TaxTMI 
TaxTMI 
2026 (7) TMI 939
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....ies lying vacant throughout the year. 1.1) On the facts and in the circumstances of the case, the learned CIT (A) Ought to have held that the deemed rental income of properties lying vacant throughout the year was nil by virtue of section 23(1)(c). 1.2) On the facts and in the circumstances of the case, the learned CIT (A) erred in confirming the addition of Rs. 59,28,277 on the ground that the assessee has not demonstrated that the assessee had made efforts to let out the property during the year and despite its efforts the property remained vacant for the whole of the year. 1.3) On the facts and in the circumstances of the case, the learned CIT (A) overlooked the fact that the assessee had made efforts during the year to let out the properties and all the properties were actually let out in the next financial year. 2) Without prejudice to the above grounds of appeal, the learned CIT(A) erred on not disposing of ground of appeal no. 4 raised before him, regarding allowing standard deduction of 30% w.r.to addition of Rs. 59,28,277. 2.1) The learned CIT (A) ought to have held that the assessee was entitled to deduction of 30% w.r. to addi....
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....s for letting out the properties under consideration. Assessee also placed on record Retainer Services Agreement entered into by it with broking companies. One such agreement is placed in the paper book, dated 14.01.2011 with Cushman and Wakefield India Pvt. Ltd., whereby this company was appointed as an exclusive marketing agent to act as its agent for the software technology park at Binarius to secure potential users on a leave and license/lease basis. It is worth noting a fact that Cushman and Wakefield is engaged in the business of providing real estate solutions including advisory and project marketing services for leasing of office space. 4. On the basis of this submission made by the assessee as well as by taking into consideration the judicial pronouncements relied upon by the assessee as noted above, ld. CIT(A) in para-8.1.6 observed that provisions contained in section 23(1)(c) provides for properties which are held for letting out during the relevant year, coupled with efforts made for letting it out. According to him, both the conditions have to be satisfied for invoking the provisions to section 23(1)(c). He thus, noted that the property held for letting out for the....
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.... sec. 23(1)(C) of the taken annual value of such at as person was accepted In A.Y. 2013-14 and no addition was made. Addition made in A.Y. 2012-13 was in respect of properties which have been sold in November 2011." 5.1. For this assessee also furnished a tabulated detail, giving entire factual matrix for the property on its status of having let out or remaining vacant. The said tabulation is extracted below for ready reference: 5.2. From the above chart, it was pointed out that premise at Sr. No.9, which was vacant from the preceding year was let out during the year and thus, it is a continuous exercise at the end of the assessee for making all the efforts of letting the properties to earn rental income. Ld. Counsel further submitted that the properties under consideration which were vacant had been subsequently let out, as detailed below: a. Podium floor 10,000 sq. ft. let out from 01.07.2017 b. Fourth Floor 44,650 sq. ft. 50% let out from 01.11.2014 and balance 50% let out from 01.02.2015 c. Sixth Floor 01/09/14 27,500 sq. ft. let out from 01.12.2013 and further 10,000 sq. ft. let out from 01.09.2014 d. Ninth Floor 37,500 sq. ft. let out....
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....vable 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 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) ....
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....xisting provision of the said section provides for the determination of annual value of a property in certain circumstances including where the property is let, or is self-occupied, or is vacant, or is partially let, or is let for part of the year. The 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 ret....
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....h the situation where the property is let and remains vacant during the year. Vacancy referred in the clause envisages two scenarios, viz. 'vacant during the whole of the year' or vacant during any part of the year'. Thus, this clause by referring to the said two scenarios addresses 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 acco....
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....enotes a temporary break for a period a property is let out. In the present case, factual position demonstrates that these eight units were let out in the immediately preceding assessment year or in the one before immediately preceding year. In other words, some of these eight units were let out 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 l....
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.... used in the said section has to be interpreted as intended to be let or available to let. To put it differently, the requirement that "house is actually let" during the year is not to be taken as a pre-requisite for bringing the case of assessee within the sweep of section 23(2)(c), as long as property is let in 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 t....
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....ed that "clause (c) encompasses cases where a property is let out for more than a year in which event alone, would the question of it being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for whole of a previous year, bringing it within the ambit of clause (c) of Section 23(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 sa....
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....to which it exercises its jurisdiction. It has further been held that the decision of the High Court does not extend beyond its territorial jurisdiction. The relevant discussion on the binding nature or otherwise of the judgment of non-jurisdictional High Court has been made in para (d) as under:- "(d) The decision of one High Court is neither 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 ....
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....e Hon'ble High Court in the concluding Para 14 & 15 had observed that though the benefit of computing the 'ALV' u/s. 23(1)(c) could not be extended to a case where the property was not let out at all, however the same would duly encompass and take within its sweep cases where the property had remained let out for two or more years, but had remained vacant 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 ha....
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....er the present factual matrix and circumstances and respectfully following the judicial precedent in the case of Classic Mall Development Company (supra), the annual lettable value of the properties which remained vacant for whole of the year as determined by assessee at nil is accepted in terms of section 23(1)(c). Accordingly, addition made by the ld. Assessing Officer in this regard is deleted. Ground no.1 raised by the assessee is allowed. 8. Ground No.2 raised by the assessee is in the alternative, without prejudice which is rendered infructuous and therefore, needs no separate adjudication. 9. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 24 March, 2026 ============= Document 1 FINANCIAL YEAR : 2013 - 2014 ASSESSMENT YEAR : 2014- 2015 18. NO Address of the property Name of the tenant Location Chargeable Area in HR Grow Annual Value of Property Bart Received Period of Rent Received 01 IT Park budding called "BINARIUS" consisting of Lower Basement, Upper Bassement, entry level Podium plus 10 Moors admeasuring about 4,53,087 sq.ft which indudes lobby, It, AHU and electrical rooms. Care Management International P. ....