SHARAN HOSPITALITY P. LTD, MUMBAI V. DCIT CIR 9(3), MUMBAI

ITA 6717/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3148 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K MAHONDAS
• Assessee Lawyers: P RIYANKA JAIN
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SANJAY ARORA , A M AND SHRI RAM LAL NEGI , J M ./ I.T.A. NO. 6717/MUM/2012 ( / ASSESSMENT YEAR: 2009 - 10 ) SHARAN HOSPITA LITY PRIVATE LIMITED GROUND FLOOR, GYS INFINITY, PARANJAPE B, SCHEME, SUBHAS ROAD, VILE PARLE (E), MUMBAI - 57 / VS. DY. CIT CIRCLE 9(3) MUMBAI ./ ./ PAN/GIR NO. AAGCS 8608 F ( / APPELLANT ) : ( / RESP ONDENT ) / APPELLANT BY : MS. PRIYANKA JAIN / RESPONDENT BY : SHRI K. MAHONDAS / DATE OF HEARING : 26.5.2016 / DATE OF PRONOUNCEMENT : 12 . 9 .2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20, MUMBAI (CIT(A) FOR SHORT) DATED 18.9.2012 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1 961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10 VIDE ORDER DATED 22.12.2011. 2. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE CORRECT AMOUNT AT WHICH THE ANNUAL VALUE IN RESPECT OF THE ASSESSEES SWAMI VIVEKANAND (S.V.) ROAD, MUMBAI PRO PERTY 2 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT IS LIABLE TO BE ASSESSED IN LAW, I.E., UNDER SECTION 22 READ WITH SEC.23 OF THE ACT, WHICH READ AS UNDER: INCOME FROM HOUSE PROPERTY. 22. THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BUILDINGS OR LANDS APPURTENA NT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEABLE TO INCOME - TAX, SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. ANNUAL VALUE HOW DETERMINED. 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEM ED TO BE ( A ) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR ( B ) 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 CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR ( C ) 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 OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE ( A ), THE AMOUNT SO RECEIVED OR RECEIVABLE : PROVIDED THAT THE TAXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED (IRRESPECTIVE OF THE PREV IOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH TAXES WAS INCURRED 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 CANNO T 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 EMPLO YMENT, BUSINESS OR PROFESSION CARRIED ON 3 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT 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) SHAL L 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) CONSISTS OF MORE THAN ONE HOUSE ( A ) THE PROVISIONS OF THAT SUB - SECTION SHALL APPLY ONLY IN RESPECT OF ONE OF SUCH HOUSES, WHICH THE ASSESSEE MAY, AT HIS OPTION, SPECIFY IN THIS BEHALF; ( B ) THE ANNUAL VALUE OF THE HOUSE OR HOUSES, OTHER THAN THE HOUSE IN RESPECT OF WH ICH THE ASSESSEE HAS EXERCISED AN OPTION UNDER CLAUSE ( A ), SHALL BE DETERMINED UNDER SUB - SECTION (1) AS IF SUCH HOUSE OR HOUSES HAD BEEN LET. [EMPHASIS, BY UNDERLINING, OURS] THE FACTS 3. THE FACTS OF THE CASE ARE SIMPLE AND UNDISPUTED. THE ASSESSEE COMPANY DURING THE PREVIOUS YEAR UNDER CONSIDERATION ACQUIRED TWO PROPERTIES, I.E., AT S. V. ROAD , MUMBAI AND VILE PARLE , MUMBAI. THE S.V. ROAD PROPERTY WAS ACQUIRED ON DECEMBER 18, 2008 FROM M/S. PRIME PROPERTY DEVELOPMENT CORPORATION LTD. VIDE CONVEYANCE DEED OF EVEN DATE, TAKING ITS POSSESSION ON THE SAME DATE (PB PGS. 31 - 4 9 ) . THE PROPERTY, IT IS CONTENDED, WAS ACQUIRED WITH THE INTENT OF LETTING, SO AS TO EARN RENTAL INCOME. THE ASSESSEE ENTERED INTO NEGOTIATIONS WITH M/S. SUPER RELIGARE LABO RATORIES LTD. (SRL), WHICH WAS IN THE PROCESS OF SETTING UP A STATE OF THE ART LABORATORY IN MUMBAI AT THE RELEVANT TIME. THE BASIC TERMS AND CONDITIONS AGREED TO BETWEEN THE PARTIES FOR TAKING THE PROPERTY ON RENT , PROPOSED TO BE 01.4.2009 ONWARDS, WERE R ECORDED IN A LETTER OF INTENT (LOI) DATED FEBRUARY 9, 2009 (PB PGS. 50 - 51) ( ALSO REFER WRITTEN SUBMISSIONS (WS) BEFORE THE FIRST APPELLATE AUTHORITY DATED 13/8/2012 AT PB PAGES 22 - 30). THIS PROPERTY WAS IN FACT LET TO SRL WITH EFFECT FROM 1/4/2009 AT THE 4 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT A GREED RENT OF RS. 38.95 LACS PER MONTH VIDE LEAVE AND LICENSE AGREEMENT DATED 06/8/2009 (PB PAGES 52 71). THE ASSESSING OFFICER (AO) COMPUTED THE ANNUAL V ALUE OF THE SAID PROPERTY FOR THE RELEVANT YEAR AT RS.116.85 LACS, I.E., TAKING THE PROPOSED ANNUAL REN T OF RS. 467.40 LACS FOR THREE MONTHS, BEING JANUARY TO MARCH, 2009. THE RESPECTIVE CASES 4. THE ASSESSEE, WHILE NOT DISPUTING THE QUANTUM OF THE GROSS ANNUAL RENTAL VALUE, CLAIMS THAT IN - AS - MUCH AS THE PROPERTY, THOUGH LET - ABLE, WAS VACANT DURING THE E NTIRE PERIOD OF THE YEAR SINCE ITS ACQUISITION IN DECEMBER, 2008, ITS ANNUAL VALUE (AV) OUGHT TO BE RESTRICTED TO THE ACTUAL RENT RECEIVED OR RECEIVABLE, I.E., NIL. THE CONDITION OF THE PROPERTY BEING LET IS MET BY THE INTENT TO LET OUT THE SAME . WHEN THE LEGISLATURE HAD REQUIRED THE HOUSE PROPERTY TO BE ACTUALLY LET, IT HAS STATED SO, AS IN SECTION 23(3)(A). NOT SO DOING WOULD LEAD TO ABSURD RESULTS, AS IN A CASE WHERE THE PROPERTY IS NOT LET FOR A SINGLE DAY OF THE YEAR, AND IS VACANT FOR THE WHOLE YEAR, SO THAT ITS AV WOULD STAND TO BE COMPUTED TAKING THE LET - ABLE VALUE FOR THE ENTIRE YEAR, WHILE IF IT IS LET EVEN FOR A SINGLE DAY DURING THE YEAR, THE SAME WOULD STAND RESTRICTED TO THE ACTUAL RENT RECEIVED/RECEIVABLE, I.E., FOR ONE DAY. THEN, AGAIN, HOW C OULD THE PROPERTY BE LET AND BE VACANT FOR THE WHOLE YEAR IN - AS - MUCH AS THE TWO CONDITIONS CANNOT CO - EXIST, EVEN AS POINTED OUT BY THE TRIBUNAL IN PREMSUDHA EXPORTS ( P .) L T D . VS. A SST. CIT [2007] 295 ITR (AT) 341 (MUM), ON WHICH RELIANCE IS PLACED. THE WORDS WHERE THE PROPERTY IS LET ARE THEREFORE TO BE CONSTRUED TO INCLUDE WHERE IT, THOUGH SELF OCCUPIED, IS WITH THE INTENT OF LETTING IT, WHICH IS APPARENT IN THE INSTANT CASE, WITH EVIDENCE BEING LED TO EXHIBIT THE EFFORTS TOWARD THE SAME. RELIANCE IS ALSO PLACED ON A NUMBER OF DECISIONS BY THE TRIBUNAL, VIZ, KAMAL MISHRA VS. ITO [2008 ] 19 SOT 251 (DEL - TRIB); SMT. POONAM SAWHNEY VS. AO [2008] 20 SOT 69 (DEL.); ASST. CIT VS. DR. PRABHA SANGHI [2012] 139 ITD 504 (DEL); DLF OFFICE DEVELOPERS VS. ASST. CIT [2008] 23 SOT 19 (DEL); INDU CHANDRA VS. DY. CIT (IN ITA NO. 96/2011 (LUCK.); SHAKUNTALA DEVI VS. D Y. DIT (IN ITA NO. 1524/ BANG/ 2010 DATED 20.12.2011 ); 5 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT ARYABHATA PROPERTIES L T D . VS. A SST. CIT (IN ITA NO. 6928/ MUM/ 2011 DATED 31.7.2013 ); AND A SST. CIT VS. S URYASHANKAR PROPERTIES LTD . (IN ITA NO. 5258/ MUM/ 2013 DATED 10.6.2015 ). THE REVENUES CASE IS THAT THE NOTION OF PROPOSED TO BE LET OR HELD FOR LETTING, ETC., CANNOT BE IMPORTED INTO THE PROVISION, WHICH SEEKS TO BRING TO TAX A NOTIONAL SUM, BEING TH E INCOME POTENTIAL TERMED ANNUAL VALUE (AV), OF A HOUSE PROPERTY, SUBJECT OF COURSE TO THE PROVISIONS OF THE ACT, THE MEASURE OF WHICH IS THE FAIR RENTAL VALUE, DEFINED AS THE RENT AT WHICH THE HOUSE PROPERTY MAY REASONABLY BE LET FROM YEAR TO YEAR. IT M AY THUS HAVE NOTHING TO DO WITH THE ACTUAL LETTING OF THE HOUSE PROPERTY, OR THE ACTUAL RECEIPT OF RENT, AND IS IN THE NATURE OF AN ARTIFICIAL OR STATUTORY INCOME. THE LAW IN THE MATTER IS WELL - SETTLED, FOR WHICH REFERENCE IS MADE TO CIT VS. DALHOUSIE PROP ERTIES LTD . [1984] 149 ITR 708 (SC) ; NEW PIECE GOODS BAZAR CO. LTD. VS. CIT [1950] 18 ITR 516 (SC); CIT VS. H. G. GUPTA & SONS [1984] 149 ITR 253 (DEL); AND SA KARLAL BALABHAI VS. ITO [1975] 100 ITR 97 (GUJ). THE AV, IRRESPECTIVE OF WHETHER THE PROPERTY IS ACTUALLY LET OR NOT, IS THUS TO BE SUBJECT TO TAX, UNLESS COVERED UNDER SECTION 23(1)(B), AS AGAIN REITERATED BY THE HONBLE APEX COURT PER ITS CONSTITUTION BENCH DECISION IN SULTAN BROTHERS (P.) LTD. V. CIT [1964] 51 ITR 353 (SC). IN LIQUIDATOR OF MAHAMUD ABAD PROPERTIES (P.) LTD. V. CIT [1980] 124 ITR 31 (SC), THE HONBLE APEX COURT HELD THAT EVEN WHERE THE PROPERTY WAS FOUND TO BE IN A STATE OF UTTER DISREPAIR, IT YET WOULD HAVE SOME ANNUAL VALUE, REJECTING THE REVENUES STAND THAT BEING NOT IN AN INHABIT ABLE STATE, IT DID NOT ADMIT OF LETTING AND, THUS, CARRIED NO AV (REFER PARA 4.5 OF THE IMPUGNED ORDER). THE DECISIONS RELIED UPON BY THE ASSESSEE BEFORE HIM , VIZ. PREMSUDHA EXPORTS ( P .) L T D . ( SUPRA ) ; SHANKUNTALA DEVI (SUPRA); AND INDU CHANDRA ( SUPRA ) WERE ALSO DISTINGUISHED BY THE LD. CIT(A) ON FACTS. BEFORE US, RELIANCE WAS ALSO PLACED ON THE DATE OF THE DECISION IN THE CASE OF VIVEK JAIN VS. ASST. CIT [2011] 337 ITR 74 (AP), WHEREIN THE HONBLE COURT, REFERRING TO A NUMBER OF DECISIONS, INCLUDING IN THE CASE OF LIQUIDATOR OF MAHAMUDABAD PROPERTIES (P.) LTD. (SUPRA), REJECTED SIMILAR CONTENTIONS AS MADE IN THE INSTANT CASE. 6 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT DISCUSSION 5.1 PRIOR TO ITS SUBSTITUTION BY FINANCE ACT, 2001 W.E.F. 1/4/2002, SECTION 23(1) BORE ONLY CLAUSES (A) AND (B), WHICH STAND RETAINED AS SUCH. THERE WAS NO REFERENCE TO VACANCY IN DETERMINING AV, ALLOWANCE IN RESPECT OF WHICH, ALONG WITH OTHER DEDUCTIONS, WAS PER DIFFERENT CLAUSES OF S. 24(1); THE PRE - AMENDED CLAUSE (IX) OF S. 24(1) READING AS UNDER: DEDUCTIONS FROM INCOME F ROM HOUSE PROPERTY . 24 (1) INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' SHALL , SUBJECT TO THE PROVISIONS OF SUB - SECTION (2), BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAMELY: (I) (II) . (IX) WHERE THE PROPERTY IS LET AND WAS VACAN T DURING A PART OF THE YEAR, THAT PART OF THE ANNUAL VALUE WHICH IS PROPORTIONATE TO THE PERIOD DURING WHICH THE PROPERTY IS WHOLLY UNOCCUPIED OR, WHERE THE PROPERTY IS LET OUT IN PARTS, THAT PORTION OF THE ANNUAL VALUE APPROPRIATE TO ANY VACANT PART, WHIC H IS PROPORTIONATE TO THE PERIOD DURING WHICH SUCH PART IS WHOLLY UNOCCUPIED. EXPLANATION - THE DEDUCTION UNDER THIS CLAUSE SHALL BE MADE IRRESPECTIVE OF WHETHER THE PERIOD DURING WHICH THE PROPERTY OR, AS THE CASE MAY BE, PART OF THE PROPERTY WAS VACANT P RECEDES OR FOLLOWS THE PERIOD DURING WHICH IT IS LET; THE WORDS WHERE THE PROPERTY IS LET OCCURRING THEREIN, AS IN THE PRESENT SECTION 23(1)(C) (WHICH, AS IN THE PRE - AMENDED S. 24(1)(IX), EXTENDS TO A PART OF THE PROPERTY), CAME UP FOR THE CONSIDERATIO N OF THE HONBLE COURTS. THE WORDS WERE HELD TO SIGNIFY THAT THE CLAUSE COMES INTO OPERATION ONLY IN CASES WHERE THE PROPERTY IS LET, THAT IS TO SAY, IT HAS NO APPLICATION IN CASE OF OWNERS DWELLING HOUSE PROPERTY [ CIT V. KRISHNA CHANDRA GAJAPATHI NARAYAN A DEO ( AIR 1926 MAD 287 ) ] . THE PROVISION OF SECTION 24(IX), AS IT STOOD UP TO ASSESSMENT YEAR 1976 - 77, I.E., WITHOUT AN EXPLANATION AT ITS END, A DEDUCTION BY WAY OF VACANCY ALLOWANCE COULD BE GRANTED ONLY WHERE THE VACANCY OCCURRED AFTER THE HOUSE HAD BEE N LET OUT BY THE ASSESSEE. AS A RESULT OF THE INSERTION OF THE EXPLANATION AT THE END OF CLAUSE (IX) OF SECTION 24(1), OPERATIVE FOR AND FROM ASSESSMENT YEAR 1977 - 78, THE DEDUCTION IN RESPECT OF VACANCY ALLOWANCE IS 7 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT TO BE GRANTED IRRESPECTIVE OF WHETHER TH E PERIOD DURING WHICH THE PROPERTY OR PART THEREOF WAS VACANT DURING THE RELEVANT YEAR PRECEDES OR FOLLOWS THE PERIOD DURING WHICH IT IS LET OUT. THIS IS SIGNIFIED IN S. 23(1)(C) BY THE USE OF THE WORDS ANY PART OF THE PREVIOUS YEAR . YET , THE DEDUCTION F OR VACANCY ALLOWANCE CAN BE CLAIMED ONLY IF THE PROPERTY OR PART THEREOF IS LET FOR AT LEAST A PART OF THE RELEVANT PREVIOUS YEAR, AND THE SAME REMAINS VACANT FOR THE OTHER PART OF THE YEAR. IN OTHER WORDS, WHERE THE PROPERTY O R PART THEREOF WAS NOT LET AT ALL DURING THE ENTIRE PREVIOUS YEAR, NO DEDUCTION FOR VACANCY ALLOWANCE IS PERMISSIBLE . A S HELD IN GUJARAT GINNING & MANUFACTURING CO. LTD . VS. CIT [1994] 205 ITR 314, 322 - 23 (GUJ), THE VACANCY ALLOWANCE CANNOT BE CLAIMED IF THE PROPERTY WAS NOT LET OUT A T ALL DURING THE PREVIOUS YEAR CONCERNED. SUCH VIEW HAS ALSO BEEN TAKEN IN RAM PERSHAD & SONS VS. CIT [1995] 81 TAXMAN 332, 334 (DEL). ALLOWANCE FOR VACANCY IS TO BE DEDUCTED FROM THE ANNUAL VALUE OF THE PROPERTY OR PART THEREOF IN PROPORTION TO AND TO THE EXTENT OF THE PERIOD OF VACANCY. FOR THE PURPOSE OF DEDUCTION UNDER SECTION 24(1)(IX), THE AMOUNT DETERMINED IN ACCORDANCE WITH SECTION 23 WOULD BE THE ANNUAL VALUE OF THE PROPERTY, AND IT IS ONLY A PROPORTIONATE AMOUNT OUT OF THIS ANNUAL VALUE, PROPORTIO NATE TO THE PERIOD OF NON - OCCUPANCY, WHICH IS PERMISSIBLE AS A DEDUCTION UNDER SECTION 24(1)(IX) [ P U NNALAL SILK MILLS ( P .) L TD. VS. CIT . [1992] 194 ITR 270, 273 (BOM)]. REFERENCE IN THIS REGARD IS ALSO MADE TO THE DECISIONS IN MANGALDAS H. VERMA VS. CIT [1 980] 124 ITR 185 (BOM); CIT VS. PRADEEPKUMAR M. SHAH [ 1981] 130 ITR 118 (KER - FB); SACHIN BARICK GENERAL ENTERPRISES (P) LTD. VS. ITO [ 1984] 147 ITR 778 (CAL); CIT VS. JOY P. JACOB [ 1985] 151 ITR 19 (KER); C IT VS. K. A. V AMANA PAI [ 1986 ] 158 ITR 211 (KER) . THE OBSERVATIONS BY THE HONBLE PATNA HIGH COURT IN MAHARAJADHIRAJ OF DARBHANGA VS. CIT AIR (1931) PAT. 223 TO THE EFFECT THAT THE PROVISION IS APPLICABLE ONLY TO THOSE CASES IN WHICH THE HOUSE PROPERTY IS HABITUALLY LET TO TENANTS, AND THE VACANCIES REFER RED TO ARE VACANCIES FALLING BETWEEN DIFFERENT TENANCIES, WAS CONSIDERED BY THE HONBLE APEX COURT IN LIQUIDATOR OF MAHAMUDABAD PROPERTIES (P.) LTD. (SUPRA) AS A MERE OBITER . THE ISSUE I S THUS WELL SETTLED BY JUDICIAL PRECEDENTS IN FAVOUR OF THE VIEW 8 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT OF TH E PROPERTY BEING LET, AT LEAST FOR A PART OF THE RELEVANT YEAR , TO BE ENTITLED TO ANY REMISSION OR DEDUCTION ON ACCOUNT OF VACANCY. 5.2 THE QUESTION THAT ARISES IS WHETHER THE SCOPE OF THE SAID WORDS CAN BE SAID TO EXTEND TO A PROPERTY NOT ACTUALLY LET, BUT INTENDED TO BE LET. THIS IS CONTENDED ON THE GROUND THAT THE NEW SECTION CONTAINS THE WORD WHOLE ALONG WITH OR ANY PART OF THE PREVIOUS YEAR IN S. 23(1)(C). IN - AS - MUCH AS VACANCY FOR THE WHOLE YEAR CANNOT CO - EXIST WITH THE PROPERTY BEING LET, THE C ONTRADICTION IS RESOLVED BY SUGGESTING THAT WHAT IS ACTUALLY MEANT IS TO COVER A PROPERTY THAT IS INTENDED TO BE LET, THOUGH NOT ACTUALLY LET. SUPPORT IS DRAWN FROM THE USE OF THE WORDS ACTUALLY LET OCCURRING IN SECTION 23(3)(A). THE HONBLE COURT IN VIVEK JAIN (SUPRA) HAS CLARIFIED THAT CLAUSE (1) OF SECTION 23 ALSO ENCOMPASSES A PROPERTY WHICH IS LET FOR MORE THAN A YEAR, AS (SAY) FOR 2 OR 3 YEARS. THERE IS A POSSIBILITY FOR SUCH A PROPERTY BEING VACANT FOR THE WHOLE OF THE RELEVANT PREVIOUS YEAR (P ARA 14). THE PROVISIONS OF A TAXING STATUTE ARE TO BE STRICTLY CONSTRUED AND, FURTHER, INTENDED TO BE UNDERSTOOD IN THEIR NATURAL, ORDINARY AND POPULAR SENSE, ACCORDING THEM THEIR GRAMMATICAL MEANING (PARA 12). NO HARDSHIP, INJUSTICE, ANOMALY OR ABSURDITY ARISES IF IT IS BORNE IN MIND THAT THE PERIOD OF VACANCY CANNOT EXCEED THE PERIOD FOR WHICH THE PROPERTY WAS LET OUT (PARA 15). WOULD A PROPERTY , ONE MAY ASK, BE GIVEN - AT LEAST ORDINARILY , ON RENT , WHICH INVOLVE S DELIVERY OF POSSESSION AS WELL AS INVESTM ENT OF TIME AND RESOURCES BY THE TENANT, F OR A SINGLE D AY ? THE ARGUMENT ADVANCED IS BOTH HYPOTHETICAL AND PRESUMPTUOUS. CLAUSE (C) OF SECTION 23(1), THE HONBLE COURT GOES ON TO CLARIFY, WAS NOT INSERTED TO TAKE OUT FROM ITS AMBIT PROPERTIES HELD BY THE OW NER FOR SELF - OCCUPATION IN - AS - MUCH AS SECTION 23(2)(A) PROVIDES FOR SUCH AN EVENTUALITY. IT IS ONLY TO MITIGATE THE HARDSHIP FACED BY AN ASSESSEE, AND AS CLAUSE (B) DOES NOT DEAL WITH THE CONTINGENCY WHERE THE PROPERTY IS LET AND, BECAUSE OF VACANCY, THE A CTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THAT THE CLAUSE WAS INSERTED. IN CASES WHERE THE PROPERTY HAS NOT BEEN LET OUT AT ALL DURING THE PREVIOUS YEAR, THERE IS NO QUESTION OF 9 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT ANY VACANCY ALLOWANCE BEI NG PROVIDED THERETO UNDER SECTION 23(1)(C) (PARA 16). THUS, ONLY SUCH PROPERTIES WHICH ARE OCCUPIED BY THE OWNER FOR RESIDENCE, WHICH ARE VACANT ON ACCOUNT OF CIRCUMSTANCES MENTIONED IN CLAUSE (B) OF SECTION 23(2), FALL OUTSIDE THE AMBIT OF SECTION 23(1), PROVIDED THEY ARE, AS STIPULATED IN SECTION 23(3)(A), NOT ACTUALLY LET OUT DURING THE WHOLE OR PART OF THE PREVIOUS YEAR. ON THAT BASIS, IT HELD THAT WHERE A PROPERTY THAT STOOD NOT LET OUT AT ALL DURING THE PREVIOUS YEAR UNDER CONSIDERATION, THERE WAS NO QUESTION OF ANY REMISSION ON ACCOUNT OF VACANCY U/S. 23(1)(C) (PARA 16 ). 5.3 THE POSITION OF LAW QUA VACANCY REMISSION POST AMENDMENT THUS REMAINS SUBSTANTIALLY THE SAME; THE DIFFERENCE WOULD BE THAT WHERE ALLOWED, THE SAME WOULD HAVE THE EFFECT OF REDUC ING THE AV (FOR THAT YEAR) TO THAT EXTENT RATHER THAN BEING ALLOWED AS DEDUCTION THERE - FROM, AND WHICH IS SO EVEN IN RESPECT OF RENT WHICH CANNOT BE REALISED, BEING ERSTWHILE ALLOWED AS A DEDUCTION U/S. 24(1)(X). THE REASON (FOR THIS CONTINUING POSITION) I S NOT FAR TO SEEK. THE WHOLE PREMISE OF VACANCY REMISSION IS TO PROVIDE RELIEF TO THE EXTENT THE RENT OF A LET OUT PROPERTY COULD NOT ACTUALLY BE MADE GOOD ON ACCOUNT OF THE PRACTICAL INCIDENT OF IT BEING, DESPITE BEING LET, VACANT . AS EXPLAINED IN THE BOA RD CIRCULAR 14/2001 (REPORTED AT [2001] 252 ITR (ST.) 68, 89) , O N ACCOUNT OF VARIOUS AMENDMENTS THE PROVISION HAD BECOME QUITE COMPLICATED, DIS JOINTED A ND DIFF ICULT TO UNDER STAND, S O THAT WITH A VIEW TO RATIONALIZE THE PROVISION, SS.23 AND 24 WERE SUB STITU TED BY FINANCE ACT, 2001, LIMITING THE NUMBER OF PERMISSIBLE DEDUCTIONS FROM AV TO TWO , EFFECTING RESTRUCTURING OF THESE SECTIONS. APART FROM THE PLACEMENT OF THE PROVISION, I.E., FROM THE ERSTWHILE S. 24(1)(IX) TO NOW S.23(1)(C), THERE IS NO MATERIAL CHANG E IN THE PROVISION. ALL THE DECISIONS RENDERED IN THE CONTEXT OF S. 24(1)(IX) WOULD THEREFORE HAVE EQUAL APPLICATION IN INTERPRETING S. 23(1)(C) AS WELL. WE FIND NO FINDING IN PREMSUDHA EXPORTS P. LTD. (SUPRA), THE PRINCIPAL DECISION BY THE TRIBUNAL ADVOCA TING THE INTENTION TO LET AS BEING SUFFICIENT TO QUALIFY THE HOUSE PROPERTY AS LET AND, THUS, ELIGIBLE FOR VACANCY REMISSION , TO THAT EFFECT, I.E., OF THE LAW EFFECTING A SUBSTANTIAL / MATERIAL CHANGE IN S.23(1)(C) WITH 10 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT REFERENCE TO S.24(1)(IX). RATHER, WE FIND NO REFERENCE TO THE SETTLED CASE LAW IN THE SAID DECISION OR THE SEVERAL OTHERS BEING RELIED UPON. ON THE CONTRARY, AS EXPLAINED BY THE TRIBUNAL IN RAMESH CHAND V. ITO [2009] 29 SOT 570 (AGRA), A DECISION RENDERED PRIOR TO VIVEK JAIN (SUPRA) AND , THUS, WITHOUT ITS BENEFIT, ONLY A PROPERTY WHICH IS LET COULD BE VACANT. THE CONCEPT OF VACANCY , IT STANDS EXPLAINED, IS INTRINSICALLY LINKED WITH THE STATE OF ACTUAL LETTING, OR ONLY APPLICABLE TO A PROPERTY THAT IS IMBUED WITH THE CHARACTER OR CONDITIO N OF BEING LET. THAT IS, VACANCY CANNOT EXIST OR BE CONSIDERED INDEPENDENT OF OR DE HORS THE LETTING. FURTHER ON , S ECTION 23(1)(C) PROVIDES FOR A FURTHER QUALIFICATION QUA A PROPERTY THAT IS ACTUALLY LET, AS CONTEMPLATED U/S. 23(1)(B), YIELDING BENEFIT TO THE OWNER, THOUGH, WHOSE AV, FOR THE PURPOSE OF SECTION 23, MAY HAVE TO BE COMPUTED BY FACTORING IN THE FACT OF VACANCY DURING THE YEAR, I.E., WHERE IT HAS THE EFFECT OF REDUCING THE RENT BELOW FAIR RENT OF THE HOUSE PROPERTY , WHICH WOULD ( FAIR RENT) BE A PPLICABLE EVEN IF THE PROPERTY IS NOT LET . IN THE FACTS OF THAT CASE THE PROPERTY HAD NOT BEEN LET AT ANY TIME SINCE THE ASSUMPTION OF ITS OWNERSHIP, SO THAT IT COULD NOT BE REGARDED AS A PROPERTY LET. IN SUM 6. THE BASIS OF THE CHARGE TO INCOME TAX I N RESPECT OF A HOUSE PROPERTY, NOT OCCUPIED BY ITS OWNER FOR THE PURPOSE OF BUSINESS OR PROFESSION CARRIED ON BY HIM, IS ITS ANNUAL VALUE ; ITS INCOME POTENTIAL, AS REFLECTED IN ITS FAIR RENTAL VALUE (FRV), I.E., THE RENT AT WHICH IT MAY REASONABLY BE EX PECTED TO BE LET FROM YEAR TO YEAR. THIS IS IRRESPECTIVE OF WHETHER THE PROPERTY IS ACTUALLY LET OR NOT . THE EXCEPTION TO TAXING THE FRV OF A HOUSE PROPERTY UNDER THE ACT IS PROVIDED IN RESPECT OF ONE HOUSE PROPERTY WHICH THE OWNER COULD NOT, BY REASON OF HIS EMPLOYMENT OR BUSINESS/PROFESSION, OCCUPY, PROVIDED IT IS NOT ACTUALLY LET AND NO OTHER BENEFIT HAS BEEN AVAILED OF BY HIM DURING THE RELEVANT YEAR, IN WHICH CASE THE AV IS TAKEN AT NIL. THE POSITION IN LAW IS CLEAR ; IN FACT, STANDS ENUNCIATED BY A NUM BER OF DECISIONS BY THE HIGHER COURTS OF LAW (REFER PARA S 4,5.1 ). THE FACT OF LETTING ASSUMES SIGNIFICANCE ONLY WHERE THE PROPERTY IS 11 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT ACTUALLY LET AND THE RENT RECEIVED/RECEIVABLE EXCEEDS THE FAIR RENTAL VALUE , SO THAT THE ENHANCED SUM SUBSTITUTES THE FRV AS THE AV . A FURTHER EXCEPTION IS DRAWN WHERE ON ACCOUNT OF VACANCY THIS RENT FALLS EVEN BELOW THE FRV, IN WHICH CASE IT IS THIS REDUCED AMOUNT WHICH IS TO BE ADOPTED AS THE AV . THE PROPERTY BEING LET, THOUGH UNABLE TO FETCH THE RENT DUE TO VACANCY , THE AM OUNT ACTUALLY REALI Z ED/REALIZABLE IS TAKEN AS THE AV, WHETHER LOWER OR HIGHER THAN THE FRV. THAT IS, WHERE THE PROPERTY IS LET, THE ACTUAL RENT IS MADE THE BASIS FOR AV IN P REFERENCE TO THE NOTIONAL (FAIR) RENT PROVIDED THE DECLINE IN RENT (W.R.T. FAIR REN T) IS ON ACCOUNT OF VACANCY OR UNREALIZABILITY . THIS IS THE EFFECT OF A COMBINED/CONJOINT READING OF SECTION 23(1), I.E., OF ALL ITS LIMBS TOGETHER, EVEN AS THE ENTIRE SECTION STANDS READ, AS IS TO BE, AS A WHOLE. BOTH SS. 23(1)(B) AND 23(1)(C) ONLY REPRES ENT DIFFERENT SCENARIOS QUA A PROPERTY WHICH IS LET. THAT THE LETTING IS FOR RENT IS BOTH PLAIN AND MANIFEST, SO THAT IT CONTEMPLATES ACTUAL LETTING ONLY. HOW ELSE COULD, ONE MAY ASK, THE REDUCTION IN RENT RECEIVED/RECEIVABLE AND, THUS, IN AV , BE POSSIBLE ? THE ACTUAL LETTING IS THUS THE SINE QUA NON WHERE A REDUCTION OR REMISSION IN RENT ON ACCOUNT OF VACANCY OCCURS, AND IS THUS TO BE TAKEN IN TO ACCOUN T . THE WORDS WHERE THE PROPERTY IS LET IN SECTIONS 23(1)(B) AND 23(1)(C), THUS, REPRESENTS A STATE OF AC TUAL LETTING AND CANNOT BE EXTENDED TO A STATE OF INTENDED LETTING. LETTING, IT MAY BE APPRECIATED, IS A CULMINATION OF INTENDED LETTING, SO THAT THE ACT STIPULATES A MATURITY/COMPLETION OF THE INTENTION TO LET. THE WORDS ACTUALLY LET IN SECTION 23 (3) HAVE NO BEARING AT ALL IN THE MATTER. THE SAME HAVE PERHAPS BEEN USED TO EMPHASIZE THE DEEMED LETTING WHERE SOME BENEFIT IS DERIVED BY THE OWNER IN RESPECT OF HIS HOUSE PROPERTY, WHETHER SELF - OCCUPIED OR NOT, AND ALSO OF SUCH DEEMING IN RESPECT OF ALL SUCH RESIDENTIAL HOUSES, SAVE ONE (SECTIONS 23(2), 23(3) AND 23(4)). THERE IS ALSO NO ANOMALY IN THE PROVISION, WHICH IS SOUGHT TO BE PLEADED WITH REFERENCE TO THE WORD WHOLE OCCURRING IN S. 23(1)(C). THE SAME STANDS ANSWERED IN VIVEK JAIN (SUPRA) ( ALSO REFER PARA 5.2 ). T HE SAME IS IN FACT WITH REFERENCE TO THE QUANTUM OF DEDUCTION IN AV, IF ANY, WHILE THE WORDS WHERE THE PROPERTY IS LET REFER TO THE QUALIFYI NG CONDITION FOR VACANCY REMISSION. VACANCY AS A CONCEPT HAS , AS AFORE - 12 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT NOTED, A SYMBIOTIC RELATI ONSHIP WITH THE NOTION OF LETTING IN - AS - MUCH AS IT DRAWS UPON AND IS INEXTRICABLY LINKED THERE TO , DEVOID OF ANY MEANING IN THE A BSENCE THEREOF, IMPLYING ONLY AN ACTUAL LETTING. BOTH, THE SCHEME OF THE ACT AS WELL A S THE LANGUAGE OF THE PROVISION ARE ABUNDA NTLY PLAIN AND CLEAR. THERE IS NO SCOPE FOR THE APPLICATION OF THE PRINCIPLE OF CAUSUS OMIS S US , EVEN AS OBSERVED BY THE HONBLE COURT IN VIVEK JAIN (SUPRA). TAXING STATUTES ARE TO BE STRICTLY CONSTRUED, AGAIN, A S NOTED BY IT. THE SETTLED POSITION OF LAW, A S ENUNCIATED ABOVE WITH REFERENCE TO A NUMBER OF DECISIONS BY THE HONBE HIGH COURTS, INCLUDING THE JURISDICTIONAL HIGH COURT, THUS REMAINS UNCHANGED POST FINANCE ACT, 2001, SUBSTITUTING SECTIONS 23 AND 24 WITH EFFECT FROM 01/4/2002, I.E., QUA THE SCOPE AN D QUALIFYING CONDITION FOR VACANCY REMISSION. THIS IS ALSO THE CLEAR FINDING GIVEN IN VIVEK JAIN (SUPRA), FOR WHICH THE HONBLE COURT ALSO REFERS TO THE NOTES ON CLAUSES (REPORTED AT [2001] 248 ITR (ST.) 35, 118) AS WELL AS THE DEPARTMENTS CIRCULAR NO. 14 OF 2001 (SUPRA) , ALSO REPRODUCING THERE - FROM (AT PAGES 80 - 81 OF THE REPORTS). THE SAID DECISION, BEING BY A HIGHER APPELLATE FORUM, HAS EVEN OTHERWISE A HIGHER PRECEDENTIAL VALUE, I.E., THAN THAT BY THE TRIBUNAL, EVEN AS NO CONTRARY DECISION BY ANY HIGHER COURT HAS BEEN BROUGHT TO OUR NOTICE. FURTHER, ALL THE DECISIONS REFERRED TO BY THE ASSESSEE STAND RENDERED FOLLOWING THE DECISION IN PREMSUDHA EXPORTS P. LTD. (SUPRA) (OR THE ORDERS PASSED BY THE TRIBUNAL FOLLOWING IT) , RENDERED WITHOUT THE BENEFIT OF TH E DECISION IN VIVEK JAIN (SUPRA), WHICH ALSO MEETS THE OBJECTIONS RAISED IN THE FORMER TO DEPARTING BY DEEMING INTENDED LETTING AS LETTING, FROM THE CLEAR MEANING OF THE LANGUAGE OF THE PROVISION. IT IS IN FACT IN THE FIRST PLACE APPALLING THAT THE DECIS ION IN VIVEK JAIN (SUPRA), RENDERED IN JANUARY, 2011 UPON RELYING ON A NUMBER OF AUTHORITIES , IS NOT CITED OR RELIED UPON BY THE REVENUE BEFORE THE TRIBUNAL IN THESE CASES, MUCH LESS THOSE BY THE TRIBUNAL TAKING A DIFFERENT VIEW, INCLUDING IN THE CASE OF VIVEK JAIN ITSELF. THIS WOULD HAVE HAD THE EFFECT OF THE TRIBUNAL TAKING A DIFFERENT VIEW IN THE MATTER, AS IN THE CASE OF INDRA S. JAIN VS. ITO [2012] 52 SOT 270 ( MUM ) . FURTHER, WHETHER THE TRIBUNAL IS COMPETENT TO READ DOWN A PROVISION OF LAW IS ANOTHER ASPECT OF THE MATTER THAT WOULD ARISE FOR CONSIDERATION IN 13 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT THE MATTER, I.E., WHERE THE SAME STAND TO BE FOLLOWED OR, IN FACT, EVEN RELIED UPON. THIS IN FACT ASSUMES ALL THE MORE SIGNIFICANCE IN A CASE AS THE PRESENT ONE WHERE THE RELEVANT PROVISION HAS REC EIVED EXHAUSTIVE ELUCIDATION BY THE HIGHER COURTS OF LAW, WHILE INTERPRETING AN ANALOGOUS PROVISION, WITH THEIR BEING NO FINDING BY THE TRIBUNAL OF THE AMENDMENT EFFECTING A MATERIAL CHANGE BY FINANCE ACT, 2001 , TOWARD WHICH, AS AFORE - NOTED, WE FIND NO IND ICATION ANYWHERE. RATHER, INTERPRETING THE PROVISION IN THE MANNER SUGGESTED, EVERY UN - L ET PROPERTY COULD POSSIBLY BE REGARDED AS A CASE OF INTEN DED LET TING, DEFEATING THE PROVISION. IN OUR VIEW, THERE IS ACCORDINGLY NO SCOPE FOR TAKING ANY DIFFERENT VIEW IN THE MATTER. BEFORE PARTING, WE MAY ALSO ADVERT TO THE ARGUMENT ADVANCED DURING HEARING OF THE OCCUPATION CERTIFICATE BEING ISSUED BY BRIHAN MUMBAI MAHANAGAR PALI KA ONLY ON MAY 21, 2009 AND THE FINAL PAYMENT OF RS. 875 LACS TO THE SELLER BEING, AS PROVIDED IN THE CONVEYANCE DEED, MADE ONLY THERE - UPON, SEEKING ITS ADMISSION AS ADDITIONAL EVIDENCE ON THAT GROUND. THE SAME IS WITHOUT MERIT, EVEN AS NOTED BY THE BENCH DURING HEARING ITSELF. THE POSSESSION OF THE PROPERTY HAS BEEN ADMITTEDLY TAKEN ON 18/12/2008, AND THE PROPERTY IS FULLY CONSTRUCTED, HAVING ALL AMENITIES (REFER CLAUSE (XV) OF THE CONVEYANCE DEED). THE PROPERTY IS LETTABLE AND, IN FACT, ACTUALLY LET 1/4/ 2009 ONWARDS (REFER PARAS 2.1, 4(A) OF WS DATED 13/8/2012/AT PB PGS. 23, 30). THE CONVEYANCE OF THE PROPERTY IS COMPLETE, AND THE DEED ONLY RECOGNIZES A LIEN THEREON IN FAVOUR OF THE VENDOR TO THE EXTENT OF THE AMOUNT UNPAID, I.E., RS. 875 LACS, ABOUT 10% OF THE PROPERTY VALUE. WE DECIDE ACCORDINGLY, UPHOLDING THE IMPUGNED ORDER. 7 . IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 12 , 201 6 SD/ - SD/ - ( RAM LAL NEGI ) (S ANJAY ARORA) 14 ITA NO. 6717/MUM/2012 (A.Y. 2009 - 10) SHARAN HOSPITALITY PRIVATE LIMITED VS. DY. CIT / J UD ICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 12 . 0 9 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI