What the courts have decided on section 23(4), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Uday Garudachar v ITO
ITATHelps taxpayerNo later treatment found
My client set off the whole house property loss against salary for AY 2018-19, not knowing about the new Rs 2,00,000 cap. The officer restricted it and has levied a s.270A penalty for under-reporting. Can the penalty be resisted?
Yes, on this authority. The Bangalore Tribunal deleted a s.270A penalty where the assessee had disclosed the whole computation of house property income but had set off the loss in full because he was unaware of s.71(3A), which had been inserted with effect from assessment year 2018-19 — the very year in issue. The explanation was held bona fide within s.270A(6), so the addition did not amount to under-reported income.
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Ravi K Sheth v DCIT
ITATHelps taxpayer
I own two flats. One is treated as self-occupied and the other is deemed let out under s.23(4). The Assessing Officer has taken market rent plus ten per cent as the deemed rent. Can I insist on the municipal rateable value?
The Mumbai Tribunal held that you can, where the flat was never actually let out. It deleted the Assessing Officer's computation of market rent increased notionally by ten per cent and restricted the annual value of the deemed let out flat to the municipal rateable value, following the Bombay High Court in Pr.CIT v. Smt Laxmi Jain that in the case of a vacant property the tax on rental income under s.23 can be computed only on the basis of the rateable value assessed by the Municipal Corporation.
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Deepak Kantilal Shah v DCIT
ITATHelps taxpayerNo later treatment found
I owned two houses at the start of the year and sold one in July. I treated the second house as deemed let out for those first months and claimed the full section 24(b) interest for that period. The Assessing Officer says there is no such thing as a split-year claim and has capped me at Rs 2,00,000. Who is right?
The Tribunal held that the assessee was right. Section 23(4)(a) is a complete and self-exhaustive code for the case where more than one house is held, the legislature has not restricted it by any proviso or explanation, and it does not restrict a splitting-up of the accounting period; applying a strict construction the Tribunal held that both the lower authorities had erred and deleted the disallowance of Rs 13,81,247.
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.
