Tribunal remands annual letting value calculation, rejects vacancy allowance claim

The Tribunal partially allowed the appeal, remanding the computation of annual letting value and the verification of improvement cost to the AO for further examination and consideration of evidence presented. The appellant's claim for vacancy allowance was rejected due to the property never being let out.

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Issues Involved:
1. Computation of annual letting value and vacancy allowance.
2. Disallowance of cost of improvement while computing capital gain.

Issue 1: Computation of Annual Letting Value and Vacancy Allowance:
The appellant, a Non-resident Indian, earned income from house property and capital gain from property sale. The dispute arose regarding the annual letting value of properties in Bangalore and Hyderabad. The AO estimated the annual letting value of the Hyderabad property at Rs. 90,000 for nine months, as the property was sold during the year. The appellant challenged this before the CIT(A), also claiming vacancy allowance for the Hyderabad property. The CIT(A) upheld the AO's decision. The appellant argued that the AO based the estimation on the Hyderabad property on lack of property tax receipt, which was later produced before the CIT(A). The Tribunal noted the AO accepted the Bangalore property's value based on municipal value but rejected the Hyderabad property's value due to lack of proof. The Tribunal remanded the issue to the AO to consider the property tax payment record. Regarding vacancy allowance, the Tribunal rejected the claim since the property was never let out.

Issue 2: Disallowance of Cost of Improvement:
The appellant, a joint property owner, sold a property in Hyderabad and claimed cost of improvement. The AO disallowed the claim due to lack of evidence. The CIT(A) agreed with the AO. The appellant contended the property was purchased without any construction and later sold as a house, justifying the claimed improvement cost. The appellant submitted an affidavit from the person who oversaw the construction. The Tribunal observed the property was sold as a house, indicating improvement. The Tribunal set aside the issue for the AO to verify if construction existed at the time of sale compared to purchase. If construction is confirmed, the claim cannot be rejected solely for lack of bills. The Tribunal allowed this ground of the appeal for statistical purposes.

In conclusion, the Tribunal partly allowed the appeal, remanding the computation of annual letting value and the verification of improvement cost to the AO for further examination and consideration of evidence presented.

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