AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 961
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...., other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to incometax, shall be chargeable to income-tax under the head "Income from house property". Annual value how determined. 23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be- (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in whic....
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....e process of setting up a state of the art laboratory in Mumbai at the relevant time. The basic terms and conditions agreed to between the parties for taking the property on rent, proposed to be 01.4.2009 onwards, were recorded in a Letter of Intent (LoI) dated February 9, 2009 (PB pgs. 50-51) (also refer Written Submissions (WS) before the first appellate authority dated 13/8/2012 at PB pages 22-30). This property was in fact let to SRL with effect from 1/4/2009 at the agreed rent of Rs. 38.95 lacs per month vide Leave and License Agreement dated 06/8/2009 (PB pages 52-71). The Assessing Officer (AO) computed the annual value of the said property for the relevant year at Rs. 116.85 lacs, i.e., taking the proposed annual rent of Rs. 467.40 lacs for three months, being January to March, 2009. The respective cases 4. The assessee, while not disputing the quantum of the gross annual rental value, claims that in-as-much as the property, though let-able, was 'vacant' during the entire period of the year since its acquisition in December, 2008, its annual value (AV) ought to be restricted to the actual rent received or receivable, i.e., Nil. The condition of the property being let ....
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....ece Goods Bazar Co. Ltd. vs. CIT [1950] 18 ITR 516 (SC); CIT vs. H. G. Gupta & Sons [1984] 149 ITR 253 (Del); and Sakarlal Balabhai vs. ITO [1975] 100 ITR 97 (Guj). The AV, irrespective of whether the property is actually let or not, is thus to be subject to tax, unless covered under section 23(1)(b), as again reiterated by the Hon'ble Apex Court per its Constitution Bench decision in Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC). In Liquidator of Mahamudabad Properties (P.) Ltd. v. CIT [1980] 124 ITR 31 (SC), the Hon'ble Apex Court held that even where the property was found to be in a state of utter disrepair, it yet would have some annual value, rejecting the Revenue's stand that being not in an inhabitable state, it did not admit of letting and, thus, carried no AV (refer para 4.5 of the impugned order). The decisions relied upon by the assessee before him, viz. Premsudha Exports (P.) Ltd. (supra); Shankuntala Devi (supra); and Indu Chandra (supra) were also distinguished by the ld. CIT(A) on facts. Before us, reliance was also placed on the date of the decision in the case of Vivek Jain vs. Asst. CIT [2011] 337 ITR 74 (AP), wherein the Hon'ble Court, referring to a n....
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....pective of whether the period during which the property or part thereof was vacant during the relevant year precedes or follows the period during which it is let out. This is signified in s. 23(1)(c) by the use of the words "any part of the previous year". Yet, the deduction for vacancy allowance can be claimed only if the property or part thereof is let for at least a part of the relevant previous year, and the same remains vacant for the other part of the year. In other words, where the property or part thereof was not let at all during the entire previous year, no deduction for vacancy allowance is permissible. As held in Gujarat Ginning & Manufacturing Co. Ltd. vs. CIT [1994] 205 ITR 314, 322-23 (Guj), the vacancy allowance cannot be claimed if the property was not let out at all during the previous year concerned. Such view has also been taken in Ram Pershad & Sons vs. CIT [1995] 81 Taxman 332, 334 (Del). Allowance for vacancy is to be deducted from the annual value of the property or part thereof in proportion to and to the extent of the period of vacancy. For the purpose of deduction under section 24(1)(ix), the amount determined in accordance with section 23 would be the an....
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....ity arises if it is borne in mind that the period of vacancy cannot exceed the period for which the property was let out (para 15). Would a property, one may ask, be given - at least ordinarily, on rent, which involves delivery of possession as well as investment of time and resources by the tenant, for a single day? The argument advanced is both hypothetical and presumptuous. Clause (c) of section 23(1), the Hon'ble Court goes on to clarify, was not inserted to take out from its ambit properties held by the owner for self-occupation in-as-much as section 23(2)(a) provides for such an eventuality. It is only to mitigate the hardship faced by an assessee, and as clause (b) does not deal with the contingency where the property is let and, because of vacancy, the actual rent received or receivable by the owner is less than the sum referred to in clause (a), that the clause was inserted. In cases where the property has not been let out at all during the previous year, there is no question of any vacancy allowance being provided thereto under section 23(1)(c) (para 16). Thus, only such properties which are occupied by the owner for residence, which are vacant on account of circumstances....
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....hout its benefit, only a property which is let could be vacant. The concept of vacancy, it stands explained, is intrinsically linked with the state of actual letting, or only applicable to a property that is imbued with the character or condition of being let. That is, 'vacancy' cannot exist or be considered independent of or de hors the 'letting'. Further on, section 23(1)(c) provides for a further qualification qua a property that is actually let, as contemplated u/s. 23(1)(b), yielding benefit to the owner, though, whose AV, for the purpose of section 23, may have to be computed by factoring in the fact of vacancy during the year, i.e., where it has the effect of reducing the rent below fair rent of the house property, which would (fair rent) be applicable even if the property is not let. In the facts of that case the property had not been let at any time since the assumption of its ownership, so that it could not be regarded as a property let. In sum 6. The basis of the charge to income tax in respect of a house property, not occupied by its' owner for the purpose of business or profession carried on by him, is its' annual value; its income potential, as reflected in its'....
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....all in the matter. The same have perhaps been used to emphasize the deemed letting where some benefit is derived by the owner in respect of his house property, whether self-occupied or not, and also of such deeming in respect of all such residential houses, save one (sections 23(2), 23(3) and 23(4)). There is also no anomaly in the provision, which is sought to be pleaded with reference to the word "whole" occurring in s. 23(1)(c). The same stands answered in Vivek Jain (supra) (also refer para 5.2). The same is in fact with reference to the quantum of deduction in AV, if any, while the words "where the property is let" refer to the qualifying condition for vacancy remission. Vacancy as a concept has, as afore12 noted, a symbiotic relationship with the notion of letting in-as-much as it draws upon and is inextricably linked thereto, devoid of any meaning in the absence thereof, implying only an actual letting. Both, the scheme of the Act as well as the language of the provision are abundantly plain and clear. There is no scope for the application of the principle of causus omissus, even as observed by the Hon'ble Court in Vivek Jain (supra). Taxing statutes are to be strictly const....