Arihant Patni Vs ITO (ITAT Pune)
The assessee’s rent for the property which remained vacant for the entire year shall be calculated as per provisions of Section 23(1)(a) of the Income Tax Act. Section 23(1)(c) will not be applicable in such case.
Facts-
The building, known as Bodhi Towers, belongs to Blackpool Realty Pvt. Ltd. in which the assessee are shareholder, and under the AOA of the Company, each shareholder has right to certain floors of the building and thus the assessee is ‘owner’ u/s 27(iii) of the Act and there is no dispute as to this fact. Building was completed in July 2011 (A.Y. 2012-13). Immediately in September 2011, the assessee appointed a broker ( CB Richards Ellis South Asia P.Ltd.) to find a suitable tenant (agreement at p. 16-26 of paper book). In view of slump in the market, the broker could not find a suitable tenant. In the return for A.Y. 2012-13, the assessee disclosed the fact and did not offer any notional income from house property. The return was accepted u/s 143(3). The Income Tax Department floated a tender in August 2013, and the Company submitted its offer in response to the said tender. Correspondence with Income Tax Department ensued between 2013 to 2015. Finally, the Income tax Department executed the lease agreement in April 2016. The Assessing Officer dismissed the claim of the assessee to determine the Annual lettable Value (ALV) u/s23(1)(C)of the Act at Nil and determined the ALV as per section 23(1)(a) of the Act.
Conclusion-
Held that it is an admitted undisputed fact that the property was vacant throughout the year and it was not let out. Following the Hon’ble A.P. High Court in the case of Vivek Jain and the Hon’ble Punjab & Haryana High Court in the case of Sushma Singla, we hold that the assessee’s rent for the said property shall be calculated as per provisions of Section 23(1)(a) of the Act and Section 23(1)(c) will not be applicable in the case of assessee for the said property.
FULL TEXT OF THE ORDER OF ITAT PUNE
These bunch of appeals preferred by the assessee as captioned above directed against orders of the ld.Commissioner of Income Tax(Appeals)-5, Pune, dated 09.09.2016& 24.04.2017 for the Assessment Year 2013-14 and 2014-15 respectively. In this group of Four(04) appeals, the assessees have raised certain common grounds of appeal, facts in all cases are almost similar, except variation of additions, therefore, all appeals were clubbed, heard and are decided by consolidated order. For appreciation of facts, the facts in ITA No.2695/PUN/2016 for AY 2013-14 is treated as lead case. The assessee has raised the following grounds of appeal:
The Assessee in ITA No.2695/PUN/2016 has raised the following grounds of appeal:
“In the fact and the circumstances of case, and in law, the learned Commissioner of Income-tax (Appeals)-5, Pune, erred in confirming the additions and observations made by the assessing officer in the assessment order in respect of following points:
1. In respect of addition of Rs.1,10,87,608 under the head “income from house property;:
a) In confirming the addition of Rs.1,10,87,608 (including income of minor children clubbed u/s 64(1A)) as deemed income from house property.
b) In not appreciating that the assessee has taken reasonable efforts to let out the property and hence by applying the provisions of section 23(1)(c) r.w.s 23(1)(a) the annual value of the property should be taken at ‘Nil’.
2. Without prejudice to above, in confirming the computation of annual value @ Rs.52 per sq. feet p.m. and not as per the annual ratable valuable computed by the Pune Municipal Corporation.
3. The appellant craves leave to add, modify or withdraw any of the grounds of appeal at the time of hearing.
ITA No.2695/PUN/2016 for A.Y. 2013-14:
2. Brief Facts of the case are that the impugned building is purely commercial building with 8 floors having total area of 83.314 sft. The building, known as Bodhi Towers, belongs to Blackpool Realty Pvt. Ltd. in which the assessee are shareholder, and under the Articles of Association of the Company, each shareholder has right to certain floors of the building and thus the assessee is ‘owner’ u/s 27(iii) of the Act and there is no dispute as to this fact. Building was completed in July 2011 (A.Y. 2012-13). Immediately in September 2011. the assessee appointed a broker (CB Richards Ellis South Asia P. Ltd.) to find a suitable tenant (agreement at p. 16-26 of paper book).In view of slump in the market, the broker could not find a suitable tenant. In the return for A.Y. 2012-13, the assessee disclosed the fact and did not offer any notional income from house property. The return was accepted u/s 143(3).The Income Tax Department floated a tender in August 2013, and the Company submitted its offer in response to the said tender. Correspondence with Income Tax Department ensued between 2013 to 2015. Finally, the Income tax Department executed the lease agreement in April 2016. The Assessing Officer dismissed the claim of the assessee to determine the Annual lettable Value (ALV) u/s23(1)(C)of the Act at Nil and determined the ALV as per section 23(1)(a) of the Act. The AO followed the decision of Hon’ble AP High Court.
2.1 At the time of hearing, the ld.AR submitted before us that the same issue whether section 23(1)(a) of the Act or Section 23(1)(c) of the Act is applicable, has been discussed by two subsequent decisions of the Tribunal having considered and distinguished the findings of the Hon’ble Andhra Pradesh High Court in the case of Vivek Jain. The ld.AR further reiterated the submissions made before the subordinate authorities. The decisions relied on by theld.AR are (i) Shri Vivek Keshav Garud vs. ITO (ITA No.747/PN/2014 for A.Y. 2009-10 dated 22-03-2016; and (ii) Sonu Realtors Pvt. LTd. vs. Dy.CIT reported in (2018) 173 ITRD 82 (Bom).
3. On the other hand, the ld.Departmental Representative(ld.DR) for the Revenue relied on the decision of the Hon’ble Andhra Pradesh High Court and orders of Lower Authorities.
4. Ground No.1 of the appellant relates as under:
“1. In respect of addition of Rs. 1,10,87,608 under the head ‘income from house property’
a) In confirming the addition of Rs. 1,10,87,608 (including income of minor children clubbed u/s 64(1A) as deemed income from house property
b) In not appreciating that the assesse has taken reasonable efforts to let out the property and hence by applying the provisions of Section 23(1)(c) r.w.s. 23(1)(a) the annual value of the property should be taken at ‘Nil’.
4.1. It is observed from the assessment order para 11 that the assessee is owner of more than one house property. As per the assessment order, the assessee owns following properties:
