Vacancy allowance to real estate developers - Relief from tax for what may not be taxed?
Finance Act, 2017 amended the Income-tax Act, 1961 (‘IT Act’) to provide that the annual value of building or land appurtenant thereto which is held by the assessee as stock-in trade will be deemed to be Nil for a period of one year from the end of the financial year in which the certificate of completion is obtained in respect of such property. It was explained in the Memorandum to the Finance Bill, that the provision had been inserted after “considering the business exigencies in case of real estate developers.” However, the provisions of IT Act do not expressly provide that the income from vacant house property can be taxed in the first place. There are contrary views of different fora on the taxation of the house property which has been vacant throughout the year. The divergence of views lies in interpretation of section 23(1)(c) of the IT Act which seeks to provide a relief in respect of vacant house properties. Section 23(1)(c) of IT Act provides that where a house property was ‘let’ but remained vacant during ‘whole or any part’ of the year owing to which the rent received or receivable is less that its lettable value (as provided in section 23(1)(a) of IT Act), then such sum received or receivable shall be deemed to be annual value of the property. If the annual value can be said to be NIL even without the help of this amendment, then there won’t be tax liability even beyond the one-year period specified in the said amendment...
Ratio decidendi
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