TaxTMI 
TaxTMI 
2025 (4) TMI 140
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....Brief facts of the case are that assessee filed its return of income on 28.03.2018 reporting total income at Rs. 9,70,79,650/-. Assessee is engaged in development of malls, entertainment centres, multiplexes, etc. Assessee completed construction of mall in Financial Year 2012-13 and started its mall operation from the month of January 2013. Assessee earned rental income by letting out units in the mall which is offered under the head "income from house property". Main objects as contained in Memorandum of Association of the assessee is reproduced hereunder which specifies objects for which the assessee is set up and includes letting out premises to tenants. "To acquire, develop, improve, build, sell, lease, manage, commercially exploit and otherwise deal in real estate, properties of all nature and description or any rights therein including land, buildings and other estate and realty including shopping malls, commercial and residential complexes." 2.2. In the year under consideration, out of 261 units of the mall, assessee had let out 253 units. For the let-out units, assessee offered rental income under the head "income from house property" which is not in dispute. Ld....
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....Let out Let out Let out Vacant Let out Let out Let out Let out UG 27 Let out Let out Let out Vacant Let out Let out Let out Let out UG 28 Let out Let out Let out Vacant Vacant Vacant Let out Let out UG 47A Let out Let cut Vacant Vacant Let out Let out Let out Let out S 50 Vacant Let out Vacant Vacant Let out Let out Let out Let out UG 22 Let out Let out Let out Vacant Let out Let out Let out Let out SF 48 Let out Let out Let out Vacant Let out Vacant Let out Let out 2.3. Despite elaborate submissions made by the assessee, ld. Assessing Officer proceeded to compute deemed rent for these eight units for the year under consideration and made an addition thereon by applying provisions u/s. 23(1)(a). The details of deemed rent for each of these units charged by the ld. Assessing Officer and added to the total income for the year, is tabulated below: Name of the unit Area of the unit Addition of Deemed Rent (Rs.) UG 15 789 2,65,104 UG 25 6,122 20,56,992 UG 26 UG27 UG 28....
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.... 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 which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.-For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. (2) Where the property consists of a house or part of a house which- (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to r....
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....annual value so determined is subject to the deductions allowable under section 24, including deductions on account of vacancy for any part of the year in respect of the property let, and on account of rent which cannot be realized. It is proposed to substitute the said section so 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." [emphasis supplied by us by underline] 5.2. The effect of substitution of section 23 has been elaborately dealt with in CBDT 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 n....
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....resses the requirement of allowing deduction in computing the annual value on account of vacancy and unrealized rent as mentioned in the notes on clauses relating to the amendment brought in to section 23(1) by the Finance Act, 2001 (already reproduced above). For this, actual rent, whether received or receivable by the owner is compared with the sum referred to in clause (a) and lesser of the two is adopted to bring the deeming provision to a logical conclusion to arrive at the annual value of the property. Sum referred to in clause (a) is the 'fair estimate' for the year which is compared with the 'actual rent'. In this clause, the condition is in reference to 'less' for adopting the actual rent vis-à-vis sum referred in clause (a). By having reference to 'less' in this clause while comparing it with sum referred in clause (a), the period for which rent is 'actually' not received or receivable on account of vacancy is factored in to arrive at the annual value. In a scenario where the property is 'vacant for part of the year', since 'actual rent' is to be taken into account, it will be only for that part of the year for which it is let. In comparison to this, the sum referr....
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....t in Assessment Year 2015-16, some of which remained vacant in Assessment Year 2015-16 continuing to be vacant in Assessment Year 2016-17. For certain units, they continued to be let out in Assessment Year 2015-16 but became vacant in Assessment Year 2016-17. The factual position also states that these units were let out in the subsequent Assessment Years, more particularly, with Assessment Year 2020-21 and thereafter when all the eight units were let out. This entire factual position is already tabulated above for ready reference. 6.1. To effectively apply the situation of "vacant for the whole year" as envisaged in section 23(1)(c), intent of letting is of vital importance which needs to be considered, at the end of the assessee. In order to understand the phrase "where the property is let" as occurring in section 23(1)(c), it is important to understand the existence of intent of letting which is evident from the main objects contained in its Memorandum of Association as reproduced above. Further, assessee has placed on record, letter of intent in the form of proposed offer cum terms of condition sheets of certain prospective tenants in respect of few of these eight units. Det....
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....n the earlier period and remains vacant for the whole year under consideration which assessee continues to hold the same for the purpose of letting out. 6.4. At this juncture, it is also important to note that provisions contained in section 23(1)(c) are a deeming provision and hence to be interpreted strictly in terms of legislative intent. Deeming provision contained in section 23(1)(c) has created a legal fiction to tax annual value of a property. In the present case of the assessee, it has neither received or accrued income either real or notional on the eight units which remained vacant for whole of the year. Taking into consideration the notes to clauses relating to amendment by Finance Act, 2001 and CBDT Circular (supra), it is culled out that legislative intent is to allow benefits of vacancy to the assessee for house property remaining vacant for whole of the year, unlike provisions contained in erstwhile section 24(2)(ix). This intent is factored in the provisions contained in section 23(1)(c). 7. From the perusal of page 13 of the impugned assessment order, we note that ld. Assessing Officer observed that case of the assessee is covered under the provisions of sect....
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....3(1) of the Act". Ld. Counsel on this, pointed out that Hon'ble Court envisioned the situation of only letting out for more than a year in clause (c) of the section 23(1) which is in contrast to the fact of the present case, where these units remained vacant for whole of the year though were let out in the preceding Assessment Years as well as in the subsequent years. 8.2. Ld. Counsel also submitted by referring to an article published in Ahmedabad Chartered Accountants Journal (March 2018 edition, page 646) wherein the author commented that "....the word 'let' and 'vacant, is mutually exclusive for owner. If it is vacant, no one can say it is let and if it is let, no one can say it is vacant. Since, vacancy and letting of property has to be seen from standpoint of the owner. Twin conditions as enumerated in judgement cannot be satisfied together. Why should owner bother for occupancy of tenant for the purpose which it is taken on rent. Once property is let out, owner is concerned with rent and not with occupancy." 8.3. Furthermore, he pointed out that on the conclusion by the Hon'ble High Court that the benefit u/s. 23(1)(c) cannot be extended to a case where the....
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....ither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only a persuasive effect. By no amount of stretching of the doctrine of stare decisis judgments of one High Court can be given the statues of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate Courts or Tribunals within their jurisdicti....
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....t for the whole of the previous year. Thus, we are of the considered view that now when in the case of the present assessee the property under consideration had remained let out for a period of 36 months, and thereafter though could not be let out and had remained vacant during whole of the year under consideration, but had never remained under the self occupation of the assessee, thus, no infirmity emerges from the computation of the 'annual value' of the said property under Sec. 23(1)(c) of the 'Act' by the assessee." 9. Similar issue had come up before the Coordinate Bench of ITAT, Mumbai, in ITA No. 241 and 242/Mum/2015, in the case of holding company of the assessee, i.e., Phoenix Mills Ltd. who is also engaged in the activity of operating and managing the commercial complex. In this case also, ld. Assessing Officer had made addition in respect of deemed rent on vacant units for Assessment Year 2009-10 and 2010-11. On this issue, the Coordinate Bench held that assessee is into the business of running commercial premises, i.e., a mall, units of which are provided on lease to various tenants. It is obvious that the assessee would have taken sufficient efforts to let out the p....