2018 (12) TMI 407 - AT - Income Tax

Addition as income from house property on a notional basis - Annual value how determined - Held that - The assessee has already elected one house situated at Saraswati Sadan as self occupied property, the value of which has been taken as Nil. Therefore, in terms of Clause (4)(b), the annual value of the other properties are to be determined as per clause (1) which envisages that the annual value of the same are to be considered as the sum for which the property might reasonably be expected to let out from year to year. We have already noted that the properties or any part thereof, as listed at serial number 4 & 5, were never let out by the assessee in any of the preceding year or during impugned AY. Therefore, the sub-clauses (1)(b) or (1)(c) becomes inapplicable to the same since both these applies in situation where property or any part thereof is let out, which is not the case here. The expression let as used by both these sub-clauses do not include mere intention to let out but the actual let out of the property keeping in view the doctrine of literal interpretation. If the annual value of the same are taken as nil in terms of sub-clause (1)(c) as contended by AR, then the provisions of clause (4) shall become otiose and shall have no applicability at all in any situation, which do not appear to be the intention of the legislatures. Estimation of annual value @8.5% appears to be without any basis since the annual value has to be determined as the value for the property might reasonably be expected to let from year to year. Therefore, AO is directed to re-compute the same in terms of the statutory provisions - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against addition of income from house property on a notional basis for Assessment Year 2009-10.

Analysis:
1. The appeal contested the addition of income from house property amounting to ?21,18,213 as determined by the Assessing Officer. The assessee, a Structural Engineer and director of a family-owned company, challenged the addition made under the head Income from House Property. The delay in filing the appeal was condoned, and the case proceeded based on its merits.

2. The Assessing Officer computed the Annual Value of various properties owned by the assessee, including those claimed to be under self-occupation and others under joint ownership. The Assessing Officer estimated the Annual Value of all properties and added ?21.18 Lacs to the assessee's income. The assessee defended the stand, arguing that certain properties were not habitable or were used for business purposes. The Departmental Representative contended that most properties should be considered as deemed to be let out.

3. The Tribunal noted that certain properties were under construction, not habitable, or used for agricultural or business purposes. The matter of notional rental value against specific properties was remanded back to the Assessing Officer for re-adjudication based on the evidence submitted. The Tribunal directed a re-evaluation of the estimation of Annual Value for properties not let out during the impugned Assessment Year, emphasizing the statutory provisions under Section 23 of the Income Tax Act.

4. The Tribunal considered the provisions of Section 23 regarding the determination of the Annual Value of properties and the applicability of vacancy allowance. It was highlighted that the properties not let out by the assessee during the impugned year were eligible for vacancy allowance as per the Tribunal's decision in a similar case. The Tribunal directed the Assessing Officer to re-compute the Annual Value based on the statutory provisions and documentary evidence to be provided by the assessee.

5. The appeal was partly allowed for statistical purposes, and the Assessing Officer was directed to re-evaluate the Annual Value of the properties in accordance with the statutory provisions. The assessee was instructed to provide necessary documentation to support the re-computation. The order was pronounced on 5th December 2018.