2021 (10) TMI 956 - AT - Income Tax

Income from house property - ALV of property - addition in respect of three properties in Amritsar - these properties were vacant during the year and annual income should have been computed at nil under section 23(1)(c) of the Act - HELD THAT - . After carefully perusing the provisions of section 22, section 23(1)(a) and section 23(1)(c) of the Act, we are of the considered view that the ALV of the property, which could not be let out during the year, would be nil in accordance with the provisions of section 23(1)(c) of the Act. The assessee is entitled for the vacancy of allowance in respect of the said properties and armed length price has to be assessed as rent received or receivable and not the amount for which the property is expected to be let out from year to year is to be considered for the purpose of assessing the ALV. In the present case since the properties have not been let out at all during the year, therefore the ALV has to be taken as nil. See M/S. METAOXIDE PVT. LTD. 2018 (4) TMI 1513 - ITAT MUMBAI - thus we direct the AO to delete the addition made in respect of three vacant properties at Amritsar. Ground No. 1 is allowed. Addition of agricultural income declared by the assessee - In the A.Y. 2011-12, the assessee has declared income of ₹ 7,63,472/- and the AO has treated the 50% as agricultural income of the assessee and 50% was added to the income of the assessee and taxed accordingly - HELD THAT - We find merit in the contention of the Ld. A.R. after perusing the assessment order for A.Y. 2011-12 wherein the AO has treated the agricultural income on the same basis. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to treat 50% as agricultural income and to treat the remaining 50% as regular taxable income. Accordingly, ground is partly allowed.

Summary

Issues:
1. Addition of rental income for vacant properties in Amritsar.
2. Addition of agricultural income declared by the assessee.

Issue 1: Addition of rental income for vacant properties in Amritsar
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition of rental income for three vacant properties in Amritsar. The Assessing Officer (AO) added the deemed rental value of the properties to the income of the assessee, as the properties were vacant during the year. The assessee claimed vacancy allowance under section 23(1)(c) of the Act, but both the AO and CIT(A) upheld the addition. The ITAT Mumbai, after considering the provisions of section 22, section 23(1)(a), and section 23(1)(c) of the Act, concluded that the annual letting value (ALV) of the vacant properties should be nil as per section 23(1)(c). Referring to a previous tribunal decision, the ITAT held that the ALV should be considered as nil when the properties were not let out during the year. Therefore, the ITAT directed the AO to delete the addition of the rental income for the vacant properties in Amritsar.

Issue 2: Addition of agricultural income declared by the assessee
The AO added the entire agricultural income declared by the assessee as the bills and vouchers to substantiate the income were not provided. The CIT(A) upheld the addition, stating that the 7/12 extracts of agricultural land and government subsidy proofs were insufficient evidence of agricultural income. The ITAT noted that the assessee owned agricultural land and had declared similar income in a previous assessment year. Considering the consistency in declaration and treatment of agricultural income, the ITAT directed the AO to treat 50% of the declared agricultural income as agricultural income and the remaining 50% as regular taxable income. Therefore, the ITAT partly allowed the appeal of the assessee in relation to the addition of agricultural income.

In conclusion, the ITAT Mumbai ruled in favor of the assessee by directing the AO to delete the addition of rental income for vacant properties in Amritsar and by allowing 50% of the declared agricultural income to be treated as agricultural income.