The flat could not be let at all because it did not match the sanctioned plan and needed alteration. Am I still taxable on a notional annual value?
The Tribunal held he was entitled to vacancy allowance under s.23(1)(c), on the footing that a flat which departs from the sanctioned plan and needs alteration is not in a position to be let until the defects are removed. The flat was found vacant for the whole of the assessment year. No proportionate computation was made: having decided entitlement, the Tribunal took the figure the assessee had himself offered in his grounds of appeal, Rs 11,83,723, and modified the order below to that extent.
Decided by the ITAT (ITAT Mumbai Bench 'G' — Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member); order authored by Shamim Yahya (Accountant Member)) on 2018-08-21, reported as (2018) 172 ITD 345 / 195 TTJ 513 / 169 DTR 305 (Mum.)(Trib.); [2018] 96 taxmann.com 476 (Mumbai - Trib.); IT Appeal No. 5811 (Mum.) of 2016; AY 2012-13. It bears on section 22, section 23, section 23(1)(a), section 23(1)(c) of the Income Tax Act 1961, in House Property matters.
It is useful for a property that could not be let because of its own condition rather than because the owner withheld it: unauthorised construction, defects, work needed to bring the building into conformity with a sanctioned plan. The Tribunal refused to let an appellate authority grade defects as 'minor' without material, and it accepted agents' letters about lettability as evidence. What it does not do is show how clause (c) is worked arithmetically. The flat was vacant for the whole year, no apportionment was made, and the figure finally taxed came from the assessee's own concession, so this is authority on entitlement rather than on computation. It also records no earlier letting, which is why it rests on the wider reading of 'property is let' rather than on an actual past tenancy.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
For assessment year 2012-13 the assessee owned property on the 12th and 13th floors of a building in Bandra, Mumbai, in addition to his own residential flats, at a cost of Rs 11,58,40,022. He returned an annual rateable value of Rs 4,00,000 less municipal taxes of Rs 20,000. The Assessing Officer rejected that, took the annual rateable value at 7 per cent of the investment, Rs 81,08,802, and assessed income from house property at Rs 56,76,162. The Commissioner (Appeals) held that method unsustainable but rejected the assessee's case that the construction was unauthorised, treating the alterations required as minor, and substituted Rs 50,40,000 a year by reference to another flat in the same building let at Rs 1,75,000 a month. The Tribunal recorded as a finding that the flat had remained vacant in the assessment year, with no rent received. Additional evidence admitted on appeal included a ledger of the additional construction expenditure, the certified floor plan, an architect's area certificate, property tax bills, a deed of rectification of 19 June 2014 dividing the flat into three parts, a valuer's letter and proof of non-occupancy charges from 13.02.2018 when the flats were let, showing that over Rs 50 lakhs was spent on alterations.
The assessee was held entitled to vacancy allowance under s.23(1)(c). Once it is accepted that the construction was not fully in accordance with the sanctioned plan and that alteration was required to bring it under the proper plan, it must be accepted that the flat was not in a position to be let until the defects were removed; the Commissioner (Appeals) had graded the defects as 'minor' without any material for dissecting them into major and minor, and his dismissal of the estate agents' letters as spurious was not supported. No proportionate vacancy computation was made. Because the assessee had offered in his grounds of appeal to be taxed on his valuer's figure of Rs 11,83,723, the Tribunal accepted that proposal and modified the order below accordingly, and the appeal was partly allowed.
The Tribunal reasoned from the condition of the property. The Commissioner (Appeals) had admitted that defects existed but graded them minor without giving any material for that distinction; once it is accepted that the construction departed from the sanctioned plan and that alteration was needed, the flat was not in a position to be let until the defects were removed, and letting out a house not constructed as per an approved plan cannot be forced on an owner. The letters from two estate agents saying the flat was not readily lettable in its condition were on record and had been wrongly dismissed. The subsequent expenditure of over Rs 50 lakhs and the bifurcation of the flat into three parts supported the claim rather than undermining it. On the law, the Tribunal read s.23(1) as allowing a proportionate deduction where the property or part of it was vacant during the period, and set out at length the reasoning in Premsudha Exports on the words 'property is let' in clause (c): those words do not mean 'property actually let out', whether the property was let in the past is not relevant, and what is required is that it be held with an intention to let in the relevant year coupled with efforts to let it. That extract sits in the second of the two paragraphs numbered 12, and the “[Para 16]” printed at the end of it is the paragraph number in Premsudha Exports, not in this order.
Once when it is accepted that the construction was not fully in accordance with the plan and some alteration was required to bring it under proper plan, it has to be accepted that the flat was not in a position to be let out dehorse removal of the defects.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppThe Tribunal held he was entitled to vacancy allowance under s.23(1)(c), on the footing that a flat which departs from the sanctioned plan and needs alteration is not in a position to be let until the defects are removed. The flat was found vacant for the whole of the assessment year. No proportionate computation was made: having decided entitlement, the Tribunal took the figure the assessee had himself offered in his grounds of appeal, Rs 11,83,723, and modified the order below to that extent. This was decided by the ITAT (ITAT Mumbai Bench 'G' — Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member); order authored by Shamim Yahya (Accountant Member)) and bears on section 22, section 23, section 23(1)(a), section 23(1)(c) of the Income Tax Act 1961. It is reported as (2018) 172 ITD 345 / 195 TTJ 513 / 169 DTR 305 (Mum.)(Trib.); [2018] 96 taxmann.com 476 (Mumbai - Trib.); IT Appeal No. 5811 (Mum.) of 2016; AY 2012-13. It is useful for a property that could not be let because of its own condition rather than because the owner withheld it: unauthorised construction, defects, work needed to bring the building into conformity with a sanctioned plan. The Tribunal refused to let an appellate authority grade defects as 'minor' without material, and it accepted agents' letters about lettability as evidence. What it does not do is show how clause (c) is worked arithmetically. The flat was vacant for the whole year, no apportionment was made, and the figure finally taxed came from the assessee's own concession, so this is authority on entitlement rather than on computation. It also records no earlier letting, which is why it rests on the wider reading of 'property is let' rather than on an actual past tenancy. If it applies to you, the first step is this: Document why the property could not be let at all — here, that the construction departed from the sanctioned plan and needed alteration — because the condition of the property is what carried the case.
For assessment year 2012-13 the assessee owned property on the 12th and 13th floors of a building in Bandra, Mumbai, in addition to his own residential flats, at a cost of Rs 11,58,40,022. He returned an annual rateable value of Rs 4,00,000 less municipal taxes of Rs 20,000. The Assessing Officer rejected that, took the annual rateable value at 7 per cent of the investment, Rs 81,08,802, and assessed income from house property at Rs 56,76,162. The Commissioner (Appeals) held that method unsustainable but rejected the assessee's case that the construction was unauthorised, treating the alterations required as minor, and substituted Rs 50,40,000 a year by reference to another flat in the same building let at Rs 1,75,000 a month. The Tribunal recorded as a finding that the flat had remained vacant in the assessment year, with no rent received. Additional evidence admitted on appeal included a ledger of the additional construction expenditure, the certified floor plan, an architect's area certificate, property tax bills, a deed of rectification of 19 June 2014 dividing the flat into three parts, a valuer's letter and proof of non-occupancy charges from 13.02.2018 when the flats were let, showing that over Rs 50 lakhs was spent on alterations. The matter was decided on 2018-08-21 by the ITAT (ITAT Mumbai Bench 'G' — Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member); order authored by Shamim Yahya (Accountant Member)). On those facts the ITAT held as follows. The assessee was held entitled to vacancy allowance under s.23(1)(c). Once it is accepted that the construction was not fully in accordance with the sanctioned plan and that alteration was required to bring it under the proper plan, it must be accepted that the flat was not in a position to be let until the defects were removed; the Commissioner (Appeals) had graded the defects as 'minor' without any material for dissecting them into major and minor, and his dismissal of the estate agents' letters as spurious was not supported. No proportionate vacancy computation was made. Because the assessee had offered in his grounds of appeal to be taxed on his valuer's figure of Rs 11,83,723, the Tribunal accepted that proposal and modified the order below accordingly, and the appeal was partly allowed.
The Tribunal reasoned from the condition of the property. The Commissioner (Appeals) had admitted that defects existed but graded them minor without giving any material for that distinction; once it is accepted that the construction departed from the sanctioned plan and that alteration was needed, the flat was not in a position to be let until the defects were removed, and letting out a house not constructed as per an approved plan cannot be forced on an owner. The letters from two estate agents saying the flat was not readily lettable in its condition were on record and had been wrongly dismissed. The subsequent expenditure of over Rs 50 lakhs and the bifurcation of the flat into three parts supported the claim rather than undermining it. On the law, the Tribunal read s.23(1) as allowing a proportionate deduction where the property or part of it was vacant during the period, and set out at length the reasoning in Premsudha Exports on the words 'property is let' in clause (c): those words do not mean 'property actually let out', whether the property was let in the past is not relevant, and what is required is that it be held with an intention to let in the relevant year coupled with efforts to let it. That extract sits in the second of the two paragraphs numbered 12, and the “[Para 16]” printed at the end of it is the paragraph number in Premsudha Exports, not in this order. In the words reproduced by the source cited on this page: "Once when it is accepted that the construction was not fully in accordance with the plan and some alteration was required to bring it under proper plan, it has to be accepted that the flat was not in a position to be let out dehorse removal of the defects." The decision followed or applied Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158 (Mum.) — followed, para 17.
It was decided by the ITAT on 2018-08-21 and is reported as (2018) 172 ITD 345 / 195 TTJ 513 / 169 DTR 305 (Mum.)(Trib.); [2018] 96 taxmann.com 476 (Mumbai - Trib.); IT Appeal No. 5811 (Mum.) of 2016; AY 2012-13. 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)(a), 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 cuts both ways and is cited by both sides. The assessee was held entitled to vacancy allowance under s.23(1)(c). Once it is accepted that the construction was not fully in accordance with the sanctioned plan and that alteration was required to bring it under the proper plan, it must be accepted that the flat was not in a position to be let until the defects were removed; the Commissioner (Appeals) had graded the defects as 'minor' without any material for dissecting them into major and minor, and his dismissal of the estate agents' letters as spurious was not supported. No proportionate vacancy computation was made. Because the assessee had offered in his grounds of appeal to be taxed on his valuer's figure of Rs 11,83,723, the Tribunal accepted that proposal and modified the order below accordingly, and the appeal was partly allowed. It arises in House Property matters, on section 22, section 23, section 23(1)(a), section 23(1)(c) of the Income Tax Act 1961, and was decided by ITAT Mumbai Bench 'G' — Shamim Yahya (Accountant Member) and Sandeep Gosain (Judicial Member); order authored by Shamim Yahya (Accountant 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. Get contemporaneous evidence of lettability from estate agents and keep the correspondence; those letters were treated as evidence here. Put the alteration expenditure, the sanctioned and certified plans and any rectification deed on record, even if they post-date the year. Do not treat this as authority for apportioning the annual value across months: the flat was vacant for the whole year and the figure taxed came from the assessee's own offer. Keep the material showing the property was not taken back for the owner's own use during the vacancy.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later treatment was found. A full-text search of a subscription research database on the distinctive part of the party name returns twenty-six records and none of them applies, follows, affirms, distinguishes or doubts this order; the document carries no later-treatment note. The one near miss, Padam Chand Gupta v. ACIT [2025] 174 taxmann.com 195 (Delhi - Trib.), cites a different and earlier appeal of the same assessee, and cites it only in counsel's list, the Bench deciding on other grounds. No contrary authority was found in that search either, but absence of contrary authority is not good law, so the status stays unverified. The clause itself remains contested: the Andhra Pradesh High Court's decision in Vivek Jain, requiring an actual letting before clause (c) can be reached at all, is the answer an officer will give, and this order records no earlier letting of the flat. That finding was checked against a published source, which is linked on this page, on 2026-08-24. 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.
The order has now been read in full and the entry is drawn from its numbered paragraphs. The sentence formerly quoted here appears nowhere in the order — it is editorial headnote language — and has been replaced with the Tribunal's own words at para 13. Two corrections of substance follow from the read. The order finds at para 12 that the flat had remained vacant in the assessment year, that is for the whole year; it identifies no part-year vacancy period, states nowhere how long the alterations took, and apportions nothing, so this entry is not authority on how clause (c) is worked where a property is let for part of a year and vacant for the rest, and the slug's 'part of the year' framing misdescribes the case. And having held the assessee entitled to the allowance, the Tribunal fixed the figure by accepting his own offer of Rs 11,83,723 in the grounds of appeal, so the quantum was settled by consent rather than computed. The appeal was partly allowed for that reason. One mechanical point about citing this order: its paragraph numbering restarts, running 11, 12, 13, 14, 15 and then 12, 13, 14 again, so a bare paragraph number is ambiguous — the passage quoted here is in the first paragraph 13, and the disposal is in the second paragraph 14. It does not show how clause (c) is worked where a property is let for part of the year and vacant for the rest, because no apportionment was made and the figure taxed came from the assessee's concession. It records no earlier letting of the flat, so it does not meet the objection that clause (c) requires an actual letting. It does not decide how long a vacancy attributable to defects may run, nor what evidence of efforts to let is required where no agent's letter exists. 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 assessee was held entitled to vacancy allowance under s.23(1)(c). Once it is accepted that the construction was not fully in accordance with the sanctioned plan and that alteration was required to bring it under the proper plan, it must be accepted that the flat was not in a position to be let until the defects were removed; the Commissioner (Appeals) had graded the defects as 'minor' without any material for dissecting them into major and minor, and his dismissal of the estate agents' letters as spurious was not supported. No proportionate vacancy computation was made. Because the assessee had offered in his grounds of appeal to be taxed on his valuer's figure of Rs 11,83,723, the Tribunal accepted that proposal and modified the order below accordingly, and the appeal was partly allowed.
TaxSphere, “Saif Ali Khan Pataudi v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/saif-ali-khan-pataudi-v-acit-vacancy-for-part-of-the-year/ (validity last checked 2026-08-24)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My unsold flats are stock in trade and were never let. Can the AO still tax notional rent?
My flat was never let during the year. Can I take the annual value as nil under the vacancy clause?
Eight units in my mall stayed empty for the whole year. The Assessing Officer relies on Vivek Jain and says section 23(1)(c) needs the unit to have been actually let during the year, so he has taxed deemed rent under section 23(1)(a). How do I meet that?
The flat was let for three years, then lay empty for the whole of this year. Is the annual value nil?
