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Is a vacant commercial property taxable

MUKUND (mgr ops) (56 Points)

12 March 2016

I am holding 3 commercial premises in a building. The building is new and one of floor has been occupied since one year. However the other 2 premises are vacant as we have got no tenants. The assessment of each unit is separately assessed for municipal value. The vacant units should not attract any income tax as there was no rent received for the 2 units . Rent was received for only one unit. I want to clarify that income tax should be applicable in one unit as other 2 units are fully vacant and no rent has been received from these units. Kindly indicate which section of IT ACT REGARDING CALCULATION OF HOUSE PROPERTY CAN BE REFFERED TO SOLVE MY QUERY.

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5 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 12 March 2016

Refer section 23: https://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx

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CA Raj Doshi (Practising CA) (8944 Points)
Replied 13 March 2016

Its net annual value is taxable as deemed let out property.

Max Payne (employed) (2574 Points)
Replied 13 March 2016

Mukund your view is correct. The 3 house properties, though they are in the same building, they are assessed to tax separately. 1 house is let out and it is chargeable to tax.

However, the meaning of vacancy in the IT Act must be properly understood. If you are getting any kind of benefit from such vacant property, like storage area or at any time occupied by you or anyone else, it will be treated as a deemed let out property and taxable as if it were let out. This is something to be proven.

Assuming that the 2 houses were actually vacant throughout the year, they cannot be treated as deemed let out.

I am merely discussing the chargeability. From a tax planning angle this angle may not be appropriate.

CHANDRAKANT PAWAR (PARTNER) (37 Points)
Replied 26 May 2018

The Pune Income-tax Appellate Tribunal (the Tribunal), in the taxpayer’s1 case, held that under section 23(1)(c) of the Income-tax Act, 1961 (Act), annual letting value (ALV) of a property that was vacant during the entire year was to be taken as Nil if the taxpayer intended to, and had taken appropriate efforts to, let the property out.