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Interpretation of vacancy allowance under section 24(1)(ix) of the Income Tax Act for properties vacant throughout the year. Analysis: The judgment by the Appellate Tribunal ITAT Cochin involved a dispute regarding the availability of vacancy allowance for properties vacant throughout the year under section 24(1)(ix) of the Income Tax Act. The Income Tax Officer (ITO) initially disallowed the vacancy allowance, calculating the income from the properties at Rs. 3,480, as the properties were vacant throughout the year. However, the Additional Commissioner of Income Tax (AAC) disagreed with the ITO's decision and deleted the addition, leading to the Department appealing the matter before the Tribunal. The Department argued, citing a decision of the Calcutta High Court, that vacancy allowance would only apply if the property was vacant for part of the year, regardless of its repair condition affecting the annual letting value. The Tribunal, however, distinguished the Calcutta High Court's decision, emphasizing the requirement that the property must be "let and was vacant during a part of the year" for the vacancy allowance to apply. The Tribunal noted that if the property is intended to be rented out but remains vacant due to tenant unavailability, the Calcutta case's ratio would not be applicable. The Tribunal analyzed the clause of section 24(1)(ix) meticulously, considering the plain grammatical interpretation advocated by the Department. However, the Tribunal highlighted the potential incongruous results of such an interpretation, where a property vacant for 364 days with one day of occupation would qualify for the deduction, while a property vacant for the entire year would not. The Tribunal concluded that such an interpretation would lead to absurd outcomes and found no legislative intent to deprive the allowance based on such a narrow construction. Referring to the principle of interpretation to avoid absurd or anomalous results, the Tribunal cited a decision of the Bombay High Court to support its reasoning. The Tribunal concluded that the assessee should be entitled to the vacancy allowance under section 24(1)(ix) even if the property remained vacant throughout the year. Ultimately, the appeals were dismissed, affirming the assessee's entitlement to the vacancy allowance despite the properties being vacant for the entire year.
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