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TMI Blog2016 (9) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... ble exceeds the fair rental value, so that the enhanced sum substitutes the FRV as the AV. A further exception is drawn where on account of vacancy this rent falls even below the FRV, in which case it is this reduced amount which is to be adopted as the AV. The property being let, though unable to fetch the rent due to vacancy, the amount actually realized/realizable is taken as the AV, whether lower or higher than the FRV. That is, where the property is let, the actual rent is made the basis for AV in preference to the notional (fair) rent provided the decline in rent (w.r.t. fair rent) is on account of vacancy or unrealizability. This is the effect of a combined/conjoint reading of section 23(1), i.e., of all its limbs together, even as the entire section stands read, as is to be, as a whole. Both ss. 23(1)(b) and 23(1)(c) only represent different scenarios qua a property which is let. That the letting is for rent is both plain and manifest, so that it contemplates actual letting only. How else could, one may ask, the reduction in rent received/receivable and, thus, in AV, be possible? The actual letting is thus the sine qua non where a reduction or remission in rent on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the annual value in respect of the assessee s Swami Vivekanand (S.V.) Road, Mumbai property is liable to be assessed in law, i.e., under section 22 read with sec.23 of the Act, which read as under: Income from house property. 22. The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to incometax, shall be chargeable to income-tax under the head Income from house property . Annual value how determined. 23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be- (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Corporation Ltd. vide conveyance deed of even date, taking its possession on the same date (PB pgs. 31-49). The property, it is contended, was acquired with the intent of letting, so as to earn rental income. The assessee entered into negotiations with M/s. Super Religare Laboratories Ltd. (SRL), which was in the process of setting up a state of the art laboratory in Mumbai at the relevant time. The basic terms and conditions agreed to between the parties for taking the property on rent, proposed to be 01.4.2009 onwards, were recorded in a Letter of Intent (LoI) dated February 9, 2009 (PB pgs. 50-51) (also refer Written Submissions (WS) before the first appellate authority dated 13/8/2012 at PB pages 22-30). This property was in fact let to SRL with effect from 1/4/2009 at the agreed rent of ₹ 38.95 lacs per month vide Leave and License Agreement dated 06/8/2009 (PB pages 52 71). The Assessing Officer (AO) computed the annual value of the said property for the relevant year at ₹ 116.85 lacs, i.e., taking the proposed annual rent of ₹ 467.40 lacs for three months, being January to March, 2009. The respective cases 4. The assessee, while not disputing the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... let from year to year. It may thus have nothing to do with the actual letting of the house property, or the actual receipt of rent, and is in the nature of an artificial or statutory income. The law in the matter is well-settled, for which reference is made to CIT vs. Dalhousie Properties Ltd. [1984] 149 ITR 708 (SC); New Piece Goods Bazar Co. Ltd. vs. CIT [1950] 18 ITR 516 (SC); CIT vs. H. G. Gupta Sons [1984] 149 ITR 253 (Del); and Sakarlal Balabhai vs. ITO [1975] 100 ITR 97 (Guj). The AV, irrespective of whether the property is actually let or not, is thus to be subject to tax, unless covered under section 23(1)(b), as again reiterated by the Hon ble Apex Court per its Constitution Bench decision in Sultan Brothers (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC). In Liquidator of Mahamudabad Properties (P.) Ltd. v. CIT [1980] 124 ITR 31 (SC), the Hon ble Apex Court held that even where the property was found to be in a state of utter disrepair, it yet would have some annual value, rejecting the Revenue s stand that being not in an inhabitable state, it did not admit of letting and, thus, carried no AV (refer para 4.5 of the impugned order). The decisions relied upon by the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted only where the vacancy occurred after the house had been let out by the assessee. As a result of the insertion of the Explanation at the end of clause (ix) of section 24(1), operative for and from assessment year 1977-78, the deduction in respect of vacancy allowance is to be granted irrespective of whether the period during which the property or part thereof was vacant during the relevant year precedes or follows the period during which it is let out. This is signified in s. 23(1)(c) by the use of the words any part of the previous year . Yet, the deduction for vacancy allowance can be claimed only if the property or part thereof is let for at least a part of the relevant previous year, and the same remains vacant for the other part of the year. In other words, where the property or part thereof was not let at all during the entire previous year, no deduction for vacancy allowance is permissible. As held in Gujarat Ginning Manufacturing Co. Ltd. vs. CIT [1994] 205 ITR 314, 322-23 (Guj), the vacancy allowance cannot be claimed if the property was not let out at all during the previous year concerned. Such view has also been taken in Ram Pershad Sons vs. CIT [1995] 81 Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the whole of the relevant previous year (para 14). The provisions of a taxing statute are to be strictly construed and, further, intended to be understood in their natural, ordinary and popular sense, according them their grammatical meaning (para 12). No hardship, injustice, anomaly or absurdity arises if it is borne in mind that the period of vacancy cannot exceed the period for which the property was let out (para 15). Would a property, one may ask, be given - at least ordinarily, on rent, which involves delivery of possession as well as investment of time and resources by the tenant, for a single day? The argument advanced is both hypothetical and presumptuous. Clause (c) of section 23(1), the Hon ble Court goes on to clarify, was not inserted to take out from its ambit properties held by the owner for self-occupation in-as-much as section 23(2)(a) provides for such an eventuality. It is only to mitigate the hardship faced by an assessee, and as clause (b) does not deal with the contingency where the property is let and, because of vacancy, the actual rent received or receivable by the owner is less than the sum referred to in clause (a), that the clause was inserted. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to s.24(1)(ix). Rather, we find no reference to the settled case law in the said decision or the several others being relied upon. On the contrary, as explained by the Tribunal in Ramesh Chand v. ITO [2009] 29 SOT 570 (Agra), a decision rendered prior to Vivek Jain (supra) and, thus, without its benefit, only a property which is let could be vacant. The concept of vacancy, it stands explained, is intrinsically linked with the state of actual letting, or only applicable to a property that is imbued with the character or condition of being let. That is, vacancy cannot exist or be considered independent of or de hors the letting . Further on, section 23(1)(c) provides for a further qualification qua a property that is actually let, as contemplated u/s. 23(1)(b), yielding benefit to the owner, though, whose AV, for the purpose of section 23, may have to be computed by factoring in the fact of vacancy during the year, i.e., where it has the effect of reducing the rent below fair rent of the house property, which would (fair rent) be applicable even if the property is not let. In the facts of that case the property had not been let at any time since the assumption of its owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents a state of actual letting and cannot be extended to a state of intended letting . Letting , it may be appreciated, is a culmination of intended letting , so that the Act stipulates a maturity/completion of the intention to let. The words actually let in section 23(3) have no bearing at all in the matter. The same have perhaps been used to emphasize the deemed letting where some benefit is derived by the owner in respect of his house property, whether self-occupied or not, and also of such deeming in respect of all such residential houses, save one (sections 23(2), 23(3) and 23(4)). There is also no anomaly in the provision, which is sought to be pleaded with reference to the word whole occurring in s. 23(1)(c). The same stands answered in Vivek Jain (supra) (also refer para 5.2). The same is in fact with reference to the quantum of deduction in AV, if any, while the words where the property is let refer to the qualifying condition for vacancy remission. Vacancy as a concept has, as afore12 noted, a symbiotic relationship with the notion of letting in-as-much as it draws upon and is inextricably linked thereto, devoid of any meaning in the absence thereof, implying onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received exhaustive elucidation by the higher courts of law, while interpreting an analogous provision, with their being no finding by the tribunal of the amendment effecting a material change by Finance Act, 2001, toward which, as afore-noted, we find no indication anywhere. Rather, interpreting the provision in the manner suggested, every un-let property could possibly be regarded as a case of intended letting , defeating the provision. In our view, there is accordingly no scope for taking any different view in the matter. Before parting, we may also advert to the argument advanced during hearing of the occupation certificate being issued by Brihan Mumbai Mahanagar Palika only on May 21, 2009 and the final payment of ₹ 875 lacs to the seller being, as provided in the conveyance deed, made only there-upon, seeking its admission as additional evidence on that ground. The same is without merit, even as noted by the Bench during hearing itself. The possession of the property has been admittedly taken on 18/12/2008, and the property is fully constructed, having all amenities (refer Clause (xv) of the Conveyance Deed). The property is lettable and, in fact, actually let 1/4/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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