2010 (2) TMI 1182 - HC - Income Tax

Notional rent under the deeming provisions of section 23(1)(a) - HELD THAT - As the Tribunal has relied upon the judgment of this Court in J.K.Investors 2000 (6) TMI 9 - BOMBAY HIGH COURT in coming to the conclusion that the value of a notional advantage like notional interest on deposit cannot form part of actual rent - no substantial question of law can be said to have arisen particularly when the Tribunal has followed a judgment of this Court - no effort has been made to urge before this Court that the judgment is distinguishable for any reason. Investments out of the interest free funds - HELD THAT - Following the judgment of the Division Bench in CIT vs. Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT the Tribunal held that if the Assessee had funds available both interest free and loaned there would be a presumption that the investments were out of the interest free funds if the interest free funds were sufficient to meet the outlay on the investment. In the present case having regard to the finding of fact that the assessee had sufficient interest free funds no substantial question of law would arise. Accrual of the income - fixed deposit - The case of the assessee that the interest on the fixed deposit would accrue only on the date of maturity has been accepted - HELD THAT - Counsel appearing on behalf of the Revenue has not demonstrated to the Court any reasons as to why the principle laid down in E.D.Sassoon 1954 (5) TMI 2 - SUPREME COURT by the Supreme Court would not be attracted. In the circumstances no substantial question of law would arise. The appeal shall accordingly stand dismissed.

Summary

Issues:
1. Notional rent addition under deeming provisions
2. Assessment of non-income bearing investment
3. Accrual of income based on enforceable right

Issue 1: Notional rent addition under deeming provisions
The Revenue appealed against the ITAT judgment concerning the addition of notional rent under section 23(1)(a). The Tribunal relied on the J.K. Investors case, upheld by the Supreme Court, stating notional interest cannot be part of actual rent. The Court found no reason to interfere with this judgment. The Revenue failed to show any distinguishable points. Hence, no substantial question of law arose, and the appeal was dismissed.

Issue 2: Assessment of non-income bearing investment
Regarding the second issue, the Tribunal found the Assessee had sufficient interest-free funds exceeding the investment amount. Citing the Reliance Utilities case, the Tribunal held that if interest-free funds cover the investment, it is presumed the investment was made from those funds. As the Assessee had enough interest-free funds, no substantial question of law was identified, leading to the dismissal of the appeal.

Issue 3: Accrual of income based on enforceable right
On the third issue, the Tribunal followed the E.D. Sassoon case, stating income accrues only when there is a legally enforceable right to receive it. The Tribunal accepted that interest on fixed deposits accrues at maturity. The Revenue failed to provide reasons why this principle should not apply. Consequently, no substantial question of law was raised, resulting in the dismissal of the appeal.

This judgment clarifies the application of legal principles in tax matters, emphasizing the importance of established case law and factual findings in determining tax liabilities. The Court's detailed analysis of each issue highlights the need for a clear legal basis to challenge decisions based on precedent and factual assessments.