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2022 (7) TMI 741 - AT - Income TaxDeemed rental income - Addition on account of notional rent being 8% of the value of the property held as stock in trade in books of accounts - HELD THAT:- We find that the issue in dispute is no longer res integra in view of the co-ordinate bench decision of this tribunal in the case of Shri Rajendra Godshalwar [2019 (1) TMI 1879 - ITAT MUMBAI] wherein after considering the various decisions in the case of CIT vs Neha Builders Pvt Ltd [2006 (8) TMI 105 - GUJARAT HIGH COURT] tribunal had rendered the decision in favour of the assessee stating that the deemed rental income cannot be assessed on value of unsold stock of flats. Thus we hold that the addition made towards deemed rental income is hereby directed to be deleted. Accordingly, the Ground No. 1 raised by the assessee is allowed. Addition made on account of interest on fixed deposits earned by the assessee by treating the same as ‘Income from Other Sources’ - HELD THAT:- We find that since the bank guarantees (both performance and financial guarantees) were obtained for the purpose of project, investment in fixed deposits also would have to be construed for the purpose of the project undertaken by the assessee, as admittedly the fixed deposits were invested only as cash margins for the purpose of obtaining those bank guarantees. Hence the business nexus is clearly proved. Under these circumstances, the interest income earned on fixed deposits should have to be construed as inextricably linked with the project and should be treated as recovery of part of the project cost and cannot be treated as income from other sources. As we hold that the interest income earned on fixed deposits should be treated as capital receipt and to be reduced from the project cost. Hence we do not find any infirmity in the treatment given by the assessee in the instant case. Accordingly, the Ground No.2 raised by the assessee is allowed.
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