1984 (9) TMI 111 - AT - Income Tax

Summary

Issues:
1. Whether the addition of rental income of the first floor should be deleted.
2. Whether vacancy allowance is allowable when the property was not let out during the accounting year.

Analysis:
Issue 1: The Revenue challenged the deletion of the addition of Rs. 36,000 in rental income of the first floor of a property in New Delhi. The property was let out to a tenant who vacated, allowing the owner to rent out the ground floor and basement. The Income Tax Officer (ITO) assessed income from the ground floor and basement but estimated the annual letting value (ALV) of the vacant first floor at Rs. 43,000 without allowing any vacancy allowance. The ITO relied on a previous case where vacancy allowance was denied for a vacant property. The Commissioner of Income Tax (Appeals) accepted the assessee's claim, emphasizing that the property was let out in the preceding year, entitling the assessee to deduction under section 24(1)(ix). However, the Appellate Tribunal disagreed with this interpretation, following the Supreme Court's decision and other judicial opinions, and held that the assessee was not entitled to vacancy allowance for the first floor.

Issue 2: The Tribunal noted that the entire property was a composite unit let out to a tenant, and only a portion was vacant during the accounting year. The Tribunal directed the ITO to re-examine the issue of ALV for the entire building and consider necessary deductions, including vacancy allowance for the first floor. The Tribunal emphasized that the property was treated as a single unit for tax purposes, and the ITO needed to assess the situation correctly. The Tribunal allowed the Revenue's appeal for statistical purposes, indicating a procedural victory without altering the substantive decision on vacancy allowance.

In conclusion, the Tribunal upheld the denial of vacancy allowance for the first floor but directed a reassessment of the property's ALV and deductions, emphasizing the unitary nature of the property and the need for a comprehensive examination by the tax authorities.