Law: Income Tax Act, 1961

Section: 24

Income-tax--- ----Income from house property---Deductions---Vacancy allowance--Agreement to sell property---Property in occupation or agreement holder to purchase property and owner not receiving rent---Owner of property is voluntarily foregoing right to collect rent---Property cannot be deemed to be vacant---Owner of property not entitled to vacancy remission---Indian Income Act Tax, 1961, S.24(1)(ix). While making the assessment of the assessee, an owner of a house property, for the assessment years 1976-77 and 1977-78, the Income-tax Officer accepted the income from the house property shown by the assessee, wherein the assessee had not admitted any income for the period from November 1, 1975 to November 30, 1976. Subsequently, the Commissioner of Income-tax found that during the above period the property was in the occupation of the agreement holder to purchase the property and that the assessee was not receiving any rent and hence the assessee should have disclosed the income from the house property in respect of the said period. The Commissioner of Income-tax, therefore, invoked the provisions of section 263. of the Income Tax Act, 1961, since the order of the Income-tax Officer was .erroneous and prejudicial to the interest of the Revenue and directed the Income-tax Officer to re-compute the income from house property. On appeal, the Tribunal held that the assessee was entitled to vacancy allowance during the period of the interregnum during which the agreement holder was occupying the premises, that the occupation of the agreement holder was not in the capacity of a tenant and was only a permissive occupation and, therefore, it should be taken that the property was vacant during the period, and that, therefore, the order of the Income-tax Officer could not be considered as erroneous and prejudicial to the interests of the Revenue. On a reference: Held, reversing the decision of the Tribunal, that the assessee had voluntarily forgone the right to collect the rent since the agreement holder was in occupation of the property as per the sale agreement by way of part performance of the contract of sale which fell through subsequently. Therefore, the Tribunal…

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