Ravi K Sheth Vs DCIT (ITAT Mumbai)
Conclusion: Where the property was not actually let out, and was treated as self-occupied property, in case of vacant property, the annual value under section 23(1)(a) must be determined on the basis of the Municipal Rateable Value and not market rent.
Held: Assessee owned two flats — Flat No. 12B and Flat No. 14B — in the building “Manek,” Mumbai. Flat No. 12B, self-occupied for over 20 years, was gifted to his son on 30.01.2017. During scrutiny assessment, AO noted that assessee had not offered deemed rental income for Flat No. 12B for the period 01.04.2016 to 31.01.2017. Rejecting the assessee’s plea to adopt the Municipal Ratable Value (MRV) as the annual letting value (ALV), AO computed deemed rent based on market value, adding ₹19,40,400 as “Income from House Property.” CIT(A), NFAC, upheld the AO’s view relying on earlier assessments, ignoring appellate relief granted in prior years. Assessee argued that the addition was excessive, arbitrary, and ignored judicial precedents, including the Tribunal’s own order in the assessee’s case for AY 2011-12, where the relief had been granted based on municipal valuation. It was held that the matter was squarely covered by assessee’s own case and the decision of the Bombay High Court in the case of CIT v. Smt Laxmi Jain. Tribunal observed the Bombay High Court case which affirmed that when a property was never let out and could be treated as self-occupied or vacant, the tax on rental income could be calculated only on the basis of the rateable value assessed by the Municipal Corporation. Tribunal also relied on its earlier decision in the assessee’s own case for AY 2011-12, where it had been held that in case of vacant property, the deemed Annual Letting Value (ALV) should be computed as per the municipal rateable value. Tribunal deleted the excessive addition made by AO respectfully following the jurisdictional High Court and its own binding precedent. Tribunal directed that the income from house property for Flat No. 12B be restricted to ₹5,026 (the municipal valuation for 10 months).
