TMI Blog2007 (5) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... Having applied these three situations to the facts of the case, we are of the view that assessee s case falls within third situation and annual value of the property is to be computed as per sub-clause ( c ) of the Act because the property remained vacant for the whole year. We feel that the words property is let are used in this clause to take out those properties from the ambit of the clause in which property are held by the owner for self-occupation i.e., self-occupied property (i.e. SOP) because even income on account of SOP, excluding one such SOP of which annual value is to be adopted at nil , is also to be computed under this head as per clause ( a ) of section 23(1) if we see the combined reading of sub-sections (2) and (4) of section 23. We find from the memorandum of association that the assessee is entitled to purchase the property for its let out and to earn rental income. Copies of resolutions of Board of Directors are also placed before us in both the cases where from it is evident that one of the Director was authorized to take necessary steps to let out the property in question. They have also fixed the monthly rent and the security deposits of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment year 2003-04 on 14-10-2003 declaring total loss at Rs. 9,024. The assessee had purchased the property i.e., flat from Vissanji Estate Private Limited, Nariman Point, Mumbai and during the year relevant to the assessment year, this flat remained vacant. Therefore, the Assessing Officer chose to assess the income from house property by invoking the provisions of section 23(1)( a ). Relying upon the appellate order in the case of M/s. Llardo Finance , the Assessing Officer determined the standard rent at 8.5 per cent on the total amount of Rs. 42,03,062. Though he has determined the standard rent as ALV at 8.5 per cent at Rs. 42,087, he adopted the ALV at Rs. 53,25,000 on the basis of monthly rent receivable/received by the assessee sister concern at Rs. 4,25,000 per month for the part period and at Rs. 4,50,000 per month for the balance period of the year for the other identical flat owned by it in the same building which was let out to High Commissioner of Canada in India Shri Peter Walker. Therefore, the Assessing Officer has adopted the ALV at Rs. 53,25,000 and determined the income from this property at Rs. 36,97,478 after deducting municipal taxes etc., and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the annual rent received or receivable by the owner in respect thereof, is in excess of sum referred to in clause ( a ), the amount so received or receivable. Having considered both these clauses, it has been held by various High Courts that where the property is not let out standard rent determined/determinable under the Rent Control Act shall be deemed to be the annual value of the property and in case where the property is let out, the annual rent received or receivable if it is in excess of the aforesaid standard rent, the said received or receivable amount shall be the annual value of the property. If the rent received or receivable is lesser than the standard rent, then in that case, the standard rent would be deemed to be the annual value of the any property. In old provisions of section 23(1), no third situation was dealt with and it was confined only to two type of situations viz., one where the property is not let out and second, where the property is let out. While computing the income from house property, deductions stated in section 24 are to be allowed. According to clause ( ix ) of section 24, the vacancy allowance is to be allowed and according to this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, since the property remained vacant for the whole year and no rent was received, the ALV should be computed at NIL as per clause ( c ) of sub-section 23(1) of the Act. The lower authorities do not examine this aspect and they have confined their deliberation on clauses ( a ) and ( b ). Since all the three clauses are independent clauses and assessee falls within clause ( c ), the determination of ALV should be as per clause ( c ) of section 23(1). 6. The learned counsel for the assessee further contended that the property could not be let out in this year, because the assessee could not get a reasonable tenant during that year. | Since no sum was received or receivable by the assessee, there was no question of bringing any amount to tax as the ALV of the property was NIL . The learned counsel for the assessee has invited our attention to the definition of the word receivable with reference to the Black s Law Dictionary in which the word receivable had been defined as awaiting receipt of payment. It has also been defined as subject to a call for payment or the amount earned, but, not yet receipt. The word receivable was also explained by the Bombay High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ALV should be computed as per provisions of clause 23(1)( c ) of the Act and since the property remained vacant for the whole year, the annual value of the property to be taken as NIL , but, the Assessing Officer did not deliberate on this arguments of the assessee in his order. Through its letter dated 13-3-2006, the Assessing Officer has explained the three situations under which the ALV is to be computed under section 23(1). Similar was the position before the CIT(A), but, none of the lower authorities has examined this aspect while computing the ALV of the property and they have considered the old provisions of section 23(1). 9. Section 23(1) was amended and substituted by new provision with effect from 1-4-2002 by Finance Act, 2001. The impugned assessment year is 2003-04 and therefore the amended section of 23 is applicable to the present case and the amended section 23(1) contains three clauses dealing with different situations to compute the annual value of any property. These three clauses are independent clauses and deals three type of situations. Clauses ( a ) and ( b ) are almost similar to the old provisions with slight modifications and deal with two type ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this interpretation is not correct because as per this clause, the property can be vacant during whole of the relevant previous year. Hence, both these situations cannot co-exist that the property is actually let out also in the relevant previous year and the property in the same year is vacant also during whole of the same year. We, therefore, reject this contention of the learned DR of the revenue. 13. The second interpretation suggested by the learned DR is that the property should be actually let out during any time prior to the relevant previous year and than only, it can be said that the property is let and this clause will be applicable. Now, we examine this contention. First of all, we find that the tense of the verb used prior to the word let is present tense and not past tense. It means that the provisions of above clause talk regarding the relevant previous year and not of any earlier period and if that be so, this contention of learned DR is also not acceptable. Secondly, we find that even if this contention of learned DR of the revenue is accepted, the provisions of this clause ( c ) cannot be made applicable in the first year, when the property is acquired an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this juncture, we examine other sub-sections of section 23 and we find that sub-section (3) of section 23 reads as under: "(3) The provisions of sub-section (2) shall not apply ( a )the house or part of the house is actually let during the whole or any part of the previous year; or ( b )any other benefit therefrom is derived by the owner." 16. From the above, we find that here, the Legislatures in their wisdom have used the words house is actually let . This shows us that the words property is let cannot mean actual letting out of the property because had it been so, there was no need to use the word actually in sub-section (3) of the same section 23. Regarding the scope of referring to actual let out in preceding period, we find no force in the contention of the DR, as the Legislature has used the present tense. Even if we interpret it so, it may lead to undesirable result because in some cases, if the owner has let out a property for one month or for even one day, that property will acquire the status of let out property for the purpose of this clause for the entire life of the property even without any intention to let it out in the relevant year. Not only tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to use the same for own business. Even if that is there, in that event also, no income can be assessed under the head "Income from house property" in view of the exclusion in section 22. The other possible use can be to let out. 18. We have carefully examined the material placed on record and we find from the memorandum of association that the assessee is entitled to purchase the property for its let out and to earn rental income. Copies of resolutions of Board of Directors are also placed before us in both the cases where from it is evident that one of the Director was authorized to take necessary steps to let out the property in question. They have also fixed the monthly rent and the security deposits of both the properties. Consequent to the resolutions, the assessee has approached to various Estate and Finance Consultants for letting out the properties and the request was also duly acknowledged by the Estate and Finance Consultants. The series of correspondence are placed before us to demonstrate the efforts made by the assessee for letting out of its properties, but, unfortunately during the year under appeal, assessee could not get the suitable tenant on account of heft ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
