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2011 (5) TMI 507 - AT - Income TaxDetermining the ALV under section 23(1)(a) - Addition made by AO by determining the ALV u/s 23(1)(a) on account of notional interest on interest free deposits - Held that:- As case of Moni Kumar Subba [2011 (3) TMI 497 - DELHI HIGH COURT] and Operative words in section 23(1)(a) of the Act are "the sum for which the property might reasonably be expected to let from year to year". These words provide a specific direction to the revenue for determining the "fair rent". The Assessing Officer, having regard to the aforesaid provision is expected to make an inquiry as to what would be the possible rent that the property might fetch. Thus, if he finds that the actual rent received is less than the "fair/market rent" because of the reason that the assessee has received abnormally high interest free security deposit 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". In the case in hand, though, AO made an enquiry about the fair market rent of the property and has given a finding that due to interest free deposit received by the assessee, actual rent of the property is deflated. However, the Assessing Officer, while determining the fair market rent under section 23(1)(a) has directly added 10 per cent of the interest free deposit being the bank interest rate prevailing on FD. In view of the Full Bench decision of the Hon'ble Delhi High Court cited supra, no addition can be made on notional interest on the interest free security deposit while determining the ALV under section 23(1)(a) - set aside the issue to the record of the Assessing Officer with a direction to re-adjudicate the issue.
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