Tribunal grants appellant relief by deleting notional rental income, recognizing vacancy allowance & rent-free period for renovations.

The Tribunal ruled in favor of the appellant, allowing the appeals and deleting the notional rental income additions made by the Assessing Officer. The appellant was granted the benefit of vacancy allowance for the period when the property was vacant before being leased out, citing the genuine efforts to let out the property. Additionally, the Tribunal recognized the legitimacy of the rent-free period for renovations, emphasizing that no rent was received during this time and deleting the addition of notional rent for that period.

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Issues Involved:
1. Application of Section 23(1)(c) of the Income Tax Act to the property let out as a bare shell structure.
2. Assessment of notional rental income for the period when the property was rent-free for renovation.

Issue-wise Detailed Analysis:

1. Application of Section 23(1)(c) of the Income Tax Act:
The appellant was engaged in real estate investment and acquired a bare shell structure property on 19.10.2012, intending to lease it out. Despite efforts, the property remained vacant until 31.12.2012. The appellant leased the property to Schneider Electric Pvt. Ltd. from 01.01.2013 with a rent-free period of five months for renovations. The Assessing Officer (AO) assessed notional rental income for the period from 19.10.2012 to 31.03.2013. The appellant argued that the property was unfit for occupation and cited judicial precedents to support the application of Section 23(1)(c) for vacancy allowance. The Tribunal noted that the appellant's intention to let out the property and efforts made were sufficient to invoke Section 23(1)(c), granting the appellant the benefit of vacancy allowance for the period 19.10.2012 to 31.12.2012, as the property was indeed vacant during this time.

2. Assessment of Notional Rental Income for Rent-Free Period:
For the period from 01.01.2013 to 31.03.2013, the AO attributed notional rent despite the property being in a rent-free period for renovations. The Tribunal observed that the agreement between the appellant and the lessee was genuine, and the property was a bare shell structure requiring significant modifications. The Tribunal emphasized that no rent was received during this period, and the AO did not establish that the property could reasonably be expected to be let out for a higher sum. Consequently, the Tribunal deleted the addition of notional rent for the period 01.01.2013 to 31.03.2013, recognizing the legitimacy of the rent-free period for making the property fit for occupation.

Conclusion:
The Tribunal ruled in favor of the appellant for both assessment years, allowing the appeals and deleting the notional rental income additions made by the AO. The judgment highlighted the importance of considering the actual condition of the property and the genuine efforts made to lease it out when applying the provisions of Section 23(1)(c) and assessing notional rental income.

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