Unrealised rent deduction requires strict Rule 4 compliance; BIFR proceedings alone do not excuse eviction or recovery steps.

Deduction for unrealised rent under section 24(1)(x) is available only on strict compliance with Rule 4, including proof that the tenant has vacated or that steps were taken to secure vacant possession, and that all reasonable measures were taken to recover the rent or show recovery would be futile. Pendency before the BIFR under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 does not by itself bar eviction or recovery action, and it does not excuse the assessee from taking such steps. On the stated facts, the conditions in Rule 4(b) and Rule 4(d) were not satisfied, so the deduction was not allowable.

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Issues: Whether the assessee was entitled to deduction for unrealised rent under section 24(1)(x) of the Income-tax Act, 1961, in the absence of compliance with Rule 4(b) and Rule 4(d) of the Income-tax Rules, 1962, and whether the pendency of proceedings before the BIFR under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, disabled the assessee from taking steps for eviction or recovery.

Analysis: The deduction for unrealised rent is available only when the conditions in Rule 4 are satisfied, including that the defaulting tenant has vacated or steps have been taken to compel vacating, and that the assessee has taken all reasonable steps to institute legal proceedings for recovery of rent or shown that such proceedings would be useless. The mere fact that the tenant company had been declared sick and was before the BIFR did not establish an absolute bar to eviction proceedings or to seeking recovery measures. Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, did not prevent all such action, and no sufficient steps had been shown to have been taken by the assessee to obtain vacant possession or recover the arrears.

Conclusion: The assessee did not satisfy Rule 4(b) and Rule 4(d), and the claim for deduction under section 24(1)(x) was not allowable.

Final Conclusion: The Revenue's appeals succeeded, the relief granted by the Commissioner (Appeals) was set aside, and the additions made by the Assessing Officer were restored.

Ratio Decidendi: Deduction for unrealised rent is allowable only upon strict compliance with the prescribed conditions, and the existence of BIFR proceedings does not by itself excuse the assessee from taking reasonable legal steps for eviction or recovery.

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