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TMI Blog2013 (7) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... otional interest cannot form part of the actual rent. In the present case, assessee had submitted that the municipal valuation of both the properties is now available which is less than the value of actual rent received in the interest of justice, this issue needs to be restored back. Disallowance of administrative expenses - Held that:- On perusal of the expenses, as found that it is not clear as to what are the expenses which have been incurred on account of income from house property and what have been incurred for the purpose of maintaining the corporate entity. If the expenses are directly related to earning of income from house property the same will not be allowed as the statute itself provides standard deduction and other deduction under section 24. However, it cannot be denied that certain expenses are required for maintaining a corporate status, which can be allowed from income from other sources under section 57. On a perusal of these expenses, it is seen that it is very difficult to bifurcate such expenses and, therefore, this issue needs to be restored back to the file of the AO. Set-off of carry forward of deprecation against income for the year disallowed - Hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer, on a perusal of the records, noted that the assessee has credited a rent of Rs. 5.34 lakhs received from two parties namely Harihar Poly Fiber, Kolkata, for sum of Rs. 2.64 lakhs, and M/s. S.L. Mining and Industries Ltd., Kolkata, for Rs. 2.70 lakhs. From these lessees, the assessee has also received interest free security deposit of Rs. 25 lakhs and Rs. 80 lakhs respectively, which aggregated to Rs. 1.05 crores. In response to the show cause notice given by the Assessing Officer as to why in view of interest free deposits, the amount equal to the bank rate interest on term deposit should not be deemed to be a part of the rent received or receivable, it was submitted by the assessee that section 23(1)(a) does not contemplate such assessment of notional rent in the form of notional interest on the interest free deposits. In support, judgment of Jurisdictional High Court was relied upon in CIT v/s J.K. Investors (Bombay) Ltd., [2001] 248 ITR 723 (Bom.). The Assessing Officer, after discussing the concept of real income and notional income and the decisions of Hon'ble Supreme Court rendered in this context, held that the assessee was charging the concessional rent and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not the case of appellant that the interest free deposit was advance rent or security deposit. The substantial amount of deposit when compared with the amount of rent clearly indicates the huge deposit, as has been rightly pointed out by the A.O., was nothing but consideration for reducing the amount of actual rent. The A.O.'s finding therefore that annual rent received being 'concessional rent' was much less than the actual fair market rent at which the properties may be expected to be let out is justified. The appellant has failed to bring any material on record to establish that the rent received by it was more than or equal to the fair market rent or the amount for which the properties may be expected to be let out. As regards the quantum of the amount of actual rent, I find that the A.O. has made the determination on reasonable basis which can not be faulted. The determination of actual rent at Rs.14,26,500/- by the A.O. is therefore upheld. The addition of Rs.8,92,500/- is therefore confirmed. The appeal on this ground is not allowed." 6. Before us, the learned Counsel, representing the assessee, submitted that the assessee's properties were actually let out and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable:" Clause (c) of the aforesaid section will not apply to the facts of the present case as none of the properties in question remained vacant during whole or any part of the previous year. Even clause (a) will also not apply to the facts of the present case as it is applicable in those cases where property has not been let out at all during the entire year and in such a case, it has to be ascertained as to what could be the rent which property might reasonably be accepted to be let out from year to year. In the present case, clause (b) would be applicable because the property was let out and rent was received. The Department's case is that even while ascertaining the ALV, for the purpose of clause (b) of section 23(1), it is necessary to determined the fair rent in terms of clause (a) because the actual rent at which property has been let out is not the fair rent. Therefore, the notional interest on interest fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atus. The Commissioner (Appeals) has rejected the assessee's contentions on the ground that the deduction can only be given if the corporate entity was engaged in activity of business and not otherwise. Since the assessee had not carried out any business activity, therefore, these expenses cannot be allowed. 12. Before us, the learned Counsel submitted that except for the expenses which are directly pertaining to the income of house property, the same should be allowed because the assessee has to maintain its corporate status and certain expenses are required. 13. On the other hand, the learned Departmental Representative relied upon the order passed by the Commissioner (Appeals). 14. After carefully considering the rival submissions, findings of the Assessing Officer and the Commissioner (Appeals) and on perusal of the expenses, we find that it is not clear as to what are the expenses which have been incurred on account of income from house property and what have been incurred for the purpose of maintaining the corporate entity. If the expenses are directly related to earning of income from house property the same will not be allowed as the statute itself provides standard d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessing Officer as to why unabsorbed depreciation of the earlier year has not been allowed to be carried forward in the subsequent years, therefore, this issue also needs to be restore back to the file of the Assessing Officer for examination. Consequently, we set aside the impugned order passed by the Commissioner (Appeals) and restore the issue back to the file of the A.O. to examine the allowability of carried forward of unabsorbed depreciation in the subsequently year and to decide the issue in accordance with law. This ground is, thus, treated as allowed for statistical purposes. 19. In the result, assessee's appeal is partly allowed for statistical purposes. We now take up assessee's appeal in ITA no.3250/Mum./2011, for assessment year 2005-06, vide which, following grounds have been raised. 20. In ground no.1, the dispute relates to the direction of the learned Commissioner (Appeals) in confirming the addition of Rs. 8,92,500 under the head "Income From house Property" for increase in annual let out value in addition to actual rent received by the assessee by calculating notional interest on interest free deposit received in respect of let out premises. 21. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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