TaxTMI 
TaxTMI 
2022 (6) TMI 1524
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....n ITA No.2695/PUN/2016 has raised the following grounds of appeal: "In the fact and the circumstances of case, and in law, the learned Commissioner of Income-tax (Appeals)-5, Pune, erred in confirming the additions and observations made by the assessing officer in the assessment order in respect of following points: 1. In respect of addition of Rs.1,10,87,608 under the head "income from house property;: a) In confirming the addition of Rs.1,10,87,608 (including income of minor children clubbed u/s 64(1A)) as deemed income from house property. b) In not appreciating that the assessee has taken reasonable efforts to let out the property and hence by applying the provisions of section 23(1)(c) r.w.s 23(1)(a) the annual value of the property should be taken at 'Nil'. 2. Without prejudice to above, in confirming the computation of annual value @ Rs.52 per sq. feet p.m. and not as per the annual ratable valuable computed by the Pune Municipal Corporation. 3. The appellant craves leave to add, modify or withdraw any of the grounds of appeal at the time of hearing. ITA No.2695/PUN/2016 for A.Y. 2013-14: 2. Brief Facts of the case ....
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....) In confirming the addition of Rs. 1,10,87,608 (including income of minor children clubbed u/s 64(1A) as deemed income from house property b) In not appreciating that the assessee has taken reasonable efforts to let out the property and hence by applying the provisions of Section 23(1)(c) r.w.s. 23(1)(a) the annual value of the property should be taken at 'Nil'. 4.1 It is observed from the assessment order para 11 that the assessee is owner of more than one house property. As per the assessment order, the assessee owns following properties: Sr. No. Description of the property Status 1. Hauz Khas, New Delhi Residential 2. Amrit Nagar, New Delhi Commercial 3. Amrit Nagar, New Delhi Commercial 4. One floor Building owned by Blackpool Realty Pvt. Ltd., Pune. Commercial Assessee has a right in one floor of the building owned by Blackpool Realty Pvt. Ltd. as per the Article of Association of the company. The said building was completed on July, 2011. Regarding the property in the building owned by Blackpool Realty Pvt. Ltd, the assessee had made following submission before the CIT(A) which is part of the paper book filed before....
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....ssee was not rented out. Assessee has mainly relied on the decision of the Coordinate Bench of the Pune Tribunal in the case of Vikash Keshav Garud Vs ITO ITA No. 747/PN/2014 for the A.Y. 2009-10 dated 22/03/2016and the decision of the Coordinate Bench of the ITAT Mumbai in the case of Premsuda Export (P) Ltd. Vs. ACIT CC, Mumbai reported in (2008) 110 ITD 158 (Mum)/(2008) 110 TTJ 89. 4.3 However, the Hon'ble Andhra Pradesh High Court in the case of Vivek Jain Vs ACIT (2011) 337 ITR 74 (Andhra Pradesh) has held as under: Quote "4. The Income-tax Appellate Tribunal observed that it is only in cases covered by (a) and (b) that the annual let out value is to be taken as nil ; even in these two cases, as provided in section 23(4), nil value could be taken only in respect of one property if the properties in those two cases was more than one ; in the rest of the cases, i.e., those mentioned in (c) to (e), and the additional properties in (a) and ( b), the value had to be determined either notionally or actually, as the case may be, and the higher of the two should prevail; it was necessary at the first instance to determine the notional value in respect of any property wheth....
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....wever, such portion of the property, as the assessee may occupy for the purpose of his business or profession the profits of which are chargeable to income-tax, is not to be charged to income under the head "Income from house property". As income from house property is charged to tax on the annual value of the property, consisting of a building or the land appurtenant thereto, section 23 provides for the manner in which the annual value of the property is to be determined for the purpose of section 22 of the Act. Section 23(1) creates a legal fiction in that, for the purpose of section 22, the annual value of the property is to be deemed to be the sum mentioned in any one of clauses (a ) to (c) thereof. 6. Section 23(1) deals with three distinct situations enumerated in clauses (a) to (c) thereunder. Under clause (a), the annual value of the property is deemed to be the sum for which the property may reasonably be expected to let from year to year. Under clause (b), where the property, or any part thereof, 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....
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....as to provide for determination of annual value in certain circumstances specified in the proposed new section after allowing deductions in computing the annual value on account of vacancy and unrealized rent. This amendment will take effect from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 8. The effect of substitution of section 23 has been elaborately dealt with in Departmental Circular No. 14 of 2001, the relevant portion of which reads as under [2001] 252 ITR (St.) 65, 89. : "29.2. The substituted section 23 retains the existing concept of annual value as being the sum for which the property might reasonably be expected to let from year to year, i.e., annual letting value (ALV). However, in case of let out property, the concept of 'annual rent' has been removed. The new section provides that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, b....
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....or to its amendment, even in such cases it was the sum referred to in clause (a) which was to be taken as the annual value of the property. 11. In order to attract section 23(l)(c), the following requirements must be fulfilled (i) the property, or any part thereof, must be let; and (ii) it should have been vacant during the whole or any part of the previous year ; and (iii) owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause (a). It is only if these three conditions are satisfied would clause (c) of section 23(1) apply in which event the amount received or receivable, in terms of clause (c) of section 23(1), shall be deemed to be the annual value of the property. Clause (c) does not apply to situations where the property has either not been let out at all during the previous year or, even if let out, was not vacant during the whole or any part of the previous year. Under the Explanation to section 23(1), for the purposes of clause (b) or (c), the amount actually received or receivable by the owner shall not include the amount of rent which the owner cannot realize. Self-occupation by....
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....64 ; Bethlehem Hospital In re [1875] L.R. 19 Eq 457; A.V. Fernandez v. State of Kerala 1957 SCR 837 ; IRC v. Bladnoch Distillery Co. Ltd. [1948] 1 All ER 616 ; CST v. Modi Sugar Mills Ltd. [1961] 12 STC 182 (SC); CIT v. V. MR. P. Firm, Muar, AIR 1965 SC 1216 ; CED v. Kantilal Trikamlal [1976] 105 ITR 92 (SC); Aphali Pharmaceuticals Ltd. v. State of Maharashtra [1989] 4 SCC 378 ; Baidyanath Ayurved Bhawan (P.) Ltd. v. Excise Commissioner AIR 1971 SC 378. The question as to what is covered must be found out from the language according to its natural meaning fairly and squarely read. IRC v. Duke of Westminster [1936] AC 1 (HL), A.V. Fernandez's case (supra) Saraswati Sugar Mills v. Haryana State Board [1992] 1 SCC 418). The meaning and intention of a statute must be collected from the plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to that is just or expedient. The expressed intention must guide the court. CIT v. Shahzada Nand & Sons [1966] 60 ITR 392 (SC). The Legislature does not waste its words. Ordinary, a grammatical meaning is to be assigned to the words used while interpreting a provision to honour the rule....
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....hat is there in the statute by way of a supposed intention of the Legislature. Union of India v. Elphinstone Spg. &Wvg. Co. Ltd. [2001] 4 SCC 139. The legislative casus omissus cannot be supplied by judicial interpretative process. Maruti Wire Industries (P.) Ltd. v. STO [2001] 122 STC 410 (SC), Govind Singh's case (supra). ] 14. The contention that, as clause (c) provides for an eventuality where a property can be vacant during the whole of the relevant previous year, both situations, i.e., "property is let" and "property is vacant for the whole of the relevant previous year" cannot coexist does not merit acceptance. Clause (c) encompasses cases where a property is; let out for more than a year in which event alone would the question of if being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for the whole of a previous year bringing it within the ambit of clause (c) of section 23(1) of the Act. 15. The contention that, if the owner had let out the property even for a day, it would acquire the status of "let out property" for the purpose of clause (c) for the entire life of the property even with....
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....tion 23(3)(a), not actually let during the whole or part of the previous year. Clause (c) was not inserted to take out from its ambit properties held by the owner for self- occupation inasmuch 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), was clause (c) inserted. In cases where the property has not been let out at all, during the previous year under consideration, there is no question of any vacancy allowance being provided thereto under section 23(l)(c) of the Act." Unquote 4.4. Thus, the Hon'ble High court in para 11 has categorically held as under: (i) the property, or any part thereof, must be let; and (ii) it should have been vacant during the whole or any part of the previous year ; and (iii) owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause (a). It is only if these three conditions are ....
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....ear and the property is also vacant cannot coexist has been considered by the Hon'ble A.P. High Court. Hon'ble A.P. High court has categorically stated that this contention does not merit acceptance. Thus, the said contention has been ruled out by the Hon'ble A.P. High Court. 4.9. Hon'ble Punjab & Haryana High Court in the case of Susham Singla Vs CIT [2016] 76 taxmann.com 349 (Punjab & Haryana) has held as under: "Thus, the annual value of the properties like the ones in the case in hand which are more than one, owned by the assessee and which admittedly remained vacant throughout the previous year would not be assessed under Section 23(1)(c) but under Section 23(1)(a). The annual value would, therefore, be determined notionally as done in the case in hand by the Assessing Officer and concurrently upheld by the Commissioner and the Tribunal." 4.10. Thus, there are two Hon'ble High Courts, i.e. Hon'ble A.P. High court and Hon'ble Punjab & Haryana High Court who have held that Section 23(1)(c) will not be applicable if the property was vacant throughout the previous year and it was not let out at all. As per judicial precedents, whenever jurisdictional High Court's de....
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....aid property shall be calculated as per provisions of Section 23(1)(a) of the Act and Section 23(1)(c) will not be applicable in the case of assessee for the said property. 5. Thus the Ground No.1 of the Appellant assessee is dismissed. 6. The Ground No.2 is regarding Annual lettable value (ALV) calculation. The AO has calculated ALV based on the fair rent for FY 2013-14. The AR submitted that the ALV shall be calculated based on Municipal lettable value. However, none of the Lower Authorities have discussed whether Rent Control Act is applicable to the relevant property or not!. The Hon'ble Bombay High Court in the case Kokilaben D.Ambani vs. CIT in I.T.Appeal No.625 of 2000 vide order dated 20th March, 2015 has held that "Accordingly, while determining the annual letting value in respect of properties which are subject to rent control legislation and in cases where the standard rent has not been fixed, the Assessing Officer shall determine the same in accordance with the relevant rent control legislation. If the fair rent is less than the standard rent, then it is the fair rent which shall be taken as annual letting value and not the standard rent. This will apply to both, ....