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2011 (12) TMI 228 - AT - Income TaxDetermination of Annual Letting value (ALV) of property vacant during the year assessee declared NIL value in pursuance of Section 23(1)(c) Revenue contending that since properties in question were earlier let out hence ALV was to be determined as per section 23(1)(a) Held that - If a property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of clause (c) of section 23(1). Thus, rent received or receivable from the property in question during the year was nil, the same was to be taken as the annual value of the property. Therefore, order of CIT(A) is set aside and addition made is deleted Decided in favor of assessee.
Issues Involved:
1. Assessment of Annual Letting Value (ALV) of vacant properties. 2. Charging of interest under sections 234B and 234C of the Income Tax Act. Detailed Analysis: 1. Assessment of Annual Letting Value (ALV) of Vacant Properties: The primary issue in this case revolves around the assessment of the ALV of two properties (Flat No. 101 and 102, Vastu Apartments, Mumbai, and property at Andheri East, Mumbai) which were vacant during the year. The assessee contended that these properties should have a NIL ALV under section 23(1)(c) of the Income Tax Act, as they were vacant for the whole year. The Assessing Officer (AO) disagreed, noting that these properties had been taxed in earlier years and had yielded income. The AO argued that the income from house property should be taxed on an actual rent received/receivable basis under sections 22 and 23 of the Act. The AO adopted a notional value of 70% on the rent received for the Assessment Year 2008-09 and made an addition of Rs. 6,95,555 for the year under consideration. The learned Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the assessee could claim exemption for one self-occupied property but not for others. The CIT(A) held that the ALV of the other properties should be determined under section 23(1)(a) of the Act, as per section 23(4)(b). Upon appeal, the assessee argued that the properties remained vacant despite efforts to let them out, and thus, the ALV should be NIL under section 23(1)(c). The assessee cited the ITAT Lucknow Bench decision in the case of Smt. Indu Chandra Vs. DCIT, which supported the view that properties intended for letting but remaining vacant should have a NIL ALV. The Tribunal considered the submissions and noted that the properties were indeed vacant and efforts were made to let them out. The Tribunal referenced the ITAT Mumbai Bench decision in Premsudha Exports (P) Ltd. Vs. ACIT, which clarified that the intention to let out the property and efforts made to do so are sufficient to invoke section 23(1)(c), even if the property was not actually let out in the relevant year. The Tribunal concluded that since the properties were held with the intention to let out and remained vacant, the ALV should be NIL under section 23(1)(c). Thus, the addition made by the AO and sustained by the CIT(A) was deleted. 2. Charging of Interest Under Sections 234B and 234C: The second issue was the charging of interest under sections 234B and 234C of the Act. Both parties agreed that the charging of interest is consequential in nature. The Tribunal ordered accordingly, implying that the interest would be recalculated based on the revised income assessment. Conclusion: The appeal of the assessee was allowed, with the Tribunal setting aside the order of the CIT(A) and deleting the addition made by the AO. The ALV of the vacant properties was determined to be NIL under section 23(1)(c), and the interest under sections 234B and 234C was to be recalculated consequentially.
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