Section 23(1)(c) of the Income Tax Act
Income-tax Act, 2025: s.21
Section 23(1)(c) falls under section 23 of the Income-tax Act, 1961, which corresponds to section 21 (Determination of annual value) of the Income-tax Act, 2025.
Read section 21 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 23(1)(c) is CIT v. Tip Top Typography (368 ITR 330), cited in 161 of the 136 judgments on BharatTax that turn on this section.
Leading authorities on Section 23(1)(c)
For computing income from house property, the Annual Letting Value (ALV) cannot be arbitrarily estimated by the Assessing Officer, but must be determined based on the Municipal ratable value of the property.
Disallowance under Section 14A for interest expenditure is not justified if an assessee uses its own interest-free funds for investments generating exempt income, and borrowed funds are entirely utilized for business purposes, without evidence of diversion to earn tax-free income.
The benefit of higher compensation should be granted to landowners who could not approach the court, based on evidence of solitary sale deeds or small pieces of land.
A taxing statute must be strictly construed: the subject is not to be taxed unless the charging provision clearly and explicitly imposes the obligation, without room for intendment or implication. There is no equity about a tax, and nothing is to be read into or implied within the language used.
For the purpose of computing income from house property, the annual value under Section 23 must be determined even if the property is vacant or not actually let out, as the statutory phrase "property is let out" does not necessitate actual letting.
If a property is not let out at all, notional income must be computed, and the benefit of section 23(1)(c) (vacancy allowance) cannot be extended. However, section 23(1)(c) can apply to properties let out for two or more years that remain vacant for the entire previous year.
Exemption under sections 11/12 of the Act should not be denied on the basis of the principle of consistency if the facts in the present case are identical to earlier and subsequent assessment years. This applies even when there are allegations of violation of provisions of section 13 of the Act.
The principle of consistency mandates that if an assessee's facts in earlier and subsequent assessment years are identical to the year under consideration, they should not be denied exemption under sections 11/12 of the Act.
The meaning and intention of a statute must be gathered from its plain and unambiguous language, rather than from the court's notions of what is just or expedient. The scope of what is covered must be determined by a fair and straightforward reading of the statutory text.
Where an assessee has sufficient own funds exceeding its investments, a presumption arises that investments were made out of interest-free funds, preventing disallowance of interest expenses.
