Deemed Rental Income applicable to Self Occupied Properties u/s 23 (4) of Income Tax Act: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT) observed that deemed rental income applicable to self-occupied properties under Section  23 (4) of Income Tax Act, 1961.

The assessee was engaged in the business of manufacture of thermo equipment. Since the assessee had stopped business in the past, it had let out its properties and earned rental income from them. During the year under consideration, the AO noticed that the assessee did not declare rental income from one of the office premises titled as “Marathon Innova A-902”. The assessee submitted that the above said property has remained vacant during the whole of the year and hence rent was not received.

The Assessing Officer, however, did not accept the above said explanations given by the assessee and took the view that the annual letting value (ALV) of the property should be assessed as “deemed rental income”.

He also took the view that the ALV of the property should be computed @ 8.5% of the value of the property. Accordingly, he determined the ALV of the property at Rs.20, 60,713/-, which was computed at 8.5% of the value of property. After allowing deduction of Rs. 30% of the annual letting value towards repairs under Section  24 of the Income Tax Act, the Assessing Officer determined the rental income assessable under the head Income from house property in respect of the above said property at Rs. 14,42,499/- and assessed the same

The bench noted that the assessee had let out the said property in the earlier years and has also declared rental income in those years. It is the submission of the assessee that during the year under consideration the property remained vacant during the whole of the year.  This submission has not been proved to be wrong. In the instant year the AO has taken the view that the ALV of the impugned property, which remained vacant during the whole of the year, is assessable as “Deemed rental income”. The concept of deemed rental income is applicable to self-occupied properties as stated in section 23(4) of the Income Tax Act. The Income tax Act did not make it applicable to let out properties.

The two member bench of the tribunal comprising Aby. T. Varkey (Judicial member) and B.R. Bhaskaran (Judicial member) noticed that the rental income has been declared by the assessee under the head ‘income from house property’. For computing income under this head, only those expenses mentioned in Section 24 of the Income Tax Act could be claimed as deduction against rental income. It was not shown that any part of expenses of Rs.7, 56,265/- is allowable as deduction under Section 24 of the Income Tax Act. Hence the above said general expenses cannot be deducted against rental

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