Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
PER SAKTIJIT DEY, J.M.
These appeals by the assessee are directed against two separate orders, both dated 24th November 2014, passed by the learned Commissioner (Appeals)–4, Mumbai, for the assessment years 2010– 11 and 2011–12.
The only common issue arising for consideration in both these appeals relate to addition made under the head “Income From House
2 Container Marine Agencies Pvt. Ltd.
Property” in respect of premises remaining vacant during the relevant previous years.
Since the facts are common in both the appeals, for the sake of convenience, we will deal with the facts as involved in Mum./2014 for the assessment year 2010–11.
Brief facts are, the assessee is a Private Limited Company. In the course of assessment proceedings, while examining assessee’s Profit & Loss account, the Assessing Officer noticed that the assessee has shown rent received of ` 1,08,01,770, from different flats as income from house property. After calling for necessary details of property owned and given on rent from the assessee and examining the same, the Assessing Officer found that the assessee has not shown rental income in respect of two flats in 2nd and 3rd floor of Rupam Building, P. D’Mello Road, on the plea that they were vacant during the relevant period. Noticing this, the Assessing Officer called upon the assessee to explain why deemed rent in respect of vacancy period should not be determined and added to the annual letting value (ALV) of the properties. In reply, it was submitted by the assessee that in the flat in 2nd floor was vacant from 1st November 2009 till 31st March 2010. Therefore, for the vacancy period, the ALV has to be treated as nil. As far as the other flat is concerned, the Assessing Officer alleged,
3 Container Marine Agencies Pvt. Ltd. the assessee did not furnish any explanation. The Assessing Officer observed, as per the provisions of the Act, ALV of any house has to be taken as municipal value or fair market value whichever is higher subject to standard rent. Referring to section 23(1) and some judicial precedents, the Assessing Officer proceeded to compute the ALV of the flat at 2nd Floor of Rupam Building for the period of 12 months at the monthly rent of ` 4,99,950. As far as the property at 3rd Floor at Rupam Building is concerned, the Assessing Officer observed, the assessee has not furnished any details, however, referring to past history of the assessee, he computed the rental income for the year at ` 26,83,065. As a result of such determination of house property income by the Assessing Officer the total income was determined at ` 3,28,39,220 as against returned income of ` 2,90,06,939. Being aggrieved of such addition, assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) referring to certain decisions, and more specifically, the decision of Hon'ble A.P. High Court in Vivek Jain v/s ACIT, [2011] 337 ITR 74 (AP), held that for attracting provisions of section 23(1)(c), the assessee has to fulfill the conditions imposed therein. He observed, as the assessee has not fulfilled these conditions vacancy allowance in terms of section 23(1)(c), is not allowable. However, as far as determination of ALV by 4 Container Marine Agencies Pvt. Ltd.
the Assessing Officer is concerned, the learned Commissioner (Appeals) directed the Assessing Officer to determine the ALV in terms of principles laid down by the Hon'ble Jurisdictional High Court in CIT v/s Tip Top Typography.
Learned Authorised Representative submitted, the flat in second floor of Rupam Building remained vacant from November 2009 to March 2010 in financial year 2009–10 and from April to October 2010 in financial year 2010–11. Similarly, the flat in third floor of Rupam Building remained vacant from April 2009 to March 2010 in financial year 2009–10 and from April 2010 to December 2010 in financial year 2010–11. Referring to the provisions of section 23(1)(c), she submitted, if a property remains vacant during the whole or any part of previous year, then the actual rent received or receivable in respect of the said property owing to the vacancy if is less than the ALV as per sub–section (i) of section 23(1), then actual rent received or receivable should be treated as ALV. In support of her contention, learned Authorised Representative relied upon the following decisions:–
i) Vikas Keshav Garud v/s ITO, [2016] 160 ITD 007 (Pn.); and ii) Inform Technologies India Ltd. v/s DCIT, [2-016] 75 taxmann.com 128 (Mum.).
5 Container Marine Agencies Pvt. Ltd.
Learned Authorised Representative further submitted, the property remained vacant for genuine reasons as the assessee could not get a tenant. The learned Authorised Representative submitted, the property was let out earlier and also during the subsequent period. She, therefore, submitted, the assessee should be given the benefit of section 23(1)(c) of the Act.
Learned Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record in the light of decisions relied upon. Undisputed facts are, the property at second and third floor of Rupam Building belongs to the assessee. It is also not disputed that the property at second floor was vacant from November 2009 to March 2010 in financial year 2009–10 and property at third floor of Rupam Building was vacant from April 2009 to March 2010. Similarly, property at second floor was vacant from April 2010 to October 2010 in financial year 2010–11 and property at 3rd floor of Rupam Building was vacant from April 2010 to December 2010 in financial year 2010–11. It is also not disputed that prior and subsequent to the vacancy period, the properties were let out to tenants. Considering the aforesaid factual
6 Container Marine Agencies Pvt. Ltd. aspects, it needs to be examined whether the assessee is eligible to get benefit of section 23(1)(c). At this stage, it needs to be mentioned, provisions contained under section 23 of the Act was substituted by Finance Act, 2009, w.e.f. 1st April 2002 and in its place a new provision was introduced to the statute book. As per the provisions of section 23(1), existing in the statute at present and which is applicable to the impugned assessment years, annual value of any property shall be deemed to be any one of the following:– a) The sum for which the property might reasonable to be expected to let from year–to–year; or b) Where the property or any part of the property is let and the actual rent received or receivable by the owner in response thereof is in excess of the sum referred to in clause (a), the amounts so received or receivable; or c) Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owning to such vacancy, the actual rent received or receivable by owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable.
7 Container Marine Agencies Pvt. Ltd.
The facts of the present case if considered in the context of the aforesaid provisions contained under section 23(1), it can be seen that the properties in question were let out earlier before the vacancy arose and also subsequently, therefore, in our view, it will be covered under section 23(1)(c). That being the case, the actual rent received or receivable owing to the vacancy should be treated as ALV. It appears from the assessment order, the Assessing Officer has failed to apply the provisions of section 23(1)(c) correctly. Similarly, the learned Commissioner (Appeals), by misreading the decision of Hon'ble A.P. High Court in Vivek Jian (supra) sustained the disallowance of vacancy allowance under section 23(1)(c). This fact is succinctly brought out in the decisions relied upon by the learned Authorised Representative. As could be seen, the Tribunal, Pune Bench, in case of Vikas Keshav Garud (supra), after taking into consideration the decision of Hon'ble A.P. High Court in Vivek Jain (supra), held that the provisions of section 23(1)(c) would apply even in the case of a property remaining vacant throughout the year. The same view was reiterated in case of Informed Technologies India Ltd. (supra), after taking into consideration the decision of the Hon'ble A.P. High Court in Vivek Jain (supra). In consideration of the aforesaid decisions of the Co–ordinate Bench, we hold that the assessee should get benefit of section 23(1)(c) and ALV of the property cannot be determined notionally for 8 Container Marine Agencies Pvt. Ltd.
the period the property remained vacant. In other words, the ALV in terms of section 23(1)(c) should be the actual rent received or receivable by the assessee. Accordingly, we delete the addition made for both the assessment years.
In the result, assessee’s appeals are allowed. Order pronounced in the open Court on 21.12.2016