2016 (7) TMI 942 - AT - Income Tax

Tribunal revises ALV to nil for vacant property based on Income Tax Act interpretation.

The Tribunal partially allowed the appeal, modifying the Annual Letting Value (ALV) determination for the property at Dande Towers in Nashik. It held that ... Annual Letting Value - Section 23(1)(c) of the Income tax Act - Vacant property for the whole year - Intention to let versus actual letting - Literal and purposive interpretation of taxing provision - Distinction under section 23(3) between 'let' and 'actually let'Annual Letting Value - Concession by assessee - Substitution of gross annual rental value for Prathamesh Plaza by the CIT(A) on the basis of the assessee's concession - HELD THAT: - The CIT(A) substituted the gross annual rental value at the amount agreed by the assessee during appellate proceedings. In the absence of the assessee at hearing and there being no material on record of ALV in previous or subsequent years to justify interference, the Tribunal declined to disturb the CIT(A)'s conclusion which was founded on the assessee's concession. No contrary evidence was placed by the Revenue to justify reopening that agreed figure in this ex parte proceeding. [Paras 5]The Tribunal abstains from interfering with the CIT(A)'s substituted ALV for Prathamesh Plaza arrived at by concession of the assessee.Section 23(1)(c) of the Income tax Act - Vacant property for the whole year - Intention to let versus actual letting - Literal and purposive interpretation of taxing provision - Whether the ALV of the property at Dande Towers, which remained vacant throughout the year though previously let, must be treated as nil under section 23(1)(c) - HELD THAT: - Section 23(1)(c) contemplates the situation where a property is in a category susceptible of being let but remained vacant for the whole or part of the previous year; if actual rent received or receivable is less than the standard sum, the amount received or receivable governs ALV. The words 'let' and 'vacant' are mutually exclusive if read narrowly; a purposive construction requires consideration of the assessee's intention and efforts to let the property. The Tribunal rejected the Revenue's contention that the provision applies only where the property was actually let during the relevant year, noting the legislature's use of the phrase 'actually let' in subsection (3) which indicates that 'let' in subsection (1)(c) cannot be to actual letting. On the facts the property had been let in an earlier year and was available to be let but remained vacant for the whole year; absence of any rebuttal by Revenue that the property was self occupied or not vacant led the Tribunal to hold that ALV must be assigned nil under section 23(1)(c). The Tribunal therefore modified the CIT(A)'s confirmation of the Assessing Officer's adoption of a notional rental based on past rent. [Paras 9]The ALV of the Dande Towers property for the year under appeal is to be treated as nil under section 23(1)(c); the CIT(A)'s order is modified accordingly.Final Conclusion: The appeal is partly allowed for AY 2009-10: the ALV of the Dande Towers property is held nil under section 23(1)(c), while the CIT(A)'s substituted ALV for Prathamesh Plaza (accepted by the assessee) is left undisturbed. Issues:Interpretation of provisions of section 23(1)(c) of the Income Tax Act, 1961 for determining Annual Letting Value (ALV) of properties at Prathamesh Plaza and Dande Towers in Nashik.Analysis:1. The appeal concerns the order of CIT(A)-I, Nashik related to the assessment year 2009-10 under section 143(3) of the Income-tax Act, 1961. The appellant raised grounds of appeal regarding the interpretation of section 23(1)(c) for determining ALV of properties.2. Despite the absence of the appellant during the hearing, the respondent's representative appeared. The appeal was disposed of ex-parte in favor of the respondent in accordance with Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963.3. The appellant contested the ALV determination by the Assessing Officer for Prathamesh Plaza and Dande Towers in Nashik. The ALV for Prathamesh Plaza was agreed upon at Rs. 40,000 per annum during the appellate proceedings. For Dande Towers, the ALV was confirmed at Rs. 1,51,200 based on the actual rent received in a previous year.4. The Assessing Officer denied the application of section 23(1)(c) for properties that remained vacant throughout the year. The appellant argued that the ALV should be nil as the properties were vacant despite efforts to let them out.5. Section 23(1)(c) states that if a property is let and vacant during the previous year, the ALV should be determined based on the actual rent received. The Tribunal noted that the property being let and vacant simultaneously is contradictory. The ALV should be zero if efforts were made to let the property but were unsuccessful.6. The Tribunal disagreed with the revenue's interpretation that the property must be actually let out in the previous year. The property's history of being rented out in a prior year supports the appellant's claim for nil ALV due to vacancy in the relevant year.7. The Tribunal modified the CIT(A)'s order to assign nil ALV to the property at Dande Towers that remained vacant throughout the year. Ground no. 1 was partly allowed, rendering ground no. 2 infructuous.In conclusion, the Tribunal partially allowed the appeal, modifying the ALV determination for the property at Dande Towers based on the interpretation of section 23(1)(c) of the Income Tax Act, 1961.