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2018 (2) TMI 1987 - AT - Income TaxIncome from House Property - Annual letting value of a property let out to a company where she is the Managing Director - Whether the receipt of interest-free security deposit by a taxpayer can be ignored while computing ALV of a property let out? - HELD THAT:- The transactions must be viewed as a whole. It is not enough to examine the separate ingredients of a transaction; for the totality of a transaction may be different from the sum of its parts. Viewed as a whole, the transaction adopted by the assessee in the instant case was a device to reduce the tax burden. This is the germ of the “pre-ordained series of transactions”. The two issues i.e. ‘Leave and License Fee’ and ‘Security Deposit’ in the instant appeal are interconnected and part of the same transaction. To persuade the Tribunal to adopt, in relation to closely integrated situation, a step by step, dissecting approach, would be a denial rather than an affirmation of the true judicial process. We find from the list of Directors of Asit C. Mehta Investment Intermediates Ltd, given to us by the Ld. counsel in response to a query by us, that the assessee (Licensor) is the Managing Director in Asit C. Mehta Investment Intermediates Ltd (Licensee). The receipt by the assessee as interest-free security deposit from the licensee-company in which she herself is the Managing Director cannot be ignored while computing the annual letting value. Security deposit in the instant case is to circumvent real rent and the same shall fall within the ambit of ‘Income from House Property’. Taking into account the facts and circumstances of the case against the backdrop of interest rate on term deposits offered by Public Sector Banks during the relevant period, we direct the AO to estimate interest on security deposit @ 9% in place of 10% on the amount done by him and bring the resultant amount as well as the leave and license fees to tax under the head ‘Income from House Property’. - Decided partly in favour of assessee.
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