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Issues Involved:
1. Addition of notional interest on interest-free security deposit for determining Annual Letting Value (ALV) u/s 23(1)(a) and 23(1)(b). 2. Deduction of maintenance expenses under the head "Income from House Property." Summary: Issue 1: Addition of Notional Interest on Interest-Free Security Deposit The Assessing Officer (AO) added notional interest on the interest-free security deposit to the rent received by the assessee to determine the ALV of the property. The AO relied on the case of Trivoli Investment & Trading Co. Pvt. Ltd., interpreting that the interest-free deposit forms part of the compensation for the premises and thus should be included in the ALV calculation. The assessee appealed, arguing that the addition of notional interest was done without verifying facts and that the rent received was reasonable and comparable to similar properties. The security deposit was meant to ensure the tenant vacates the property after the lease period and to prevent misuse or damage. The CIT(A) held that as per the jurisdictional High Court decision in J.K. Investors (Bom) Ltd., the assessee's case falls u/s 23(1)(b), and no notional interest should be added to determine the ALV. The AO was directed to delete the notional interest while calculating the ALV. The Revenue appealed, arguing that the CIT(A) erred in deleting the addition of notional interest and that the case should be governed by Sec. 23(1)(a). The Tribunal referred to the co-ordinate Bench decision in DCIT Vs Reclamation Realty India Pvt. Ltd., which held that the actual rent received should be the annual value of the property u/s 23(1)(b), and notional interest on interest-free security deposit should not be added. The Tribunal dismissed the Revenue's appeal, following the decision of the co-ordinate Bench. Issue 2: Deduction of Maintenance Expenses The AO disallowed maintenance expenses claimed by the assessee under the head "Income from House Property," arguing there is no provision to allow such expenses. The assessee appealed, citing that the maintenance expenses relate to amenities provided and recovered from tenants. The CIT(A) allowed the deduction, referencing the ITAT's decision in the assessee's own case for A.Y. 1998-99. The Tribunal upheld the CIT(A)'s decision, referencing the ITAT's earlier decision that maintenance charges should be deducted while arriving at the ALV of the property u/s 23. The Tribunal dismissed the Revenue's appeal on this ground as well. Conclusion: The appeal filed by the Revenue was dismissed on both grounds. The Tribunal upheld the CIT(A)'s decisions to exclude notional interest from the ALV calculation and to allow the deduction of maintenance expenses. The order was pronounced on January 28, 2011.
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