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TMI Blog2017 (3) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit and loss account of the assessee, therefore, the benefit derived from the deposit received from the tenant is very much part of the total income declared by the assessee. Hence, there is no scope for making any addition on account of so called notional interest on the deposit while determining the annual value of the property for the purpose of section 23 of the Act. Delete the impugned addition and accept the income as declared by the assessee under the head “income from house property” on account of rent earned on the property leased to Deutsche Bank. - Decided in favour of assessee Nature of interest income earned by the assessee - Held that:- The orders of the authorities below do not require any interference in as much as factually it has been made out by the AO that no activity of giving loans and advances has indeed been carried out and, therefore, the impugned interest income has been correctly taxed as “income from other sources”. Notably interest has been earned on the fixed deposit kept with the bank and the source of such deposit is the security deposit received from the tenant. Under these circumstances, we confirm the stand of the AO that interest income is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/-, which was low; and, that the assessee had also taken interest free deposit from the tenant i.e. Deutsche Bank of ₹ 4,28,29,693/-. In this background, the AO required the assessee to show cause as to why the notional rent on the deposit received from the tenant should not be taxed u/s. 24 of the Act. In response, the assessee company submitted that the annual value of the property is required to be determined in accordance with the provisions of section 23 of the Act and that the annual value is to be higher of the sum for which the property is reasonably expected to be let out from year to year or the actual rent received. The assessee asserted that the actual rent received by it was more than the rent determined by the local authorities for which property was expected to be let out from year to year and, therefore, the annual value of the property would not exceed the annual rent received. In this manner the assessee resisted the action of the AO in taking into account the notional interest on deposit for the purpose of determining the annual value of the property. Apart from the aforesaid, the assessee also brought to the notice of the AO that the deposit received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest as a part of the annual value of the property. Further, the learned representative for the assessee pointed out that the annual letting value fixed by the municipal authorities is a good basis to determine the annual letting value for the purpose of section 23 of the Act. In support of the said proposition, he placed reliance on the judgment of the Hon ble Calcutta High Court in the case of CIT Vs. Prabhabati Bansali [1983] 141 ITR 419. The learned representative pointed out that the language of section 154 of the Mumbai Municipal Corporation Act, 1988 is pari materia with section 23(1)(a) of the Act. In support of his arguments, the learned representative also placed reliance on the judgment of Hon ble Bombay High Court in the case of CIT vs. Tip Top Typography [2014] 368 ITR 330. Even otherwise, it is made out that income earned from the deposit received from Deutsche Bank has been offered for tax and in this context it was pointed out that the assessee had earned interest income of ₹ 10,28,644/-, which is duly credited in the profit loss account. It was therefore contended that the action of the AO in adding the notional interest in the determination of annual val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and because of that reason, the actual rent received is less than the rent which the property might fetch, he can undertake necessary exercise in that behalf. However, by no stretch of imagination, the notional interest on the interest-free security can be taken as determinative factor to arrive at a fair rent . The provisions of section 23(1)(a) do not mandate this. The Division Bench in Asian Hotels Ltd. [2010] 323 ITR 490 (Delhi), thus, rightly observed that in a taxing statute it would be unsafe for the court to go beyond the letter of the law and try to read into the provision more than what is already provided for. We may also record that even the Bombay High Court in the case of CIT v. J.K. Investors (Bombay) Ltd. [2001] 248 ITR 723 (Bom) categorically rejected the formula of addition of notional interest while determining the fair rent It is, thus, manifest that various courts have held a consistent view that notional interest cannot form part of actual rent. Hence, there is no justification to take a different view that what has been stated in Asian Hotels Ltd. [2010] 323 ITR 490 (Delhi). [underlined for emphasis by us] 7. Applying the aforesaid parity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led notional interest on the deposit while determining the annual value of the property for the purpose of section 23 of the Act. 9. Thus, in conclusion we set aside the order of the CIT(A) and direct the AO to delete the impugned addition and accept the income as declared by the assessee under the head income from house property on account of rent earned on the property leased to Deutsche Bank. The assessee succeeds on this aspect. 10. The second issue in this appeal is with regard to the nature of interest income earned by the assessee. The AO noted that interest income was offered for taxation by the assessee as business income . The assessee was show caused as to why the interest income should not be taxed as income from other sources since no business activity was carried out by the assessee. Before the AO, the assessee contended that its main business was to give loans and advances and therefore interest income is to be seen as part and parcel of its business activities and, therefore, such income be taxed as business income . The AO did not find any merit in the explanation rendered by the assessee as no activity of advancing loan was carried out and the only inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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