Friday, 30 December 2016

Whether annual value of every second property owned by individual, which remained vacant, would be assessable u/s 23 - YES: HC

THE ISSUE IS - Whether the annual value of every second property owned by an individual, which admittedly remained vacant throughout the year would be assessable u/s 23(1)(a). YES IS THE VERDICT.


Facts of the case:
During the subject year, a search was conducted upon J Jeweller Group and assessee being related to that Group, was also subjected to such search, on the basis of which, a notice was issued to him as to why deemed income by determining annual value of properties, of which he was found to be the owner, may not be added to his income. Assessing Officer found assessee to be the owner of the properties. In the course of the proceedings, the property at Patiala was treated as self-occupied but since the aassessee was found to own more than one property and in his return, had not shown any deemed income from them, notional rent was determined and after providing the statutory deductions, added to assessee's income.
On appeal, the HC held that,
++ Where the property referred to in Section 23(2) consists of more than one house, then Section 23(2) is to apply only in respect of one of such houses and Section 23(4)(b) provides that the annual value of the house or houses, other than the house in respect of which the assessee had exercised an option under Section 23(4)(a) shall be determined under Section 23(1) as if such house or houses had been let. In case the assessee owns more than one house, then the annual value of one of such houses, which is in his occupation as his own residence or which was not occupied by him for the reason that on account of his employment, business or profession, he had to reside at other places in a building not owned by him, is to be taken as 'Nil'. For the other houses that the assessee may own which are under his occupation or could not be occupied by him for the reason that on account of his employment, business or profession he had to reside at other places in a building not owned by him, their annual value is to be determined under Section 23(4) read with Section 23(1);
++ Section 23(1)(b) and (c) would apply only to those properties which were actually let out and for which rent was actually received or receivable by the assessee. These provisions deal with the concept of real income and not notional income. Therefore, the annual value of the properties which are more than one, owned by the assessee and which admittedly remained vacant throughout the previous year would not be assessed under Section 23(1)(c) but under Section 23(1)(a). The annual value would, therefore, be determined notionally as done by the AO.

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