Section 23(3) — Annual Value of House Property

Section 23(3) of the Income-tax Act, 1961, deals with the determination of the annual value of house property that is self-occupied or deemed to be let out. This provision is significant as it impacts the calculation of income from house property, which is a taxable head under the Act. For self-occupied properties, the annual value is considered to be nil, provided the property is not let out during any part of the previous year. However, if a taxpayer owns more than two self-occupied properties, only two can be treated as self-occupied, and the others are deemed to be let out, requiring the calculation of notional rent. This section is crucial for taxpayers owning multiple properties, as it influences their taxable income and potential tax liability. The burden of proof lies on the taxpayer to establish the self-occupied status of the property.

Common Litigation Flashpoints

1. Determination of self-occupied status
2. Calculation of notional rent for deemed let out properties
3. Selection of properties as self-occupied when owning multiple properties
4. Disputes over periods of actual occupancy versus deemed occupancy

Judgments on Section 23(3) — Annual Value of House Property

• Messrs Mehta Parikh & Co. vs The Commissioner of Income-Tax, Bombay — SC,
  Conclusions based on facts proved or admitted may be conclusions of fact, but whether a particular inference can legitimately be drawn from such conclusions may be a question of law.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.