TMI Blog2018 (1) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... 23(1)(a), since in view of the decision in Vivek Jain (2011 (1) TMI 897 - Andhra Pradesh High Court), the assessee cannot claim the benefit of Section 23(1)(c) having never actually let out the properties held as stock in trade. Thus sub- section (5) would be squarely applicable, but for the fact that sub- section (5) has been inserted w.e.f. 1 April 2018. Moreover, sub-section (5) does not use language which would indicate that it has been inserted as a clarification (which would make clear that it was always the legal position) or by way of abundant caution. The amendment therefore clearly applies prospectively and since a separate sub-section was inserted in Section 23, it is clear that the legislative intent is that the peculiar situation in sub-section (5) was not already covered by sub-section (3). That being the case, for the relevant assessment years, the properties held as stock in trade would be taxable on the basis of notional annual letting value under Section 23. - Decided against assessee. - ITA 931/2017, ITA 934/2017 - - - Dated:- 3-11-2017 - S. Ravindra Bhat And Sanjeev Sachdeva, JJ. For the Appellant : Mr Ajay Vohra, Senior Advocate with Mr Gaurv Jain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buyers as its stock- in-trade for business purposes and were in self-possession till their sale. 5. The assessee s counsel argued that in view of the amendment to Section 23 of the Act with effect from 1st April 2002 in the assessee s case, the annual letting value of the properties held as stock in trade was to be considered as Nil . Counsel for the assessee argues that Section 23(1)(c) of the Act, inserted after the amendment, applies in its case and where the property was vacant for the whole of the previous year the annual letting value shall be taken to be nil. Section 23(1)(c) of the Act is reproduced below: Section 23- Annual value how determined (1) For the purposes of section 22, the annual value of any property shall be deemed to be - (c) where the property or any part of the property is let and was 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 is less than the sum referred to in clause (a), the amount so received or receivable. 6. The assessee relied on a decision of the Mumbai bench of the ITAT in Premsudha Exports (P.) Ltd. v. Additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of sub-sections (2) and (4) of section 23. One thing is more important because we find that where the Legislatures have considered that actual letting out is required, they have used the words house is actually let . This can be seen in sub-section (3) of same section 23. But in clause (c) above, actually let words are not used and this also shows that meaning and interpretation of the words property is let cannot be property actually let out . In our opinion, it talks of properties, which are held for letting out having intention to let out in the relevant year coupled with efforts made for letting it out. If these conditions are satisfied, it has to be held that the property is let and the same will fall within the purview of this clause. 7. It is clear that the ITAT concluded that only when the property is held for letting out and efforts were made to let it out, would Section 23(1) (c) apply, to assist an assessee. In the present case, it is clear that neither the properties held as stock in trade were for the purpose of letting out, nor were efforts made to let them out and hence even going by the ratio in Premsudha (supra), the assessee s case would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or receivable shall be the annual value of the property. The notes on clauses relating to the amendment to Section 23(1) reads thus: Clause 14 seeks to substitute a new section for Section 23 of the Income Tax Act relating to determination of annual value of house property. The existing provision of the said Section provides for the determination of annual value of a property in certain circumstances including where the property is let, or is self-occupied, or is vacant, or is partially let, or is let for part of the year. The annual value so determined is subject to the deductions allowable under Section 24, including deductions on account of vacancy for any part of the year in respect of the property let, and on account of rent which cannot be realized. It is proposed to substitute the said section so as to provide for determination of annual value in certain circumstances specified in the proposed new section after allowing deductions in computing the annual value on account of vacancy and unrealized rent. This amendment will take effect from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is required to be borne in mind, since such an interpretation would dispense with the need for zseparate deduction for vacancy allowance, though the interpretation as now placed may not take into consideration, where the property is vacant for the major period during the year. (emphasis supplied) 10. While interpreting a statute, the Court may not only take into consideration the purpose for which it had been enacted, but also the mischief it seeks to suppress. (Sneh Enterprises v. Commissioner of Customs, New Delhi 2006 7 SCC 714.) It is evident that Clause (c) has been inserted as a protection to the Assessee in cases where, on account of vacancy, the rent received or receivable on a property which has been let out is less than the sum referred to in Clause (a). Prior to its amendment, even in such cases it was the sum referred to in Clause (a) which was to be taken as the annual value of the property. 11. In order to attract Section 23(1)(c), the following requirements must be fulfilled (i) the property, or any 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 event alone would the question of if being vacant during the whole of the previous year arise. A property let out for two or more years can also be vacant for the whole of a previous year bringing it within the ambit of Clause (c) of Section 23(1) of the Act. 15. The contention that, if the owner had let out the property even for a day, it would acquire the status of let out property' for the purpose of Clause (c) for the entire life of the property even without any intention to let it out in the relevant year is also not tenable. The circumstances in which the ALV of a house property should be taken as NIL is as specified in Section 23(2) of the Act. Under Section 23(1)(c) the period for which a let out property may remain vacant cannot exceed the period for which the property has been let out. If the property has been let out for a part of the previous year, it can be vacant only for the part of the previous year for which the property was let out and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the property has not been let out at all, during the previous year under consideration, there is no question of any vacancy allowance being provided thereto under Section 23(1)(c) of the Act. 8. Thus, the Andhra Pradesh High Court s view is that the vacancy allowance in Section 23(1)(c) is applicable where the property is let out and was vacant for the whole or any part of the previous year and owing to such vacancy, the actual rent received or receivable by the owner was lesser than the annual letting value in Section 23(1)(a). Thus, the decision in Vivek Jain (supra) is clear on the point that in a case where the property has been let out for more than one year, if in one of those years, owing to vacancy for the entire year, the rent received or receivable is lower than the annual letting value, then the assessee would be entitled to take the benefit of Section 23(1)(c). In the present case however, the properties held as stock in trade were not let out for any previous years either, and hence there would be no question of availing the vacancy allowance given in Section 23(1)(c). This Court is in agreement with the views of the Andhra Pradesh High Court in Vivek Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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