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2008 (4) TMI 530 - AT - Income TaxDeemed income under House Property - Allowability of vacancy allowance u/s 24(1)(ix) - Determining the ALV of residential house lying vacant during the year u/s 23 - HELD THAT - On perusal of the Section 24(ix) it is clear that it has two limbs If we apply the second limb of the provision then it will be found that it applies in a case where the assessee is owner of a larger property comprising of various parts. For attracting the second limb two conditions are to be satisfied (1)That the assessee is owner of a property comprising of various parts; and (2)That out of the various parts one or some part should be vacant. If these two conditions are satisfied then vacancy remission is to be allowed as per the provisions contained in section 24(1)( ix ) i.e. proportionate to the period during which such part is wholly unoccupied. The issue relating to the construction of the term property is let came before the Mumbai Bench of the ITAT in the case of Premsudha Exports (P.) Ltd. 2007 (5) TMI 348 - ITAT MUMBAI . In that case the assessee-company held property for the purpose of letting out. However the property could not be let out despite efforts and the property remained vacant throughout the year. As the object of the company was to acquire the property from letting out and further since all efforts were made to let it out the Bench found that the property was to be held as let out property. According to the Bench therefore the annual letting value of the property was to be worked out as per section 23(1)( c ) and as per this clause the rent received or receivable during the year was nil and as such the same is to be taken as annual value of the property. Thus according to the Bench expression property is let appearing in clause ( c ) of section 23(1) does not mean that the property should have been actually let in the relevant previous year or any time during the relevant previous year. The ITAT Delhi Bench I in the case of Kamal Mishra v. ITO 2007 (8) TMI 484 - ITAT DELHI has also considered a similar case. In that case also the assessee was owning certain property which was let out till December 2000 and after that the property was lying vacant till April 2002. Hence the property was vacant. The assessee computed annual letting value of the property as per provisions of section 23(1)( c ). The issue was as to whether the assessee was justified in adopting the ALV of the property as per the provisions of section 23(1)( c ). The Bench upheld the claim of the assessee. In view of the above two authorities and on the facts and circumstances of this case the claim of the assessee is maintainable. In the instant case there is no dispute that the building held by the assessee was one building having common in and exit points and several common facilities and services. Thus in our considered opinion the vacancy remission claimed by the under section 24(1)(ix) is to be allowed. Therefore the order of the learned CIT(Appeals) on the issue in question is set aside and the matter is decided in favour of the assessee. Accordingly grounds taken by the assessee are allowed. In the result assessee s appeal is allowed.
Issues Involved:
1. Allowability of vacancy allowance under section 24(1)(ix) of the Income-tax Act, 1961. 2. Determination of annual value for vacant parts of the property under section 23 of the Income-tax Act. Detailed Analysis: Issue 1: Allowability of Vacancy Allowance under Section 24(1)(ix) The core issue revolves around whether the assessee is entitled to claim a vacancy allowance for portions of its commercial property, "Gateway Tower," which remained vacant during the assessment year 2001-02. The assessee claimed a vacancy allowance of Rs. 2,39,65,997 under section 24(1)(ix) of the Income-tax Act, 1961, for the vacant portions of the property. The Assessing Officer (AO) disallowed this claim, arguing that the vacant portions were independent and could be let out separately, thus not qualifying for the vacancy allowance. The AO relied on the Kerala High Court's decision in the case of CIT v. Joy P. Jacob, which held that independent portions of a building should be considered separately for income from house property. The CIT(Appeals) upheld the AO's decision, leading to the assessee's appeal to the ITAT. The ITAT examined the provisions of section 24(1)(ix), which allows deduction for the proportionate annual value of the property that remained wholly unoccupied during the year. The Tribunal noted that the building was a single commercial entity with common facilities and services, making it a compact unit. The ITAT referenced the Mumbai Bench's decision in Premsudha Exports (P.) Ltd. v. Asstt. CIT, which interpreted "property is let" to include properties intended for letting out, even if they remained vacant. Issue 2: Determination of Annual Value for Vacant Parts of the Property under Section 23 The second issue pertains to the determination of the annual value for the vacant parts of the property. The assessee computed the annual letting value (ALV) of the property, including the vacant portions, and claimed the vacancy allowance accordingly. The AO, however, assessed the ALV of the vacant portions on a notional basis, disallowing the vacancy allowance for the parts that remained vacant throughout the year. The ITAT analyzed the provisions of section 23(1)(c), which was amended effective from 1-4-2003, and the old provision of section 24(1)(ix) applicable for the assessment year 2001-02. The Tribunal concluded that both provisions contain the term "property is let," which should be interpreted consistently. The ITAT cited the Mumbai Bench's decision in Premsudha Exports, which held that the term "property is let" includes properties intended for letting out, regardless of whether they were actually let out during the relevant year. Conclusion: The ITAT found that the assessee's building was a single commercial entity with common facilities, and the vacant portions were part of this larger property. The Tribunal held that the assessee was entitled to the vacancy allowance under section 24(1)(ix) for the vacant portions of the building. The ITAT set aside the order of the CIT(Appeals) and allowed the assessee's appeal, granting the claimed vacancy allowance of Rs. 1,14,31,200. The Tribunal emphasized that the interpretation of "property is let" should include properties held for letting out, aligning with the decisions in Premsudha Exports and Kamal Mishra v. ITO. Result: The assessee's appeal was allowed, and the claimed vacancy allowance was granted.
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