Section 23(1)(c)

Section 23(1)(c) — the law in short

What the courts have decided on section 23(1)(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Ansal Housing & Construction Ltd v ACIT High CourtHelps departmentUnder appeal
  My unsold flats are stock in trade and were never let. Can the AO still tax notional rent?
  On this Delhi High Court view, yes. Vacancy allowance under s.23(1)(c) presupposes an actual letting, so where flats have never been let in any previous year the assessee cannot enter that clause at all and is taxed under s.23(1)(a) on the sum for which the property might reasonably be expected to let.
• Vivek Jain v ACIT High CourtHelps department
  My flat was never let during the year. Can I take the annual value as nil under the vacancy clause?
  No, on this High Court view. Section 23(1)(c) presupposes an actual letting - the clause covers a property that is let and is vacant for the whole or part of the year, and where the property has not been let out at all during the previous year there is no question of any vacancy allowance. The annual value then falls to be computed under s.23(1)(a).
• Classic Mall Development Company Ltd v ACIT ITATHelps taxpayerNo later treatment found
  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 Tribunal held the annual value of units vacant for the whole year to be nil under section 23(1)(c) and deleted the addition of Rs 56,26,656. It construed the word 'let' in section 23(1)(c) purposively as meaning intended to be let or available to let, so that actual letting during the year is not a pre-requisite where the property was let in an earlier period, remained vacant for the whole year in question and continued to be held for letting. Counsel's submission that the Andhra Pradesh High Court's decision in Vivek Jain is a non-jurisdictional decision of persuasive force only was recorded at paragraph 8.3, and the Tribunal at paragraph 10 said it found force in the submissions of counsel and was in agreement with them; the Tribunal did not itself analyse the point.
• Sunil Ramnarayan Mantri v DCIT ITATHelps taxpayerNo later treatment found
  My property was let for only a few days in the year and lay vacant for the rest. The officer has taxed the full twelve-month notional value. Can section 23(1)(c) substitute the small rent I actually received?
  Yes, on this order. The Pune Bench held that section 23(1)(c) applies once three conditions are met: the property or part of it was let, it was vacant for the whole or any part of the previous year, and the rent actually received or receivable is, because of that vacancy, less than the sum computed under clause (a). The assessee's Ahmedabad mall was let for fifteen days in each year for Rs 30,000. The Assessing Officer had adopted an annual letting value of Rs 75,48,492 under clause (a) and added Rs 52,83,945 after the standard deduction. The Tribunal deleted the addition and directed the officer to allow section 23(1)(c).
• Sonu Realtors P Ltd v DCIT ITATHelps taxpayer
  The flat was let for three years, then lay empty for the whole of this year. Is the annual value nil?
  Yes, on this Tribunal view. Where a property was let in an earlier year and is found vacant for the whole of the year under consideration, s.23(1)(c) applies and the annual value is nil - provided the vacancy was not because the owner took the property back for his own occupation. The Tribunal read 'property is let' in clause (c) as deliberately different from 'house is actually let' used elsewhere in s.23.
• Saif Ali Khan Pataudi v ACIT ITATCuts both waysNo later treatment found
  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.
• Sachin R Tendulkar v DCIT ITATHelps taxpayer
  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.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.