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TMI Blog2014 (6) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... notional interest that may accrue on the security deposit would not form part of income from house property to determine the fair rent which is reasonably expected to be fetched from the property - The AO has to make necessary enquiries. After having undertaken the necessary exercise in that behalf, it comes out from the facts that the payment of security deposit is to circumvent the real rent then the same may be considered for computing the income from house property - interest earned from security deposit cannot be included in the annual letting value to be determined by the AO - the adding of interest income into the rent would lead to double assessment of the same income – thus, there was no reason to interfere with the finding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had shown the annual rental income of 2,16,000/- (i.e. Rs. 18000/- per month) for each of the three flats, one rented out in her own name and the other two in the names of her minor son and daughter respectively, situated at Anand Bhavan Mumbai. The assessee had received interest free deposits of Rs.65 lakh each for each of the above mentioned three flats from the lessee Bank of America . The AO was not satisfied with the amount of rental income. When he called for an explanation from the assessee in respect of low rental of the flats, the assessee vide letter 22.12.2006 explained that the municipal rateable value of the flats was lower than the actual rent received by the assessee and that the actual rent received by the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiries and compared the rent offered by the assessee with the market rent of the similarly situated property in the vicinity of the building. Since the comparative market rates were not called for/furnished and hence the applicability of section 23(1)(a) was not examined by the AO. He therefore held that the estimation of income by the AO without any supporting material was wrong and thus deleted the addition so made by the A.O. The Revenue is thus in appeal before us. 5. Before us, the contention of the ld. DR has been that the AO rightly relied upon the judgment in the case of Trivoly Investment and Trading Company Pvt. Ltd. (supra). The ld. DR has further relied upon an authority of the Hon ble Punjab Haryana High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rental value of the property. It may be observed that the full bench of the Hon ble Delhi High Court in the case of CIT vs. Moni Kumar Subba (supra) has held that section 23(1)(a) requires determination of the fair rent being the sum for which the property might reasonably be expected to let from year to year . The AO has to make an enquiry as to what would be the possible rent that the property might fetch. If he finds that the actual rent received is less than the fair/market rent because the assessee has received abnormally high interest free security deposit, he can undertake necessary exercise in that behalf. For determination of fair rent, the AO can take into account various factors including standard rent. If the standard r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at can be drawn from the above said decisions of the Hon ble Delhi High Court in the case of CIT vs. Moni Kumar Subba (supra) and of the Hon ble Punjab Haryana High Court in the case of CIT vs. K. Streetlite Electric Corpn. (supra) is that ordinarily the notional interest that may accrue on the security deposit would not form part of income from house property to determine the fair rent which is reasonably expected to be fetched from the property. The AO has to make necessary enquiries as observed by the Hon ble Delhi High Court in the case of CIT vs. Moni Kumar Subba (supra). However, after having undertaken the necessary exercise in that behalf, it comes out from the facts that the payment of security deposit is to circumvent the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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