The third umpire – ITAT has ruled in favor of Sachin Tendulkar in a tax dispute case
If the taxpayer owns more than one house properties then only one house property is considered as self occupied house property & the other house properties are deemed to have been let out even though such properties are not actually let out or are lying vacant. In short, tax is payable on rent by the owner of the properties even if no rent is received nor accrued to the taxpayer. However, there is section 23(1)(c) which provides deduction towards vacancy of such property i.e., the period during which house was lying vacant will be not be taxable.
Question arises as to whether the person owning more than one house properties are liable to pay tax on notional basis even thought owner has made all the attempts to let out but could not found the tenant? On similar issue, Income Tax Appellate Tribunal (ITAT), Mumbai has made an interesting observation in the case of Sachin Tendulkar who owns two flats in Pune, i.e., flat at Saphire Park and flat in Treasure Park. It has delivered an interesting judgement in favor of Sachin Tendulkar with following key observations in the order:
- The words used in section 23(1)(c) does not cover ‘actual let out’ only but also cover the situation where there is ‘intention to let out’. If the property is held by the owner for letting out and efforts are made to let it out, that property is covered by clause (c) and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year.
- Sachin Tendulkar has written three letters to the builder requesting him to find the tenant. It may be noted that, as emanating from the records and the letter, the same builder had identified the tenant for another flat of the assessee which was let out and whose rent has been offered and accepted for taxation. In this factual scenario, the authorities below have doubted the veracity of these letters and doubted the credentials of the Assessee’s claim. In our considered opinion, this does not display application of mind to the facts of the case.
The assessee is a well renowned cricketer who has furnished income tax return with income of Rs. 61,23,14,400/-. The disputed amount in respect of the property was Rs. 1,26,000/- only. When the same builder has helped the assessee to find tenant for another flat, why his letters to the same builder to help him identify one more tenant, can be considered as fake, defies logic. The assessee should have maintained a dispatch register for his letters as expected by the authorities below, is also abnormal expectation. That the assessee should get stamped receipt from the builder for the receipt of his letters, is equally quixotic proposition. In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law. The expectation that despite his unarguably busy professional engagements commanding huge amount of money Shri Sachin Tendulkar should have embarked upon and displayed a more robust and exuberant expedition to find a tenant for his vacant flat by approaching other real estate brokers and keeping an infallible record thereof, is beyond Shri Sachin R. Tendulkar normal conception. Hence, we have no hesitation in setting aside the orders of the authorities below and deleting the addition. Hence, we decide the issue in favour of the assessee.
It’s a welcome judgment given the facts & circumstances of the case. In the present tax disputes Sachin Tendulkar has emerged as the ‘Man of the Match’. ITAT has come down heavily on the I-T department for doubting the master blaster’s submission on meager sum of Rs. 1.26 Lakh even though he has paid tax on Rs. 61.23 Cr of income. The judgement has much wider connotation now in view of the fact that the scope of taxing rental income has been specifically extended by the Finance Act-2017 to the builders who are holding numbers of vacant properties as “stock in trade”. However, taxpayer needs to be very cautious in view of the fact that the present decision is rendered in the context of Sachin Tendulkar where he has offered income of Rs. 61.23 Cr in its ITR as against disputed amount of meager Rs. 1.26 Lakh.