2018 (9) TMI 1687 - AT - Income Tax

Computing the Annual Letting Value of the office premises at Nil u/s 23(1)(c) - Property remained vacant - applicability of Provisions of Sec. 23(1)(c) or determining the annual value by pressing into service Sec. 23(1)(a) - Held that - The usage of the term Property is let in Sec. 23(1)(c) had purposively been used to exclude those properties from the ambit of the clause which are held by the owner for self occupation purposes, because even though the annual value of oneself occupied property so chosen by the assessee is taken at Nil, however the annual value of all the remaining self occupied properties are to be determined in terms of Sec. 23(1)(a) of the Act . Thus, to our understanding, though the term Property is let used in Sec. 23(1)(c) is solely with the intent to avoid misuse of determination of the annual value of self occupied properties by the assesses by taking recourse to Sec. 23(1)(c), however, the same cannot be stretched beyond that and the annual value of a property which is let, but thereafter remains vacant for the whole year under consideration, though subject to the condition that the same is not put under self occupation of the assessee and is held for the purpose of letting out of the same, would continue to be determined u/s 23(1)(c). Assessee in the present case had rightly determined the annual value of the property at Nil by taking recourse to Sec. 23(1)(c) of the Act . As 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) of the Act by the assessee. - decided in favour of assessee.

Issues Involved:
1. Computation of Annual Letting Value (ALV) of the office premises under Section 23(1)(c) of the Act.
2. Adoption of deemed rent received for the vacant office premises.
3. Calculation of profit on the sale of office units under the head Short Term Capital Gain.

Detailed Analysis:

1. Computation of Annual Letting Value (ALV) of the office premises under Section 23(1)(c) of the Act:

The primary issue in both assessment years (A.Y 2011-12 and A.Y 2012-13) was whether the ALV of the property, which remained vacant throughout the year, should be computed as Nil under Section 23(1)(c) of the Act. The assessee contended that since the property was not let out during the year and remained vacant, the ALV should be Nil. The Assessing Officer (A.O.), however, determined the ALV based on Section 23(1)(a), arguing that the property was not actually let out during the year, thus Section 23(1)(c) was not applicable.

The Tribunal examined the legislative intent and judicial precedents, particularly focusing on the terms "property is let" and "house is actually let" used in the Act. The Tribunal concluded that the term "property is let" in Section 23(1)(c) does not necessitate actual letting during the year but includes properties intended for letting and remained vacant. The Tribunal relied on several coordinate bench decisions, such as Premsudha Exports (P) Ltd. Vs. ACIT, Informed Technologies India Ltd. Vs. DCIT, and others, which supported the assessee's interpretation. Therefore, the Tribunal held that the ALV should be computed as Nil under Section 23(1)(c) for both years.

2. Adoption of deemed rent received for the vacant office premises:

In A.Y 2011-12, the A.O. adopted a deemed rent of ?81,99,360/- for the vacant office premises, which was contested by the assessee. The Tribunal, after analyzing the facts and relevant provisions, concluded that since the property was intended for letting and remained vacant, the ALV should be Nil under Section 23(1)(c). Consequently, the deemed rent adopted by the A.O. was vacated.

Similarly, for A.Y 2012-13, the A.O. adopted a deemed rent of ?90,19,296/-, including a 10% appreciation over the previous year. The Tribunal, applying the same rationale as in A.Y 2011-12, held that the ALV should be Nil under Section 23(1)(c), and the deemed rent adopted by the A.O. was vacated.

3. Calculation of profit on the sale of office units under the head Short Term Capital Gain:

In A.Y 2011-12, the assessee declared the profit on the sale of two office units as business income, whereas the A.O. computed it under the head Short Term Capital Gain. However, during the appeal hearing, the assessee's representative did not press this ground of appeal. Consequently, the Tribunal dismissed this ground as not pressed.

Conclusion:

The Tribunal allowed the appeals for both A.Y 2011-12 and A.Y 2012-13, setting aside the orders of the CIT(A) and vacating the ALV determinations made by the A.O. under Section 23(1)(a). The Tribunal upheld that the ALV for the vacant properties should be Nil under Section 23(1)(c) of the Act. The ground relating to the calculation of profit on the sale of office units was dismissed as not pressed.

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