My flat stayed vacant although I tried to let it. Can I still claim vacancy allowance?
Yes, on this Tribunal view. The words 'property is let' in s.23(1)(c) do not mean 'property actually let out' - holding the property for letting during the year with genuine, documented efforts to find a tenant is enough, and infallible proof of those efforts cannot be demanded.
Decided by the ITAT (Income Tax Appellate Tribunal, Mumbai Bench 'G' - Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member)) on 2018-08-10, reported as (2018) 172 ITD 266 / 169 DTR 169 / 195 TTJ 241 / 66 ITR 74 (SN) (Mum.)(Trib.); ITA No. 3755/Mum/2016. It bears on section 22, section 23, section 23(1)(c) of the Income Tax Act 1961, in House Property matters.
Officers routinely refuse vacancy allowance on the short ground that no tenant was found, and then compute the annual value as though the property were let. This reads the clause as describing the character in which the owner holds the property, which is the argument that gets the annual value reduced. The Tribunal also set the evidentiary bar at a reasonable demonstration of effort rather than conclusive proof, which is what most assessees can actually produce.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2012-13 the assessee, a cricketer who returned income of Rs. 61,23,14,400, owned two flats in Pune: one at Treasure Park, costing Rs. 82,80,750, which was let for nine months at Rs. 15,000 a month, and one at Sapphire Park, costing Rs. 60,60,000, which he said had stayed vacant the whole year because no suitable tenant could be found. He returned the annual value of the Sapphire Park flat as nil, claiming vacancy allowance under s.23(1)(c). The Assessing Officer rejected the explanation and estimated rental income at six per cent of the cost of both flats taken together, adding Rs. 8,60,445. The evidence of the effort to let consisted of three letters to the builder - one of 15 May 2011 thanking him for finding a tenant for the Treasure Park flat and asking him to find one for Sapphire Park, and reminders of 18 August 2011 and 4 December 2011. The Commissioner (Appeals) treated those letters as insufficient because there was no proof of despatch, receipt or reply, said a prudent owner would have gone to estate agents, but took a rate of Rs. 15,000 a month from a property website and reduced the addition to Rs. 1,26,000.
The appeal was allowed and the addition was deleted in full, the annual value of the vacant flat standing at nil. The Tribunal did not lay down a new construction of s.23(1)(c); it adopted the construction already given by the Mumbai Bench in Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158, which it set out at para 12, that a property held with the intention of letting in the relevant year coupled with efforts to let it falls within clause (c) even though it was not actually let. What this Bench decided for itself was evidentiary: on facts where the same builder had in fact found a tenant for the assessee's other flat, it was not open to the authorities to treat the assessee's letters to that builder as fabricated, and to demand a despatch register or a stamped receipt from the builder was an unreasonable standard of proof (para 13).
The Tribunal set out s.23(1) and reasoned that where a property is vacant during the period, a proportionate deduction follows from the sum for which it might reasonably be expected to let (para 12). For the meaning of 'property is let' it reproduced the passage from Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158 (Mum.), which reasons from the word 'actually' in s.23(3) that clause (c) does not require an actual letting, and warns that a contrary reading would let a single day's letting fix the character of a property for its whole life. It then tested the assessee's case on that footing. The department's doubts about the three letters did not survive the fact that the same builder had found a tenant for the assessee's other flat, whose rent had been offered and accepted; the demand for a despatch register and a stamped acknowledgment was an abnormal expectation; and it was beyond normal conception to require a man with the assessee's professional commitments to have mounted a more elaborate search through estate agents and kept an infallible record of it. On that basis the orders below were set aside and the addition deleted.
In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law.
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Handle my notice → Ask a CA on WhatsAppYes, on this Tribunal view. The words 'property is let' in s.23(1)(c) do not mean 'property actually let out' - holding the property for letting during the year with genuine, documented efforts to find a tenant is enough, and infallible proof of those efforts cannot be demanded. This was decided by the ITAT (Income Tax Appellate Tribunal, Mumbai Bench 'G' - Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member)) and bears on section 22, section 23, section 23(1)(c) of the Income Tax Act 1961. It is reported as (2018) 172 ITD 266 / 169 DTR 169 / 195 TTJ 241 / 66 ITR 74 (SN) (Mum.)(Trib.); ITA No. 3755/Mum/2016. Officers routinely refuse vacancy allowance on the short ground that no tenant was found, and then compute the annual value as though the property were let. This reads the clause as describing the character in which the owner holds the property, which is the argument that gets the annual value reduced. The Tribunal also set the evidentiary bar at a reasonable demonstration of effort rather than conclusive proof, which is what most assessees can actually produce. If it applies to you, the first step is this: Put the letting efforts on record for the year in question - the material showing the property was held out for letting and that tenants were sought.
For assessment year 2012-13 the assessee, a cricketer who returned income of Rs. 61,23,14,400, owned two flats in Pune: one at Treasure Park, costing Rs. 82,80,750, which was let for nine months at Rs. 15,000 a month, and one at Sapphire Park, costing Rs. 60,60,000, which he said had stayed vacant the whole year because no suitable tenant could be found. He returned the annual value of the Sapphire Park flat as nil, claiming vacancy allowance under s.23(1)(c). The Assessing Officer rejected the explanation and estimated rental income at six per cent of the cost of both flats taken together, adding Rs. 8,60,445. The evidence of the effort to let consisted of three letters to the builder - one of 15 May 2011 thanking him for finding a tenant for the Treasure Park flat and asking him to find one for Sapphire Park, and reminders of 18 August 2011 and 4 December 2011. The Commissioner (Appeals) treated those letters as insufficient because there was no proof of despatch, receipt or reply, said a prudent owner would have gone to estate agents, but took a rate of Rs. 15,000 a month from a property website and reduced the addition to Rs. 1,26,000. The matter was decided on 2018-08-10 by the ITAT (Income Tax Appellate Tribunal, Mumbai Bench 'G' - Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member)). On those facts the ITAT held as follows. The appeal was allowed and the addition was deleted in full, the annual value of the vacant flat standing at nil. The Tribunal did not lay down a new construction of s.23(1)(c); it adopted the construction already given by the Mumbai Bench in Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158, which it set out at para 12, that a property held with the intention of letting in the relevant year coupled with efforts to let it falls within clause (c) even though it was not actually let. What this Bench decided for itself was evidentiary: on facts where the same builder had in fact found a tenant for the assessee's other flat, it was not open to the authorities to treat the assessee's letters to that builder as fabricated, and to demand a despatch register or a stamped receipt from the builder was an unreasonable standard of proof (para 13).
The Tribunal set out s.23(1) and reasoned that where a property is vacant during the period, a proportionate deduction follows from the sum for which it might reasonably be expected to let (para 12). For the meaning of 'property is let' it reproduced the passage from Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158 (Mum.), which reasons from the word 'actually' in s.23(3) that clause (c) does not require an actual letting, and warns that a contrary reading would let a single day's letting fix the character of a property for its whole life. It then tested the assessee's case on that footing. The department's doubts about the three letters did not survive the fact that the same builder had found a tenant for the assessee's other flat, whose rent had been offered and accepted; the demand for a despatch register and a stamped acknowledgment was an abnormal expectation; and it was beyond normal conception to require a man with the assessee's professional commitments to have mounted a more elaborate search through estate agents and kept an infallible record of it. On that basis the orders below were set aside and the addition deleted. In the words reproduced by the source cited on this page: "In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law." The decision followed or applied Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158 (Mum.)(Trib.).
It was decided by the ITAT on 2018-08-10 and is reported as (2018) 172 ITD 266 / 169 DTR 169 / 195 TTJ 241 / 66 ITR 74 (SN) (Mum.)(Trib.); ITA No. 3755/Mum/2016. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 22, section 23, section 23(1)(c), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the addition was deleted in full, the annual value of the vacant flat standing at nil. The Tribunal did not lay down a new construction of s.23(1)(c); it adopted the construction already given by the Mumbai Bench in Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158, which it set out at para 12, that a property held with the intention of letting in the relevant year coupled with efforts to let it falls within clause (c) even though it was not actually let. What this Bench decided for itself was evidentiary: on facts where the same builder had in fact found a tenant for the assessee's other flat, it was not open to the authorities to treat the assessee's letters to that builder as fabricated, and to demand a despatch register or a stamped receipt from the builder was an unreasonable standard of proof (para 13). It arises in House Property matters, on section 22, section 23, section 23(1)(c) of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Mumbai Bench 'G' - Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Argue the construction first: 'is let' describes how the property was held, not a completed letting. Resist a demand for conclusive proof of the attempts, and cite the Tribunal's holding that infallible proof cannot be required. Check the forum before relying on this, because a High Court view in your jurisdiction may be stricter.
Still good law. Applied by a later Bench. In Dy. CIT v. Dhaval D. Patel [2022] 145 taxmann.com 20 / [2023] 198 ITD 293 (Ahmedabad - Trib.), decided 10 November 2022 (P.M. Jagtap VP and Siddhartha Nautiyal JM), this decision is set out at para 8.5 and recorded as followed at para 8.8, among a line of orders on which the Bench dismissed the Revenue's appeal against deletion of notional annual value on twelve vacant properties. Two qualifications a reader should carry. First, Dhaval D. Patel states the rule more narrowly than this order does: it holds that clause (c) is available where the property was let in some earlier year and could not be let despite best efforts, and says s.23(1)(a) can be invoked where the property has never been let in any year and no effort was made. This order, following Premsudha Exports, does not require a prior letting. Second, the contrary authority is at High Court level. In Dhaval D. Patel the Departmental Representative relied on Vivek Jain v. Asstt. CIT [2011] 14 taxmann.com 146 / 337 ITR 74 (AP), where the High Court held that there is no vacancy allowance under s.23(1)(c) where the property was not let at all during the previous year and that 'let' cannot be read as 'intended to be let', and on Susham Singla v. CIT [2016] 76 taxmann.com 349 / [2017] 244 Taxman 302 (Punj. & Har.) to the same effect. The later order in the assessee's own case, Sachin R. Tendulkar v. ACIT [2021] 130 taxmann.com 415 / 191 ITD 478 (Mumbai - Trib.), is a remand to the Commissioner (Appeals) for assessment year 2014-15 for failure to adjudicate the same ground and expressly says the merits were not touched, so it neither supports nor disturbs this decision. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read the order for what it decides and what it borrows. The construction of 'property is let' that this order is usually cited for is not its own: the Tribunal reproduced it from the earlier Mumbai decision in Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158 and applied it. What this Bench decided for itself is evidentiary, and that is its real value: where the same builder had found a tenant for the assessee's other flat, letters to that builder asking him to find another could not be dismissed as fabricated, and a despatch register or a stamped receipt is not a fair thing to require. The efforts to let consisted of three letters to the builder, dated 15 May, 18 August and 4 December 2011. There is a real limit on where the point can be used. Two High Courts, Andhra Pradesh in Vivek Jain v. ACIT [2011] 337 ITR 74 and Punjab & Haryana in Susham Singla v. CIT [2017] 244 Taxman 302, hold that s.23(1)(c) has no application where the property was not let at all during the previous year, and even the Ahmedabad Bench that follows this order states the rule as requiring a letting in some earlier year. The order does not decide the case of a property that has never been let in any year, which is where the contrary High Court authority bites. Whether the Revenue appealed this order was not established. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the addition was deleted in full, the annual value of the vacant flat standing at nil. The Tribunal did not lay down a new construction of s.23(1)(c); it adopted the construction already given by the Mumbai Bench in Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158, which it set out at para 12, that a property held with the intention of letting in the relevant year coupled with efforts to let it falls within clause (c) even though it was not actually let. What this Bench decided for itself was evidentiary: on facts where the same builder had in fact found a tenant for the assessee's other flat, it was not open to the authorities to treat the assessee's letters to that builder as fabricated, and to demand a despatch register or a stamped receipt from the builder was an unreasonable standard of proof (para 13).
TaxSphere, “Sachin R Tendulkar v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/sachin-r-tendulkar-v-dcit-vacancy-allowance/ (validity last checked 2026-08-19)
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