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2016 (12) TMI 455 - AT - Income TaxComputation of annual value of the property let out to the assessee’s sister concern - AO observed that in the interim period of one year no payment of rent appears to have actually made to the assessee by the lessee - Held that:- Undisputedly the property in question was let out to its sister concern vide lease deed dated 1.4.2006 for a monthly rent of ₹ 5 lakhs. At that time, no interest free security deposit was given or credited to the assessee’s account. By supplementary lease deed dated 29.3.2007, the terms of the lease were modified and monthly rent was reduced to ₹ 25,000 per month from ₹ 5 lakhs per month. At that time, interest-free security deposit was also negotiated and as per the revised terms of lease deed, the lessee would pay the appellant an interest-free security deposit of ₹ 25 crores. Meaning thereby that on receipt of substantial amount of ₹ 25 crores, monthly rent was reduced from ₹ 5 lakhs to ₹ 25,000 per month. Therefore, the notional rent earned on this ₹ 25 crores cannot be ignored at the time of computing the ALV of the property. Punjab & Haryana High Court in the case of CIT v. K. Streetlite Electric Corporation, (2010 (10) TMI 742 - Punjab and Haryana High Court ) categorically held that interest-free security deposit taken by the assessee hugely disproportionate to monthly rent charged is a device to circumvent liability to income-tax. Therefore, notional interest on security deposit is to be treated as income from house property. Therefore the AO has rightly adopted the ALV which was even lesser to the monthly rent of ₹ 5 lakhs per month initially agreed upon by the parties. Thus, we find no infirmity in the order of CIT(Appeals) and we confirm the same. - Decided against assessee
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