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2019 (12) TMI 761 - AT - Income TaxIncome from house property - Computation of ALV of the office premises at Balaji Bhavan when the premises were as lying vacant - HELD THAT - As 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. 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) by the assessee. Ground of appeal No. 1 and 2 of the assessee are allowed and the determination of the annual value‟ of the property under consideration viz. Unit No. 401 425 of project Balaji Bhavan by the A.O by taking recourse to Sec. 23(1)(a), which thereafter was sustained by the CIT(A), is vacated.
Issues Involved:
1. Computation of Annual Letting Value (ALV) of vacant office premises. 2. Application of Section 23(1)(a) vs. Section 23(1)(c) of the Income Tax Act. Detailed Analysis: 1. Computation of Annual Letting Value (ALV) of Vacant Office Premises: The primary issue raised by the assessee in this appeal was the confirmation of the action of the Assessing Officer (AO) by the Commissioner of Income Tax (Appeals) [CIT(A)] in computing the ALV of the office premises at Balaji Bhavan at ?99,21,226/- despite the premises being vacant. The AO observed that the assessee had made significant investments in house properties which were not categorized as stock-in-trade. Consequently, a show-cause notice was issued to the assessee to explain why the provisions of Section 23 should not be invoked. The assessee responded that the properties were vacant for the entire year as the tenant had vacated the premises, and no rent was received. The assessee argued that under Section 23(1)(a) of the Act, the annual value should be taken as NIL since the property was vacant throughout the year. However, the AO did not accept this explanation and calculated the deemed rent of ?90,19,296/-, making the addition accordingly. 2. Application of Section 23(1)(a) vs. Section 23(1)(c) of the Income Tax Act: In the appellate proceedings, the CIT(A) dismissed the appeal of the assessee, referencing earlier decisions for A.Y. 2011-12 and 2012-13, which were decided against the assessee based on the Hon'ble Andhra Pradesh High Court's decision in Vivek Jain vs. ACIT. However, the assessee's representative submitted that the issue was covered by the decision of the Coordinate Bench in the assessee’s own case for A.Y. 2011-12 and 2012-13, where the issue was decided in favor of the assessee. Upon hearing both parties and reviewing the material on record, it was observed that the issue, under identical facts, had been decided in favor of the assessee and against the Revenue in previous cases. The Tribunal noted that the property was let out previously and remained vacant after the tenant vacated. It was not under self-occupation by the assessee. The Tribunal referred to several cases, including Vikas Keshav Garud vs. ITO, ACIT vs. Dr. Prabha Sanghi, Premsudha Exports (P) Ltd. vs. ACIT, and Informed Technologies India Ltd. vs. DCIT, which supported the assessee's position. The Tribunal emphasized that the term "Property is let" in Section 23(1)(c) does not require the property to be actually let out during the year. As long as the property was let in the earlier period and remained vacant for the whole year under consideration, and was not under self-occupation, the ALV should be determined under Section 23(1)(c) of the Act. The Tribunal concluded that the assessee had rightly determined the ALV at NIL under Section 23(1)(c). The CIT(A) had misconstrued the judgment of the Hon'ble Andhra Pradesh High Court in Vivek Jain vs. ACIT, which actually supported the assessee's case where the property had been let out previously but remained vacant during the year under consideration. Conclusion: The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition resulting from the estimation of deemed annual letting value in respect of the vacant properties. The appeal of the assessee was allowed, and the determination of the ALV by the AO, which was sustained by the CIT(A), was vacated. Result: The appeal of the assessee was allowed.
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