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2016 (9) TMI 961 - AT - Income TaxCharge to income tax in respect of a house property - deemed income - annual value - Held that:- The basis of the charge to income tax in respect of a house property, not occupied by its’ owner for the purpose of business or profession carried on by him, is its’ annual value; its income potential, as reflected in its’ fair rental value (FRV), i.e., the rent at which it may reasonably be expected to be let from year to year. This is irrespective of whether the property is actually let or not. The exception to taxing the FRV of a house property under the Act is provided in respect of one house property which the owner could not, by reason of his employment or business/profession, occupy, provided it is not actually let and no other benefit has been availed of by him during the relevant year, in which case the AV is taken at nil. The position in law is clear; in fact, stands enunciated by a number of decisions by the higher courts of law (refer paras 4,5.1). The fact of letting assumes significance only where the property is actually let and the rent received/receivable 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 of vacancy occurs, and is thus to be taken in to account. The words “where the property is let” in sections 23(1)(b) and 23(1)(c), thus, represents 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). 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 1/4/2009 onwards. The conveyance of the property is complete, and the Deed only recognizes a lien thereon in favour of the Vendor to the extent of the amount unpaid, i.e., ₹ 875 lacs, about 10% of the property value.
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