2022 (8) TMI 572 - AT - Income Tax

Income from house property - ALV determination - property was let out, but was vacant for the impugned assessment year alone - HELD THAT - There is no dispute with regard to fact that property owned by the assessee was let right from assessment year 2008-09 to 2011- 12, however, same was vacant due to non-availability of tenants for the assessment year 2012-13 to assessment year 2013-14. But, same property was again let out from the assessment year 2015-16 onwards. The assessee has computed Nil annual letting value of the property in terms of provisions of section 23(1)(c) of the Act, whereas the AO has determined annual value in terms of provisions of section 23(1)(a) of the Act. The Assessing Officer has relied upon decision Mr. Vivek Jain 2011 (1) TMI 897 - ANDHRA PRADESH HIGH COURT to support his findings. According to Assessing Officer, in order to apply provisions of section 23(1)(c) of the Act, property must be let out during the previous year and it should be vacant for any part of the previous year. it is very clear that provisions of section 23(1)(c) of the Income Tax Act, 1961 does not apply, in case where property is not let out at all. However, if the property is let out for two or more years and was vacant for whole or any part of the previous year, then said property would come within ambit of provisions of section 23(1)(c). In this case, property was let out earlier, however, it was vacant during the impugned assessment year owing to non-availability of tenants. It is not the case of the Assessing Officer that property was not at all let out. In fact, the Assessing Officer has admitted fact that property was let out, but was vacant for the impugned assessment year alone. Further, the assessee has made his best efforts to let out the property which is evident from e-mail correspondence between the assessee and agents however, could not get tenants for relevant period. Therefore, we are of the considered view that the assessee has rightly computed annual letting value of the property as per provisions of section 23(1)(c) and this principle is supported by the decision of M/s. Sonu Realtors Pvt.Ltd 2018 (9) TMI 1687 - ITAT MUMBAI where an identical issue has been considered by the Tribunal and held that term property is let used in section 23(1)(c) is solely used with intent to avoid misuse of determination of annual value of self-occupied property by taking recourse to section 23(1)(c), however, same cannot be stretched beyond that and thus, annual value of property which was let, but thereafter remains vacant for whole year under consideration, subject to condition that 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). Thus we are of the considered view that the Assessing Officer has erred in computing annual letting value of the property in terms of section 23(1)(a) of the Act. Hence, we direct the Assessing Officer to delete addition made towards income from house property. Assessee appeal allowed.

Summary

Issues involved:
1. Interpretation of provisions of Section 23(1)(c) of the Income Tax Act, 1961 for computation of annual value of property.
2. Application of judicial precedents in determining annual letting value of property.
3. Consideration of property being vacant and efforts made to find tenants.
4. Discrepancy in assessment of income from house property.

Issue 1: Interpretation of provisions of Section 23(1)(c)
The case involved a dispute regarding the computation of annual value of a property under Section 23(1)(c) of the Income Tax Act, 1961. The Assessing Officer had determined the annual value of the property as per provisions of Section 23(1)(a) due to the property being vacant throughout the year. However, the appellant argued that the property should be assessed under Section 23(1)(c) as it was let out in previous years but remained vacant during the assessment year. The tribunal analyzed the requirements of Section 23(1)(c) and concluded that the property, which was let out in previous years but vacant in the assessment year due to non-availability of tenants, should be assessed under Section 23(1)(c) for computing the annual value.

Issue 2: Application of judicial precedents
The appellant relied on judicial precedents to support their argument that the property should be assessed under Section 23(1)(c). The tribunal considered the decisions of the Hon'ble High Court of Andhra Pradesh and the ITAT, Mumbai Benches, which emphasized that if a property was let out for multiple years but remained vacant for a specific assessment year, the annual value should be computed under Section 23(1)(c). The tribunal distinguished the facts of other cases cited by the Revenue and upheld the appellant's contention based on the specific circumstances of the case.

Issue 3: Consideration of property being vacant and efforts to find tenants
The tribunal acknowledged the efforts made by the appellant to find tenants for the property, as evidenced by email correspondence with agents. Despite the property being vacant during the assessment year, the tribunal noted that the appellant had actively sought tenants, indicating a genuine effort to let out the property. This factor influenced the tribunal's decision to compute the annual value under Section 23(1)(c) rather than Section 23(1)(a) of the Act.

Issue 4: Discrepancy in assessment of income from house property
The tribunal found that the Assessing Officer had erred in computing the annual letting value of the property under Section 23(1)(a) instead of Section 23(1)(c). Citing the decision of the ITAT, Mumbai Benches, the tribunal directed the Assessing Officer to delete the addition made towards income from house property. Consequently, the appeal filed by the assessee was allowed, and the decision was pronounced in favor of the appellant on 29th July 2022.

This summary provides a detailed analysis of the issues involved in the legal judgment, highlighting the interpretation of relevant provisions, application of judicial precedents, consideration of property vacancy, and resolution of discrepancies in the assessment of income from house property.