2018 (12) TMI 757 - AT - Income Tax

Income from house property - Addition estimating the annual value of the commercial flat - property or part thereof was vacant during the period - Held that - In present facts of case, admittedly property at Chennai in dispute has remained vacant post assessment year 2002-03 till date. It is not the case of revenue that the property after being vacant, remained under self occupation of assessee. It is also not been disputed by the revenue that prior to assessment year 2002-03 the property was not let out. It is not at all relevant as to whether property was let out in past or not. These words do not talk of actual let out, but talk about intention of assessee to let out. If property is held by owner for letting out and efforts are made to let it out, such property will be covered by section 23(1)(c), and this requirement has to be satisfied in each year that property was being held to let out, but remained vacant for whole or part of the year. Thus, if a property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of clause (c) of section 23(1). The fact the present case assessee always had the intention of letting out the property at Chennai, post assessment year 2002-03, however, it has been submitted that due to fall in property prices, the same could not be let out year after year because of which disputed property remained vacant. One more relevant factor which we observe is that, assessing officer in any of preceding assessment year, post assessment year 2002-03, has never disputed that the property was not vacant. In fact in assessment order passed for year under consideration, AO is admitting to the fact that property in question was let out only till assessment year 2002-03 and thereafter it was vacant, even during year under consideration. Assessee s case stands squarely covered by view taken by coordinate bench of this Tribunal in case of Premsudha Exports (P) Ltd. 2007 (5) TMI 348 - ITAT MUMBAI , and benefit under section 23(1)(c) has to be granted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of annual value of commercial flat at Laxmi Bhawan, Madras
2. Application of section 23(1)(c) of the Income Tax Act

Analysis:

Issue 1: Addition of annual value of commercial flat at Laxmi Bhawan, Madras
The case involved an appeal by the assessee against the addition of ?31,306 as the annual value of a commercial flat at Laxmi Bhawan, Madras. The Assessing Officer (AO) made this addition under section 23(1)(A) after determining the property's annual value based on potential rental income. The assessee contended that the property should be considered under section 23(1)(c) due to being continuously vacant since 2002-03. The assessee's representative argued that the property was intended for letting out, but due to market conditions, it remained vacant. The Tribunal examined previous decisions and concluded that the property met the criteria under section 23(1)(c). The Tribunal noted that the property was vacant post-2002-03, and the AO acknowledged this fact. Therefore, the Tribunal allowed the appeal, stating that the property qualified for the benefit under section 23(1)(c).

Issue 2: Application of section 23(1)(c) of the Income Tax Act
The Tribunal analyzed the requirements for section 23(1)(c) to apply, emphasizing that the property must be let out and vacant during the previous year, resulting in reduced rental income. The Tribunal clarified that the provision does not cover properties not let out or not vacant during the relevant period. Citing precedents, the Tribunal highlighted that the intention to let out the property, coupled with efforts to do so, suffices for section 23(1)(c) to apply. In this case, the Tribunal found that the assessee consistently intended to let out the property but faced challenges due to market conditions. The Tribunal noted that the AO never disputed the property's vacancy post-2002-03. Therefore, the Tribunal concluded that the assessee's case aligned with the precedent and granted the benefit under section 23(1)(c), allowing the appeal.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee based on the application of section 23(1)(c) and the property's continuous vacancy since 2002-03. The judgment highlighted the importance of intention to let out the property and efforts made in that regard when considering the annual value of a property for taxation purposes.