TMI Blog2017 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... g out of the property and there is no allegation of deliberate unreasonable delay in letting out of the property. Thus the addition made by the Assessing Officer is not justified and the same is deleted. Addition on account of deemed advance - Assessing Officer has made an addition of income as notional interest @ 12% p.a. on deemed advance received from the tenant - Held that:- There is no dispute that as per the lease agreement the advance was received by the assessee only in the next assessment year at the time of execution of the lease agreement. Therefore there is no justification in making the addition by deeming the advance from the tenant. The Assessing Officer has not disputed the fact that the advance was received only at the time of lease agreement therefore, the addition of notional interest is highly arbitrary action on the part of the Assessing Officer as there is no actual benefit received by the assessee. Hence, the said addition made by the Assessing Officer is absolutely illegal and without any basis and accordingly deleted. Addition by applying the guiding value as per section 50C as cost of purchase of the property - Held that:- The provisions of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property is let out and the addition has been made merely on the basis of assumptions and presumptions. 4. That the learned Commissioner of Income Tax (Appeals) ought to have appreciated that the appellant had been renovating the property during the financial year 2006-07 and could not have let out the property. 5. That the learned Commissioner of Income Tax (Appeals) ought to have held that the annual letting value of house property at Langford Road should be determined at nil u/s. 23(1)(c)of the Act. 6. That the finding of the learned Commissioner of Income Tax (Appeals) that the appellant had let out the property situated at Airport Road is perverse as it is not supported by any materials on record. 7. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the appellant had let out the property without bringing on record even the name of the tenant to whom the property is let out and the addition has been made merely on the basis of assumptions and presumptions. 8. That the learned Commissioner of Income Tax (Appeals) ought to have held that the annual letting value of the house property at Airport Road is nil u/s 23(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 2007-08. The Assessing Officer proposed to assess the annual letting value of the flat for the year under consideration. The assessee has submitted before the Assessing Officer that flats were vacant and therefore even if Annual Letting Value (ALV) has to be assessed, the vacancy allowance should be allowed. The Assessing Officer did not accept the contention of the assessee and assessed the ALP @ ₹ 7,400 p.m. Further the Assessing Officer has also proceeded to assess the deemed advance received from letting out of the property. The Assessing Officer noted that the lease agreement for the Assessment Year 2009-10 shows that the assessee received rental advance for these letting out properties based on which the Assessing Officer estimated the deemed advance for three properties of ₹ 1,20,000, ₹ 1,20,000 and ₹ 90,000 respectively total amounting to ₹ 3,30,000. Accordingly, the Assessing Officer has applied the interest rate of 12% p.a. on the money deemed deposited and bring to tax ₹ 39,300 as income from other sources. The assessee challenged the action of the Assessing Officer before the CIT (Appeals). The CIT (Appeals) con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from next year. When the assessee has explained the reason that the house was under renovation and therefore, it could not be let out during the year under consideration. Further it was not intentionally kept vacant by the assessee. The vacancy of the house was beyond the control of the assessee and therefore the benefit of vacancy is available to the assessee as per the provisions of section 23(1)(c) of the Act. It is pertinent to note that even otherwise it may not be always possible to let out the property just after its acquisition or its readiness to be occupied. The process of letting out may take some time in searching the suitable tenant and for settling the terms and conditions of the letting out. Therefore even if it is presumed that the house was ready for occupation if it is not intentionally kept vacant by the assessee then it cannot be presumed that the assessee has deliberately not let out the house during the year under consideration. The co-ordinate bench of this Tribunal in the case of Shakuntala Devi (supra) has considered an identical issue in para 8 as under : 8. We have considered the submission of both the parties and carefully gone through the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property should be actually let out during any time prior to the relevant previous year and then only, it could be said. that the property is let out and clause (c) would be applicable. The tense of the verb used prior to the word 'let' is present tense and not past tense. It means that the provisions of clause (c) talk regarding the relevant previous year and not of any earlier period and if that be so, the contention of the revenue was not acceptable. [Para 13] Now the question arose as to what would be the correct and workable interpretation of the words 'property is let' in clause (c) of section 23 (1). For this, it is to be determined as to whether actual letting out is a must for a property to fall within the purview of clause (c) of section 23(1). [Para 15] From a reading of the provisions of sub-section (3) of section 23, it appears that the Legislatures in their wisdom have used the words 'house is actually let'. This shows that the words 'property is let' cannot mean actual letting out of the property because had it been so, there was be no need to use the word 'actually' in subsection (3) of section 23. Regarding the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under appeal, the assessee could not get the suitable tenant on account of hefty rent and security deposits. Thus, during the whole year, the assessee made continuous efforts to let out the property and under these circumstances, this property could be called to be let out property in terms of observations made in foregoing paras. Since the property had been held to be let out property, its annual letting value could only be worked out as per clause (c) of section 23 (1) and since the rent received or receivable from the said property during the year was nil the same was to be taken as the annual value of the property in order to compute the income from house property. [Para 18] 11.1 In our opinion the aforesaid referred to case is on the same facts, so respectfully following the decision of the coordinate Bench in the case of Premsudha Exports (P.) Ltd. vs. ACIT, C.C.-I0,Mumbai (supra), we are of the view that since the rent received or receivable from the property in question during the year was nil, the same was to be taken as the annual value of the property in order to compute the income from house property as provided in section 23(1)(c) of the Act. We, therefore, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional interest is highly arbitrary action on the part of the Assessing Officer as there is no actual benefit received by the assessee. Hence, the said addition made by the Assessing Officer is absolutely illegal and without any basis and accordingly deleted. 8. The next issue is regarding the addition made by the Assessing Officer by applying the guiding value as per section 50 C as cost of purchase of the property. 9. I have heard the rival submissions as well as considered the relevant material on record. The property was purchased in 2004 and the sale deed was registered on 28.6.2007. The Assessing Officer made an addition on account of difference in the purchase consideration and stamp duty valuation of the property. The learned Authorised Representative has relied upon the decision in the case of CIT Vs. Chandni Buchar (2010) 323 ITR 510 (P H) and submitted that the deeming provision of section 50C cannot be applied in the hand of the purchaser. He has further pointed out that amendment in section 56(2)(vi) of the Act was brought vide Finance Act, 2009 dt.1.4.2010. Therefore, for the year under consideration no addition can be made on account of difference in purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. The CIT(A) deleted this addition by holding that s. 50C is a deeming provision for the purpose of bringing to tax the difference as capital gain. The CIT(A) further held that in the absence of any legally acceptable evidence, valuation done for the purpose of s. 50C would not represent actual consideration passed on to the seller. He placed reliance on the judgment of Allahabad High Court rendered in the case of CIT vs. Smt. Raj Kumari Vimla Devi (2005) 279 ITR 360 (All). In that case Allahabad High Court has relied upon the observations made by Hon ble Supreme Court in the case of Jawajee Nagnatham vs. Revenue Divisional Officer (1994) 4 SCC 595 to hold that the basic valuation register prepared and maintained for the purpose of collecting stamp duty could not form the foundation to determine the market value of the acquired land under s. 23 of the Land Acquisition Act, 1894. The burden of proof is always on the claimant to prove such a fact and in each case the prevailing market value as on the date of notification published in the State Gazette under s. 4(1) of the Act has to be proved. The Tribunal also held that valuation done by any State agency for the purpose of stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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