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2022 (1) TMI 779 - AT - Income TaxIncome from House Property - as per the lease and licence agreement the property was let out for a monthly rent and the assessee has received interest free refundable security deposit - whether the departmental authorities can substitute the actual rent received by the assessee by computing notional rent? - HELD THAT:- In case of J.K. Investors (Bom) Ltd [1999 (7) TMI 675 - ITAT MUMBAI] the Tribunal has held that the benefit of the security deposit does not accrue to the lessor at the time of receipt, but only on utilization of the same. The Bench observed, when the income derived on utilization of the security deposit is otherwise taxable, there is no justification to hold that the assessee received the security deposit anticipating that certain benefit would be received. See case of CIT vs Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT]. In case of Shri Owais Hussain vs ITO [2018 (5) TMI 1817 - ITAT MUMBAI] has followed the decision of Hon’ble High Court in case of Tip Top Typography (supra) and has directed the assessing officer to compute the deemed rent as per municipal rateable value. The Hon’ble Court has held that based on cogent material the assessing officer must come to a definite conclusion that parties have concealed the real position. The Hon’ble Court has further held that Municipal rateable value cannot be discarded straightaway, unless, there is cogent and reliable material to do so. Thus, the ratio that follows from the aforesaid decisions is: the assessing officer cannot determine notional rent based on estimation / guess work. In the facts of the present appeal, the assessee has furnished the municipal rateable value which is much less than the rental income offered - AO has not brought any concrete evidence on record to demonstrate that parties have concealed the real position. That being the case, no further addition can be made to the rental income by computing notional rent based on the interest free security deposit. In view of the aforesaid, we delete the addition made by the assessing officer. - Decided in favour of assessee. Disallowance u/s 14A - HELD THAT:- As emerging from record reveals that during the year under consideration, the assessee has not earned any exempt income. Therefore, in absence of any exempt income earned by the assessee, no disallowance under section 14A r.w.r.8D can be made. This is a fairly well settled legal principle enunciated in a number of judicial precedents including the decision of the Hon’ble jurisdictional High Court in case of Principal Commissioner of Income-tax vs M/s Ballarpur Industries Ltd [2016 (10) TMI 1039 - BOMBAY HIGH COURT]. Disallowance of interest expenditure - from the material on record as found that the entire borrowings were from related parties and the assessee was used as a conduit for availing the loan from Mercator Ltd and lending to AHM Investments Pvt Ltd thus, alleging that the assessee was unable to establish that the interest expenditure was incurred for the purpose of business - HELD THAT:- The factual matrix clearly reveal that before the departmental authorities, the assessee failed to furnish any evidence to demonstrate that the interest expenditure claimed as deduction was incurred for the purpose of business. This the factual position remains unaltered even before us. The onus is entirely on the assessee to establish on record that the interest expenditure claimed as deduction was incurred for the purpose of business. The assessee having failed to do so, the claim cannot be allowed. Accordingly, we do not find any reason to differ with the view expressed by the learned first appellate authority. This ground is dismissed.
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