Notional ValueIn the case, Income Tax Officer vs. M/s National Engineering, Calcutta High Court recently held that Notional Value of building under construction cannot be taken for determining house property income.
The assessee in the present case M/s National Engineering Ltd has duly filed its return of income for the relevant assessment year.
During the course of the assessment year, the Assessing Officer (AO) noticed that the Assessee has a building and a part of the same was let out and another part thereof was under construction. While completing the assessment the AO added the income receivable to the total income of the Assessee under the head income from house property and also taxed the same by applying the provision of Section 23(1)(c) of the Income Tax Act, 1961.
Aggrieved by the order of the AO the Assessee approached the CIT(A) on appeal and contended that the building is under construction during the relevant previous year, the same could not be taxed applying the provision of Section 23(1)(c) of the Income Tax Act, 1961. Further, the Assessee submitted that service charges received from the occupiers/tenants ought to be taxed as business income and not income from house property and depreciation should have been allowed.
After analyzing the material facts on records the CIT(A) observed that in the event any part of the property was vacant then only actual rent had to be taken and not any amount received or receivable on the basis of annual valuation and accordingly the assessee was entitled to allowance, expenses and depreciation of assets used for rendering the service in connection with the property let out. The authority granted relief by allowing the appeal filed by the Assessee and the same was upheld by the Tribunal.
Thereafter the Revenue approached the High Court on further appeal against the order passed by the lower authorities.
The division bench comprising of Justice Anirudha Bose and Justice Amitabha Chatterjee observed that notional value of building under construction cannot be taken for computing the total income of the Assessee under the head income from house property for the purpose of computation of tax liability and also upheld the order passed by the authorities below.
While concluding the issue the Court further held that therefore the Assessee in the present case is eligible getting the deductions and allowances for rendering the service in connection with the said property which was let out.
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