9911796707
TMI Blog2025 (4) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... d its return of income on 28.03.2018 reporting total income at Rs. 9,70,79,650/-. Assessee is engaged in development of malls, entertainment centres, multiplexes, etc. Assessee completed construction of mall in Financial Year 2012-13 and started its mall operation from the month of January 2013. Assessee earned rental income by letting out units in the mall which is offered under the head "income from house property". Main objects as contained in Memorandum of Association of the assessee is reproduced hereunder which specifies objects for which the assessee is set up and includes letting out premises to tenants. "To acquire, develop, improve, build, sell, lease, manage, commercially exploit and otherwise deal in real estate, properties of all nature and description or any rights therein including land, buildings and other estate and realty including shopping malls, commercial and residential complexes." 2.2. In the year under consideration, out of 261 units of the mall, assessee had let out 253 units. For the let-out units, assessee offered rental income under the head "income from house property" which is not in dispute. Ld. Assessing Officer noted that assessee did not offer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Let out Let out Vacant Vacant Vacant Let out Let out UG 47A Let out Let cut Vacant Vacant Let out Let out Let out Let out S 50 Vacant Let out Vacant Vacant Let out Let out Let out Let out UG 22 Let out Let out Let out Vacant Let out Let out Let out Let out SF 48 Let out Let out Let out Vacant Let out Vacant Let out Let out 2.3. Despite elaborate submissions made by the assessee, ld. Assessing Officer proceeded to compute deemed rent for these eight units for the year under consideration and made an addition thereon by applying provisions u/s. 23(1)(a). The details of deemed rent for each of these units charged by the ld. Assessing Officer and added to the total income for the year, is tabulated below: Name of the unit Area of the unit Addition of Deemed Rent (Rs.) UG 15 789 2,65,104 UG 25 6,122 20,56,992 UG 26 UG27 UG 28 2,658 8,93,088 UG 47A 702 2,35,872 S 50 2,878 9,67,008 UG 22 419 1,40,784 SF48 300 1,00,800 S 50 2,878 9,67,008 Total 16,746 56,26,656 3. Aggrieved, assessee went in appeal before the ld. CIT(A). Ld. CIT(A) observed in para-7 that there is no dispute on the fact of vacancy of eight units d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. (2) Where the property consists of a house or part of a house which- (a) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil. (3) The provisions of sub-section (2) shall not apply if- (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. (4) Where the property referred to in sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This amendment will take effect from 1st April, 2002 and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." [emphasis supplied by us by underline] 5.2. The effect of substitution of section 23 has been elaborately dealt with in CBDT Circular No. 14 of 2001, the relevant portion of which reads as under [2001] 252 ITR (St.) 65, 89.: "29.2. The substituted section 23 retains the existing concept of annual value as being the sum for which the property might reasonably be expected to let from year to year, i.e., annual letting value (ALV). However, in case of let out property, the concept of annual rent has been removed. The new section provides that where the property or any part of the property is let and the actual rent received or receivable is in excess of the ALV, the amount so received or receivable shall be the annual value. This will be the case even if the property (or part of the property) was vacant for a part of the year, but the actual rent received or receivable during the year is higher than the ALV. 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 ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (a) is the 'fair estimate' for the year which is compared with the 'actual rent'. In this clause, the condition is in reference to 'less' for adopting the actual rent vis-à-vis sum referred in clause (a). By having reference to 'less' in this clause while comparing it with sum referred in clause (a), the period for which rent is 'actually' not received or receivable on account of vacancy is factored in to arrive at the annual value. In a scenario where the property is 'vacant for part of the year', since 'actual rent' is to be taken into account, it will be only for that part of the year for which it is let. In comparison to this, the sum referred to in clause (a) shall be for the entire year. Further, in a scenario where the property is 'vacant for whole of the year', since 'actual rent' is to be taken into account, it will be 'Nil', there being no tenant. However, the sum referred to in clause (a) shall continue to be for the entire year. Hence, by having reference to 'less' for comparison, aspect of vacancy is factored in to arrive at the annual value of the property in this clause (c) which will be 'Nil' in the scenario where property is 'vacant for whole of the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To effectively apply the situation of "vacant for the whole year" as envisaged in section 23(1)(c), intent of letting is of vital importance which needs to be considered, at the end of the assessee. In order to understand the phrase "where the property is let" as occurring in section 23(1)(c), it is important to understand the existence of intent of letting which is evident from the main objects contained in its Memorandum of Association as reproduced above. Further, assessee has placed on record, letter of intent in the form of proposed offer cum terms of condition sheets of certain prospective tenants in respect of few of these eight units. Details of these are reproduced by ld. CIT(A) at page No.38 of his order. The same are extracted below for ready reference. Name of the Brand Unit No. Date of Issue Remarks Rado Food and Beverages Pvt Ltd UG-47A 07.01.2017 Copy of Agreement enclosed as Annexure 2A. Arvind Lifestyle Brands Limited UG-25,26 & 27 11.04.2016 Copy of Agreement enclosed as Annexure 2B. Zodiac UG-22 01.03.2013 Copy of Letter of Intent enclosed as Annexure 2C. 6.2. From the above, assessee demonstrated that it had issued letter of intent for the vac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich remained vacant for whole of the year. Taking into consideration the notes to clauses relating to amendment by Finance Act, 2001 and CBDT Circular (supra), it is culled out that legislative intent is to allow benefits of vacancy to the assessee for house property remaining vacant for whole of the year, unlike provisions contained in erstwhile section 24(2)(ix). This intent is factored in the provisions contained in section 23(1)(c). 7. From the perusal of page 13 of the impugned assessment order, we note that ld. Assessing Officer observed that case of the assessee is covered under the provisions of section 23(1)(a) as the incidence of taxation is on inherent capacity of the building. According to him, case of the assessee squarely falls in section 23(1)(a), as the units are not let out at all, during the year. According to him, question of vacancy allowance arises only if unit is let out as mentioned in section 23(1)(c). He placed reliance on the decision of Hon'ble High Court of Andhra Pradesh in the case of Vivek Jain vs. ACIT [2011] 337 ITR 74 (AP). According to him, in the said decision, it is held that if property is not let out then notional income has to be shown. He t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant, is mutually exclusive for owner. If it is vacant, no one can say it is let and if it is let, no one can say it is vacant. Since, vacancy and letting of property has to be seen from standpoint of the owner. Twin conditions as enumerated in judgement cannot be satisfied together. Why should owner bother for occupancy of tenant for the purpose which it is taken on rent. Once property is let out, owner is concerned with rent and not with occupancy." 8.3. Furthermore, he pointed out that on the conclusion by the Hon'ble High Court that the benefit u/s. 23(1)(c) cannot be extended to a case where the property was not let out at all, makes the phrase "vacant for the whole year" nugatory and redundant. It is also assertively submitted that the said decision is of a non jurisdictional High Court and therefore does not carry a force of binding nature but has only a persuasive effect. According to him, it is a settled law that decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its jurisdiction. He placed strong reliance on the decision of Hon'ble Jurisdictional High Court of Bombay which carried a force of binding nature i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate Courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all Courts in the country by virtue of Art. 141 of the Constitution." 17.13 Similar position has been reiterated again by the Hon'ble jurisdictional High Court in the case of Consolidated Pneumatic Tool Co. (India) Ltd. v. CIT [1994] 209 ITR 277/[1995] 79 Taxman 458 (Bom.) by holding that the decision of other High Court is not a binding precedent for Courts, Authorities or Tribunals outside its territorial jurisdiction. Again the Hon'ble Bombay High Court in Geoffrey Manners & Co. Ltd v CIT (1996) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Mum/2015, in the case of holding company of the assessee, i.e., Phoenix Mills Ltd. who is also engaged in the activity of operating and managing the commercial complex. In this case also, ld. Assessing Officer had made addition in respect of deemed rent on vacant units for Assessment Year 2009-10 and 2010-11. On this issue, the Coordinate Bench held that assessee is into the business of running commercial premises, i.e., a mall, units of which are provided on lease to various tenants. It is obvious that the assessee would have taken sufficient efforts to let out the property. No reasonable business person would not want to let out its premise at the loss of revenue, if any opportunity exists. Accordingly, Assessing Officer's assumption that the properties were not intended to be let out was held to be erroneous one. It was also noted that the vacant premises were let out in the subsequent year thus, concluded that the premises were intended to be let out. It was also concluded that since the property were vacant for the whole year, in view of the provisions contained in section 23(1)(c), assessee is entitled to vacancy allowance and thus, the addition made by the ld. Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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