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Commissioner of Income Tax, Chandigarh-II Versus M/s Punjab State Civil Supplies Corporation Ltd, Chandigarh

2015 (12) TMI 565 - PUNJAB & HARYANA HIGH COURT

Taxability of unrealized rent - taxable on accrual basis or receipt basis - Applicability of Section 25AA in respect of only that rent which was unrealisable due to the circumstances of Rule 4 read with explanation to Section 23(1) of the I.T. Act - Held that:- the unrealized rent cannot be taken to be taxable in the hands of the assessee under the head "income from house property" when it is not realizable.

From a perusal of the orders passed by the Assessing Officer, the CIT(A) and .....

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the substantial question of law claimed on that basis does not arise.

Adverting to the judgments in D.C. Anand and sons and D.M. Vakil's cases (1945 (9) TMI 1 - BOMBAY HIGH COURT ) relied upon by the learned counsel for the appellant-revenue, it may be noticed that the principle of law enunciated therein, is well recognized, however, in view of the findings noticed hereinbefore, no benefit can be derived by the revenue from the aforesaid pronouncements. - Decided against revenue - ITA .....

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Tribunal") in ITA No. 561/CHANDI/2007, for the assessment year 2004-05. The appeal was admitted by this Court vide order dated 15.12.2008 for considering the question of law proposed in para 5 of the appeal which is to the following effect:- Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was correct in not appreciating that Section 25AA is applicable in respect of only that rent which was unrealisable due to the circumstances of Rule 4 read with explana .....

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in the original return. The return was processed on 30.3.2006 and notice under Section 143(2) of the Act was issued on 27.8.2006. Thereafter, notice under Section 142(1) along with questionnaire was issued on 3.10.2006. The assessee had not declared the income of rent of the building at Mohali amounting to ₹ 10 lacs. The assessment was framed by the Assessing Officer vide order dated 31.10.2006 (Annexure A-1) by making addition of ₹ 7,00,000/- after allowing deduction at the rate of .....

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n of ₹ 7,00,000/- made on account of income from house property. Hence, the present appeal. 3. Learned counsel for the revenue-appellant submitted that the Tribunal was in error as the unrealized rent was to confirm to the requirements as laid down under Rule 4 of the Income Tax Rules, 1962 (for brevity "the Rules") which have been made in pursuance to Explanation to Section 23 of the Act. In support of his contention, learned counsel has relied upon the judgments in D.C. Anand a .....

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r not? 7. It would be expedient to refer to Explanation to Section 23 of the Act, which reads thus:- "23. Annual value how determined.- (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 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 .....

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lity to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation - For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. XX XX .....

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