Arun Pruthi Vs ITO (ITAT Delhi)
Deemed Rent is Law, Deemed Cash is Guesswork – ITAT Draws the Line- Vacant or Under Repair? ITAT Says Still Deemed Rent – But No to Ad-hoc Cash Addition
In this case, Assessee, an individual, owned five immovable properties. In the return of income, he declared rental income from one property which was actually let out & claimed another property as self-occupied. A third property was used for his own business, & the income from such business activity was already offered to tax under the head “Business & Profession”. The remaining two properties were not let out: one of them was lying vacant or under repair, while the other was occupied by Assessee’s son without any rent being charged.
During scrutiny, AO held that since Assessee owned more than one house property, only one could be treated as self-occupied & the others must be assessed as “deemed to be let out” under section 23(1)(a). He rejected Assessee ’s explanation that one property was under repair & the other was used by a family member, & computed a notional Annual Lettable Value on both properties, thereby adding ₹8,40,000 as deemed rental income.
Assessee argued before CIT(A) that the property used for business could not be subjected to notional rent, as income from that property had already been offered as business income, & taxing ALV would amount to double taxation. He also contended that a vacant or under-repair property could not be deemed let out, & occupation by his son did not amount to a commercial letting. CIT(A) examined the nature of each property. He agreed that the property actually let out could not be taxed further, the self-occupied property was eligible for relief under section 23(2), & the property used for the business of Assessee was exempt from notional rent as per law. However, with respect to the two other properties, he held that Assessee was entitled to treat only one property as self-occupied, & the remaining properties had to be considered under section 23(1)(a). Relying on judicial precedents such as the Calcutta High Court decision in Ganga Ram, he held that even if a property is vacant or under repair, ALV has to be computed when Assessee owns multiple houses. However, he found AO’s estimate of ₹8.40 lakh excessive & reworked the notional rent to ₹6,12,000, providing partial relief.
