4 “11.1. In our opinion the aforesaid referred to case is on the same facts, so respectfully following the decision of the Co-ordinate Bench in the case of Premsudha Exports (P) Ltd., vs ACIT, C.C.-10, Mumbai (supra), we are of the view that since the rent received or receivable from the property in question during the year was nil, the same was to be taken as the annual value of the property in order to compute the income from house property as provided in section 23(1)(c) of the Act. We, therefore, set aside the order of the learned CIT(A) and the grounds of appeal Nos.5, 6 & 7 raised by the assessee are allowed.”
3.2. He has also relied upon the order of the ITAT, Pune Bench in the case of Vikas Keshav Garud vs ITO in dated 31.03.2016 in which it was held as under:-
“……..Therefore, in the totality of the circumstances and having regard to the provisions of the Act, we are of the view that the ALV of the property at Dande Towers which remained vacant for the whole year has to be assigned Nil value in terms of section 23(1)(c) of the Act. Accordingly, the order of the CIT(A) stands modified to this extent. Ground No.1 is thus partly allowed.”
3.3. On the other hand, Ld.DR relied upon the orders of the authorities below.
Considering the facts of the case in the light of the above decisions, it is clear that despite making best efforts, the assessee could not let out the godown in question for the remaining period and as such it was lying vacant. The authorities below, therefore, should have extended benefit of section 23(1)(c) of the Act to the assessee. The issue is covered by the above decisions of the appellate Tribunal in the cases of Dr.Prabha Sanghi, Dr.A.C.Sreeram and Vikas Keshav Garud (supra)
Page 4 of 4 5. In view of the above, I set aside the orders of the authorities below and delete the addition.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court.