4 Section 23(1)(a) – Provisions of section 23(1)(a) cannot be applied to a property constructed by the assessee, construction whereof was completed in the month of February and property remained unsold and vacant, as it is not possible to let out property just after its completion i.e. only after one month.

The Tribunal noted that the commercial
complex under consideration was held by the assessee as its stock-in-trade. It
noted that it was not the allegation of the AO that the assessee has
deliberately not let out the property in question under consideration. The
Tribunal, observed that without going into the controversy as to applicability
of section 23 in respect of a property held as stock-in-trade, it came to the
conclusion that it is not a case of keeping the property vacant from year after
year but the project was completed in Feb 2013. It observed that reasonably
expected rent envisaged by section 23(1)(a) itself signifies the possibility of
letting out of the property and also that there is a time lag between the
completion of construction of the property and letting out the property
thereafter. It is not practically possible to let out the property on the next
day of completion of construction or acquisition of the property. It held that
in a case when there is no possibility of any deliberate or unreasonable delay
in letting out the property then it is not expected to fetch a reasonable rent
just after completion of the project in question. Moreover, the present case
was not one of letting out a small space of the house but the entire project
was completed by assessee in the month of Feb 2013 and therefore the provisions
of section 23(1)(a) itself would not be workable in such a case for want of
immediate letting out the property just after its completion.

The Tribunal noted that the Legislature has
also recognised this aspect while inserting section 23(5) by Finance Act, 2017
w.e.f. 1.4.2018 allowing vacancy allowance of one year from the end of the
financial year in which certificate of completion of construction of the
property is obtained from the competent authority.

Though s/s. (5) is not applicable for
assessment year under consideration, however, it is not a case of allowing the
vacancy allowance in respect of the property held as stock-in-trade but it is
the fundamental issue of determination of notional annual letting value just
after completion of construction of the property held as stock-in-trade. The
Tribunal noted that without allowing a reasonable period or time gap from the
completion of construction of property held as stock-in-trade to let out the
same, the property cannot reasonably be expected to be let from year to year
and fetch fair market rent just after completion of construction.

The Tribunal held that in the facts and
circumstances of the case, section 23(1)(a) cannot be applied to the property
in question due to the peculiar reason that the completion certificate was
obtained only in Feb 2013 and it is not expected to let out the property just
after completion of the project and, therefore reasonable expected rent to be
fetched by the property in question is not possible immediately after the
completion without allowing a reasonable period, which is also recognised by
the Legislature.