Priyananki Singh Sood v. Acit ., Income Tax Appellate Tribunal, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

ITA No. 6698/Del/2015 AY: 2012-13

Attorney(S)

Assessee by: Shri U.N. Marwah, CA
Department by: Shri Shailesh Kumar, Sr. DR

Judges

N.S. Saini, A.M.
Beena A. Pillai, J.M.

Acts

clause (c) of section 23(1). 14.
clause (c) of section 23(1)
section 23(1)(c)
section 23(l)(c),

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Smart Summary

Factual and Procedural Background

The assessee filed a return of income on 29/09/2012 declaring total income of Rs. 1,86,79,370 for assessment year 2012-13. The return was selected for scrutiny and notices under sections 143(2) and 142(1) were issued. In the statement of affairs the assessee disclosed ownership of a commercial flat at Laxmi Bhawan, 609, Mount Road, Madras, but no income from that house property was offered for the year under consideration. The Assessing Officer (AO) called for details, and after considering the submissions, made an addition under section 23(1) by estimating the annual value of the property (the AO took Rs. 71,213 as income from the Madras property and, after allowing 30% standard deduction under section 24(a), made an addition of Rs. 49,849). The CIT(A) confirmed the addition by order dated 26/10/2015. The assessee appealed to the Tribunal (ITA No. 6698/Del/2015), challenging confirmation of an addition (the notice of appeal identifies an addition of Rs. 31,306 by estimating the annual value of the commercial flat). The Tribunal heard submissions and delivered its order on 13/12/2018.

Legal Issues Presented

Whether the benefit of section 23(1)(c) of the Income-tax Act applies to the commercial flat that was let out up to assessment year 2001-02 but remained vacant from assessment year 2002-03 onwards, thereby excluding or reducing the annual value assessed by the AO.
Whether the additions made by the Assessing Officer (and confirmed by the CIT(A)) estimating the annual value of the property are justified in the facts of this case.

Arguments of the Parties

Appellant's Arguments

The property in question is a commercial flat in Madras owned jointly by the assessee and her two sisters; it was purchased in 1980 and had been let out until assessment year 2001-02.
From assessment year 2002-03 onward a suitable tenant could not be found and the property remained vacant; therefore the property should be assessed under section 23(1)(c) of the Act (vacancy-related provision).
Counsel relied on several coordinate-bench decisions to support the contention that a property held for letting-out, with efforts to let and which remained vacant, falls within section 23(1)(c) (cited authorities include Premsudha Exports (P) Ltd. v. ACIT (2008) 110 ITD 158 and others).
Counsel argued that the CIT(A)'s reliance on Vivek Jain v. ACIT (2011) 14 Taxmann.com 146 and Ram Pershad and Sons v. CIT (1995) 81 Taxmann 332 was misplaced: Ram Pershad was distinguishable on facts; and Vivek Jain, properly read, supports the assessee where the property had been let in earlier years but remained vacant subsequently.
Counsel submitted there were no additions in the intermediate assessment years (2003-04 to 2011-12) and that the assessee made efforts to let out the property.

Respondent's Arguments

The Revenue (through the Departmental Representative) relied upon the orders of the authorities below (the AO and CIT(A)) and the decisions that those authorities had relied upon to sustain the addition; specifics were not elaborated in the text beyond reliance on those orders.
The CIT(A) had relied on the Andhra Pradesh High Court decision in Vivek Jain v. ACIT and the Delhi High Court decision in Ram Pershad and Sons v. CIT to confirm the addition.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Premsudha Exports (P) Ltd. v. ACIT ((2008) 110 ITD 158)	The Tribunal's view (as described in the opinion) that the words "property is let" should not be read as requiring actual letting; a property held with intention to let and where efforts are made to let will be covered by section 23(1)(c). It recognized that "actually let" appears in section 23(3) and therefore "let" in clause (c) can relate to intention/holding for letting-out rather than literal actual letting.	The Tribunal relied on this decision as directly applicable: it concluded that the assessee's case is squarely covered by this view and therefore the benefit under section 23(1)(c) must be granted.
Vivek Jain v. ACIT ((2011) 14 Taxmann.com 146; Andhra Pradesh High Court)	The opinion cites the High Court's holding (paragraphs 14 and 15 as summarized) that clause (c) encompasses cases where a property was let out for more than a year and thereafter became vacant for the whole of the relevant previous year; and that clause (c) would not apply where the property was not let out at all.	The Tribunal interpreted the Vivek Jain decision as supporting the assessee's position (contrary to the CIT(A)'s reading). The Tribunal found that the authorities below had misconstrued Vivek Jain and that, properly read, it supports grant of section 23(1)(c) where the property had earlier been let and subsequently remained vacant.
Ram Pershad and Sons v. CIT ((1995) 81 Taxmann 332; Delhi High Court)	The decision was relied upon by the CIT(A) below; the opinion characterizes the facts of that case as involving a claim of vacancy allowance on a property that had never been let out in any preceding years or during the year under consideration.	The Tribunal noted that Ram Pershad was relied upon by the CIT(A) to confirm the addition but considered it distinguishable on facts (because in Ram Pershad the property was not let out in earlier years unlike the present case).
Shakuntala Devi v. DDIT ((2000 Del) 31 CCH 32 (Bang))	The opinion lists this case among authorities relied upon by the assessee's counsel, but the provided text does not state the specific rule or principle from this decision.	The opinion records that the assessee placed reliance on this decision; no further application or reasoning from this case is set out in the text.
ACIT v. Dr. Prabha Sanghi ((2012) 139 ITD 504 (Delhi))	The decision is cited by the assessee's counsel in support, but the provided opinion does not set out the precise principle cited from it.	The opinion notes reliance on this decision by the assessee; the Tribunal's detailed analysis did not single out a specific application of this authority in the written text.
Reynaud Shamlal v. ACIT (ITA No. 1100/Del/2014; order dated 21/09/2016)	The case is listed among decisions relied upon by the assessee's counsel; the provided opinion does not state the particular rule or principle from it.	The opinion records reliance but does not describe how the Tribunal applied this specific decision beyond listing it among supportive authorities.

Court's Reasoning and Analysis

The Tribunal set out the statutory requirements for applicability of section 23(1)(c), identifying three conditions explicitly from the provision as recited in the opinion:

the property, or any part thereof, must be let;
it should have been vacant during the whole or any part of the previous year; and
owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause (i) (i.e., the sum for which the property might reasonably be expected to let out year to year).

The Tribunal emphasized that all three conditions must be satisfied together for clause (c) of section 23(1) to apply. It also noted statutory text and the Explanation to section 23(1) which provides that, for the purposes of clause (b) or (c), the amount actually received or receivable does not include rent which the owner cannot realize.

Factually, the Tribunal accepted that the property in Chennai had been let up to assessment year 2001-02 and had remained vacant thereafter (post AY 2002-03) up to the date of the order. The Revenue had not argued that the property was self-occupied after it became vacant, and did not dispute prior letting. The Tribunal received the assessee's submission (in response to a bench question) that no additions were made for assessment years 2003-04 through 2011-12 and that efforts had been made to let the property.

The Tribunal examined the authorities relied upon. It concluded that the CIT(A) had misconstrued the Andhra Pradesh High Court decision in Vivek Jain; after reading that decision, the Tribunal found that Vivek Jain recognizes that clause (c) can apply where a property was let prior to the relevant year and later remained vacant. The Tribunal relied heavily on the coordinate-bench decision in Premsudha Exports, which interpreted "property is let" to encompass a property held with intention to let and where efforts are made to let it out, rather than requiring actual letting in the relevant year.

Applying these principles to the facts (admitted prior letting, continued vacancy since AY2002-03, admitted efforts to let, lack of contrary assessments in intermediate years), the Tribunal found that the three conditions of section 23(1)(c) were satisfied and that the assessee was therefore entitled to the benefit of clause (c).

Holding and Implications

Core Ruling: APPEAL ALLOWED — benefit under section 23(1)(c) granted; the grounds raised by the assessee are allowed.

Direct Consequence: The Tribunal allowed the assessee's appeal, concluding that the addition made by the Assessing Officer (and confirmed by the CIT(A)) by estimating the annual value of the commercial flat in Madras is not sustainable in view of applicability of section 23(1)(c). The Tribunal held that the assessee is entitled to the vacancy-related computation under section 23(1)(c) on the facts before it and the additions are accordingly set aside.

Broader Implications: The opinion reasons with reference to existing coordinate-bench and High Court authorities but does not state that it is establishing any new binding precedent; its decision applies the cited principles to the facts of this case. No broader legal change or novel precedent is announced in the text of the opinion.

Order pronounced in open court on 13/12/2018. Bench: (N.S. Saini) — Accountant Member; (Beena A Pillai) — Judicial Member. File and circulation notes are recorded in the order text.

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Priyananki Singh Sood v. Acit .

PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 26/10/15 passed by Ld.CIT (A)-18, New Delhi for assessment year 2012-13, on following grounds of appeal:

1. The Ld.CIT(Appeals) has erred in law and on facts in confirming the addition of Rs. 31,306/- made by estimating the annul value of the commercial flat at Laxmi Bhawan, Madras while ignoring the facts and submissions of the case. Thus, the addition so made should be deleted.

2. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.

2. Brief facts of case are as under: Assessee filed her return of income on 29/09/12 declaring total income of Rs. 1, 86, 79, 370/-. The case was selected for scrutiny and notice under section 143(2) was issued along with ITA No. 6698/Del/2015 questionnaire and notice under section 142(1). In response to the statutory notices, representative of assessee appeared before Ld.AO and furnished required details as called for. 2.1 Ld.AO observed that assessee had earned income from salary, house property business, capital gain and other sources during the year under consideration. It was further observed that assessee in a statement of affairs had mentioned owning of property at Laxmi Bhawan, 609, Mount Road, madras. It was further observed that no income from this house property was offered for year under consideration. Ld.AO, accordingly, called upon assessee to file requisite details in respect of the said property. After considering the submissions advanced by assessee, dissatisfied with the same, Ld.AO made an addition under section 23(1)(A) considering the annual value of property to be the sum for which the property might reasonably be expected to let out year to year. Ld.AO took Rs.71,213/- as income from house property receivable from property at madras and after allowing 30% of standard deduction as per provisions of section 24(a) of the Act made an addition of Rs.49,849/-as assessees income from house property.

3. Aggrieved by the additions made, assessee preferred appeal before the Ld.CIT (A) who upheld the addition.

4. Aggrieved by order of Ld. CIT (A) assessee is in appeal before us now.

5. Ld. Counsel submitted that the property under question is a commercial flat at Madras owned by assessee along with her 2 sisters. He submitted that the said property was purchased be back in 1980 and was let out. He submitted that the said ITA No. 6698/Del/2015 property was continuously let out till assessment year 2001-02 and thereafter from assessment year 2002-03 a suitable tenant could not be found and remained vacant. It was thus, submitted by Ld. Counsel that under such circumstances the property has to be considered as per provisions of section 23(1)(c) of the Act. He plays reliance upon following decisions of coordinate benches of this Tribunal: Preamsudha Exports (P) Ltd., vs. ACIT reported in (2008) 110 ITD 158; Shakuntala Devi versus DDIT reported in (2000 del) 31 CCH

32 (Bang); ACIT versus Dr Prabha Sanghi reported in (2012) 139 ITD

504 (Delhi); Reynaud Shamlal vs. ACIT in ITA No. 1100/del/2014 wide order dated 21/09/16;

6. Ld. Counsel further submitted that Ld.CIT (A) confirmed addition by relying upon decisions of Honble Andhra Pradesh High Court in case of Vivek Jain vs ACIT reported in (2011) 14 Taxmann.com 146 and Honble Delhi High Court in case of Ram Pershad and Sons vs CIT reported in (1995) 81 Taxmann 332. 6.1 He submitted that decision of Honble Delhi High Court in case of Ram Pershad and Sons vs CIT(supra) is distinguishable on facts, as it was a case where, assessee claimed vacancy allowance on occupied property, which was never been let out in any of preceding assessment years, or even partly during year under consideration. Insofar as decision of Vivek Jain vs ACIT (supra) is concerned, Ld. Counsel submitted that Ld. CIT(A) misconceived the judgment of Honble Andhra Pradesh High Court by placing reliance upon the concluding paragraphs 14 and 15 of the said decision wherein, Honble Court though has concluded that the benefit of computing the ale be under section 23(1)(c) could not ITA No. 6698/Del/2015 be extended to a case where the property was not let out at all, however the same would duly income passed to take within its sweet cases where the property had remained let out for 2 or more years but thereafter had remained vacant for whole of the previous year. He submitted that in fact the decision of Honble Andhra Pradesh High Court is in favour of assessee as in the present facts of the case admittedly the property has remained vacant since assessment year 2002-03 which has been a part of observations recorded by Ld.AO in the assessment order.

7. On contrary, Ld. DR placed reliance upon orders of authorities below.

8. We have perused the submissions advanced by both sides and the light of the records placed before us.

9. In order to attract section 23(l)(c), the following requirements must be fulfilled

(i) the property, or any part thereof, must be let; and

(ii) it should have been vacant during the whole or any part of the previous year ; and

(iii) owing to such vacancy the actual rent received or receivable by the owner in respect thereof should be less than the sum referred to in clause 9.1 It is only if these three conditions are satisfied together, would clause (c) of section 23(1) apply, in which event amount received or receivable, in terms of clause (c) of section 23(1), shall be deemed to be the annual value of the property.

10. Further, Clause (c) does not apply to situations where property has either not been let out at all during any of the previous years or, even if let out, was not vacant during whole or ITA No. 6698/Del/2015 any part of previous year. Further Under Explanation to section 23(1), for the purposes of clause (b) or (c), amount actually received or receivable by the owner shall not include the amount of rent which the owner cannot realize.

11. 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.

12. On a question being posed by the bench to Ld. Counsel regarding view of revenue during interregnum assessment years, Ld. Counsel submitted that there has been no addition made by the authorities during assessment years 2003-04 to 2011-12. Further the submissions of Ld. counsel that assessee has made all efforts to let out the property in dispute.

13. We are agreed with submissions of Ld. Counsel regarding decision of Honble Andhra Pradesh High Court in case of Vivek Jain vs ACIT (supra) being misconceived by the authorities below. We have perused the said decision and find that Honble High Court held as under:

14. The contention that, as clause (c) provides for an eventuality where a property can be vacant during the whole of the relevant previous year, both situations, i.e., "property is let" and "property is vacant for the whole of the relevant previous year" cannot co-exist does not merit acceptance. Clause (c) encompasses cases where a property is; let out for more than a year in which ITA No. 6698/Del/2015 event alone would the question of if being vacant during the whole of the previous year arise. 13.1 From the above provision of law, it can be construed that in case the property or part thereof was vacant during the period, the proportion deduction should be allowed from the sum on which the property might reasonably be let out from year to year. We find that it is the plea of the assessee that due to inherent defects, the flat could not be let out. Hence, the flat remained vacant. Hence, the assessee has claimed benefit of section 23(1)(c) which duly permits deduction in this regard. We find that the coordinate bench of this Tribunal in case of Premsudha Exports (P) Ltd. (supra), had occasion to deliberate on identical issue. This Tribunal has observed on a plain reading of section 23(3) that, Legislature in their wisdom used words, 'house is actually let', which shows that words, 'property is let' cannot mean actual letting out of property, because had it to be so, there was no need to use words, 'actually' in section 23(3). It was observed by this Tribunal that, 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 ITA No. 6698/Del/2015 property and the same would fall within the purview of clause (c) of section 23(1).

14. In our considered opinion 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, Ld.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. Under such circumstances, in our considered opinion assessees case stands squarely covered by view taken by coordinate bench of this Tribunal in case of Premsudha Exports (P) Ltd. (supra), and benefit under section 23 (1) ( c) has to be granted. Accordingly the grounds raised by assessee stands allowed. In the result appeal filed by assessee stands allowed. Order pronounced in the open court on 13/12/2018 Sd/- Sd/- (N.S. SAINI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dt. 13/12/2018 *Kavita Arora ITA No. 6698/Del/2015 Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT - TRUE COPY - By Order, ASSISTANT REGISTRAR ITAT Delhi Benches ITA No. 6698/Del/2015 Date

1. Draft dictated on 11/12/2018 13/12

2. Draft placed before author 11/12 13/12

3. Draft proposed & placed before the second member

4. Draft discussed/approved by Second Member.

5. Approved Draft comes to the Sr.PS/PS 13/12

6. Kept for pronouncement on 13/12

7. File sent to the Bench Clerk And uploaded 13/12

8. Date on which file goes to the AR

9. Date on which file goes to the Head Clerk.

10. Date of dispatch of Order.

Priyananki Singh Sood v. Acit .

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Priyananki Singh Sood v. Acit .

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