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Mangaldas H. Verma Vs. Commissioner of Income-tax, Bombay City-iii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 140 of 1969
Judge
Reported in[1980]124ITR185(Bom)
ActsIncome Tax Act, 1961 - Sections 24(1)
AppellantMangaldas H. Verma
RespondentCommissioner of Income-tax, Bombay City-iii
Appellant AdvocateS.J. Mehta, Adv.
Respondent AdvocateR.J. Joshi. Adv.
Excerpt:
direct taxation - deduction - section 24 (1) (9) of income tax act, 1961 - whether assessee entitled to allowance in respect of vacancy of property while determining income under head 'property' in accordance with provisions of section 24 (1)(9) - property was never let out to anybody during accounting periods relevant to two assessment years - property self-occupied by assessee - held, question answered in negative. - - he, therefore, submitted that the taxing authorities as well as the tribunal were in error in rejecting the contention that was urged on behalf of the assessee......[1972] 8 itr 470. it was held in that case that under s. 24(1)(ix) where 'property is let and was vacant', the assessee was entitled to deduct the proportionate annual value. this expression should be given its ordinary reasonable meaning. that means that during a part of the year in question the property 'is let and was vacant'. where property is not let out at all during a particular year, the assessee would not be entitled to a deduction for vacancy. having regard to the language of clause (ix) there is nothing unusual in the view that has been taken by the calcutta high court in this case and no special reason in pointed out why we should differ from the view that has been taken by the calcutta high court in this case. 8. reference was made on behalf of the assessee to the.....
Judgment:

Kantawala, C.J.

1. Mangaldas H. Verma, the assessee, owned a property at Sion consisting of two floors. He had let out the ground floor and the first floor thereof was occupied by him. In the years of account, viz., years ending March 31, 1962, and March 31, 1964 relevant to the assessment years 1962-63 and 1964-65, the assessee shifted to his bungalow at Juhu, which was constructed earlier. The first floor in Sion property was not used by him nor was it kept vacant for his use. It was, however, not let out to anybody. The simple question which arose for consideration before the taxing authorities and the Tribunal was whether the assessee was entitled to any allowance in respect of the vacancy in regard to that portion of the property. The ITO did not give any allowance on account of vacancy in the computation on the assessee's income from the property for both the years. The order of the ITO upheld by the AAC and by the Tribunal. The Tribunal took the view that the deduction under s. 24(1)(ix) of the I.T. Act, 1961, will be available to the assessee provided two conditions are fulfilled : (1) The property must have been actually let out for some time, and (2) the property must have been vacant during a part of the accounting period. Since, in the present case, at no time the first floor which was initially occupied by the assessee, was let out, in the opinion of the Tribunal, the assessee was not entitled to deduction as contemplated by s. 24(1)(ix). He, accordingly, confirmed the order that was passed by the taxing authorities.

2. From this order of the Tribunal, the following question has been referred to us for our determination :

'Whether, on the facts and in the circumstances of the case, the assessee was entitled to the allowance for vacancy in determining his income under the head 'Property' in accordance with the provisions of s. 24(1)(ix) of the Income-tax Act, 1961 ?'

3. It was urged on behalf of the assessee that the provisions of clause (ix) of s. 24(1) of the Act ought to be given a comprehensive meaning or liberal construction and any property which is available for letting should enable the assessee or the owner thereof to claim deduction in respect thereof during the relevant accounting year or a part thereof it was vacant irrespective of the fact that at no time prior there to the property was let out. He, therefore, submitted that the taxing authorities as well as the Tribunal were in error in rejecting the contention that was urged on behalf of the assessee.

4. Section 24(1) deals with deductions from 'Income from house property.' We are concerned with clause (ix) thereof and its provisions are as under :

'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 :- ....

(ix) where the property is let and was vacant 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, which is proportionate to the period during which such part is wholly unoccupied.'

5. The provisions of clause (ix) can only be attracted if the condition therein mentioned is fulfilled. A deduction as contemplated by this clause can only be available if the property is let prior to the vacancy arising. It is only if it was so let out then alone the question of claiming a deduction in respect of portion of the annual value appropriate to any vacant part can arise. In the present case, at no time prior to the accounting periods relevant to the two assessment years with which we are concerned, the first floor of the property was ever let out to anybody. Initially, it was self-occupied by the assessee and after the assessee shifted to his new bungalow at Juhu, it was not let out to anybody. If that was so, on a plain reading of the provisions of clause (ix) of s. 24(1), it is quite clear that no deduction is permissible since at no time the first floor of the property was let out at any time prior to the end of the accounting periods.

6. It was urged on behalf of the assessee if the properties are available for letting, then the benefit of deduction permissible under s. 24(1)(ix) will be permissible to the assessee. Such a contention cannot be accepted on a plain reading of the language of the provisions of clause (ix). Prior letting is a condition precedent to a claim for deduction as contemplated by clause (ix) and since in the present case at no time prior to the two accounting periods with which we are concerned was the first floor of the building at any time let out, the deduction is not permissible even though it was available for being let out.

7. We may refer to the decision of the Calcutta High Court in the case of Liquidator, Mahmudabad Properties Ltd. v. CIT [1972] 8 ITR 470. It was held in that case that under s. 24(1)(ix) where 'property is let and was vacant', the assessee was entitled to deduct the proportionate annual value. This expression should be given its ordinary reasonable meaning. That means that during a part of the year in question the property 'is let and was vacant'. Where property is not let out at all during a particular year, the assessee would not be entitled to a deduction for vacancy. Having regard to the language of clause (ix) there is nothing unusual in the view that has been taken by the Calcutta High Court in this case and no special reason in pointed out why we should differ from the view that has been taken by the Calcutta High Court in this case.

8. Reference was made on behalf of the assessee to the provisions of the Explanation which was added by the Finance (No. 2) Bill, 1977. It is unnecessary to consider the effect of the Explanation because it is specifically stated in the objects and reasons of the Bill that the amendment will take effect from April 1, 1977, and will accordingly apply in relation to the assessment year 1977-78 and subsequent years. Since, in the present case, the question referred to us pertains to assessment years 1962-63 and 1964-65, the provisions of this Finance Bill are entire to the assessee.

9. In the result, the question referred to us is answered in the negative and in favour of the revenue. The assessee shall pay the costs of the revenue.


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