TMI Blog2022 (6) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of clause (c) of section 23(1). Physical possession was handed over only on 01.06.2016, since works for the period between 01.02.2016 and 01.06.2016 was being undertaken to make the demised property as operational - when the lease was executed on 01.02.2016, the lessee has paid the security deposit equivalent to 10 (Ten) months rent towards an interest free security deposit in respect of leased premise - Therefore, the lease commenced as on date of executing the lease deed and hence, the `property was let as per the provisions of section 23(1)(c) within the relevant financial year. Only an intention to let out a property and coupled with efforts to let out the property is sufficient to come within section 23(1)(c) of the I.T.Act. The case of the assessee in this appeal stands on better footing, inasmuch as, the property was actually been let out during the relevant financial year. Hence, applicable section is 23(1)(c) of the I.T.Act instead of section 23(1)(a) of the I.T.Act invoked by the CIT(A). Since the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises is Rs.11,70,840/- and out of the total rent, a sum of Rs.3,73,800 is payable to the share of the Assessee. Hence, it is clear that the Assessee was in receipt of rental income of Rs. 3,73,800 pm for the month of February and March 2018 but the same has not been offered to tax in ITR filed for AY. 2016-17. Therefore, income of Rs.7,47,600/- is now added back to the returned income. 4. Aggrieved, the assessee filed an appeal before the first appellate authority. The CIT(A) accepted the contention of the assessee that the possession of the property was given only on 01.06.2016, and hence, no lease rental could be brought to tax for the month of February 2016 and March 2016. However, the CIT(A) directed the assessee to show cause why income from house property should not be calculated on the basis of Annual Letting Value (ALV) as per section 23(1)(a) of the I.T.Act. To the proposed enhancement notice, the assessee filed objection vide its reply dated 22.02.2022. However, the objection of the assessee was rejected and the CIT(A) enhanced the addition made by the A.O. at Rs.5,23,320 to Rs.28,78,260 by working out the income from house property on the basis of ALV. The relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be the date of handing over the physical possession of the fully fitted out and operational possession of the property. Section 23 of the I.T.Act was substituted with effect from 01.04.2002 by Finance Act, 2001 for and from assessment year 2002- 2003. The case laws relied on by the learned CIT(A) are all pertaining to assessment years prior to 01.04.2002. Subsequent to the substitution of section 23 of the I.T.Act for the purpose of section 22, the annual value of property shall deemed to be - the sum for which the property might reasonably be expected to let from year to year [s.23(1)(a)]; or - where the property or any part 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 section 23(1)(a), the amount so received or receivable [s.23(1)(b)]; or - 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 section 23(1)(a), the amount so received or receivable [s.23(1)(c)]. 7.1 In the case of S.M.Chandrashekar v. ITO reported in (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical issue in para 8 as under : 8. We have considered the submission of both the parties and carefully gone through the material available on record. In the present case, it is not in dispute that the properties in question were earlier let out but remained vacant and could not be let out for the year under consideration since those were inhabitable. A similar issue has been adjudicated by the ITAT, Lucknow Bench B in the case of Smt. Indu Chandra Vs. DCIT (supra). In the said case, one of us (AM) is the signatory. In the case of Smt. Indu Chandra (supra), addition which was made in similar circumstances, was deleted by following the decision of the ITAT, Mumbai Bench C in the case of Premsudha Exports (P) Ltd. Vs. ACIT (2008) 110 ITD 158 (Mum) and the relevant findings have been given in para 11 and 11.1 of the order dated 29.4.2011 which are reproduced as under : 11. After considering the submissions of both the parties and the material on record, it is noticed that the property in question remained vacant and claim of the assessee was that she made all the efforts to let out the property, but the same could not be let out because the property was situated at 5th f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 referring to actual letting out in preceding period, there was no force in the contention of the revenue, as the Legislature has used the present tense. Even if it is interpreted 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 would acquire the status of 'let out property' for the purpose of clause (c) of section 23(1) for the entire life of the property, even without any intention to let it out in the relevant year. Not only that, even if the property was let out at any point of time even by any previous owner, it could be claimed that the property is let out property because the clause talks about the property and not about the present owner and since the property was let out in past, it is a let out property, although the present owner never intended to let out the same. Therefore, it is not at all relevant as to whether the property was let out in past or not. These words do not talk of actual let out also but talk about the intention to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual 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, set aside the order of the learned CIT(A) and the grounds of appeal Nos.5, 6 7 raised by the assessee are allowed. In the present case, the facts involved are similar to that of Smt. Indu Chandra (supra). So, respectfully following the order of co-ordinate bench B of ITAT, Lucknow in the aforesaid referred to case, we set aside the order passed by the learned CIT(A) and the addition made by the Assessing Officer and sustained by the learned CIT(A) is deleted. In the case on hand the assessee has claimed that prior to the lease agreement produced before the Assessing Officer it was not possible for the assessee to let out the property and therefore it claimed the benefit of vacancy allowance. In the absence of any contrary finding that the assessee has deliberately not let out during the year under consideration, it cannot be presumed. Therefore pre-letting out period cannot be deemed to be let out the property. In any case, if the provisions of section 23(1)(c) of the Act are to be understood that the vacancy allowance is available onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities below, is also abnormal expectation. That the assessee should get stamped receipt from the builder for the receipt of his letters, is equally quixotic proposition. In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law. The expectation that despite his unarguably busy professional engagements commanding huge amount of money Shri Sachin Tendulkar should have embarked upon and displayed a more robust and exuberant expedition to find a tenant for his vacant flat by approaching other real estate brokers and keeping an infallible record thereof, is beyond normal conception. Hence, we have no hesitation in setting aside the orders of the authorities below and deleting the addition. Hence, we decide the issue in favour of the assessee. 7.3 In the instant case, as mentioned earlier, the assessee and two other co-owners executed a registered lease deed on 01.02.2016 (within the relevant financial year) with the lessee for a monthly rent of Rs.11,70,840. Out of the total rentals, the assessee s share of rental was Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as under:- During the F.Y. 2015-16 relevant to AY. 2016-17, the Assessee has earned dividend income of Rs.62,905/- and interest on PPF of Rs 11,059/- and claimed as exempt. The Assessee has also offered negative income of Rs. 96,208/- under head income from other sources after claiming deduction of Rs. 2,89,211/- as interest paid to M/s Divya Prakash Sup Pvt. Ltd. Vide this office notices dated 27.11.2018 30.11.2018, the Assessee was required to provide detailed note on such deduction along with relevant evidentiary documents. In response to the notices, the Assessee's representative CA submitted an extract of ledger account of M/s Divya Prakash Suppliers Pvt. Ltd. maintained in Assessee' books of account. The document I explanation provided by the Assessee to sustain his claim of expenditure of Rs. 2,89,211/- under the head income from other sources is not satisfactory. As the Assessee could not provide any reliable piece of evidence to allow the deduction of Rs.2,89,211/-, same is hereby disallowed. 10. The CIT(A) reduced the addition to Rs.1,83,003. The relevant finding of the CIT(A) reads as follows:- 7. The assessee has also objected to charging o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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