TMI Blog2011 (3) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed off by way of this consolidated order. 2. The sole common dispute raised by the Revenue in all these appeals is, whether or not, the learned CIT(A) was justified in deleting the addition made on account of interest accrued on advance security deposit as notional rent. 3. Brief facts relating to the issue under consideration is that the assessee has shown rental income of Rs. 8,55,960. The Assessing Officer noticed that the assessee has received interest free deposits of Rs. 1,64,40,000. He was of the view that the assessee had taken interest free deposits from parties to whom property was let out only with a view to understate the rental income and avoid the payment of tax genuinely payable on such income. The Assessing Officer, after considering the explanation and reply of the assessee, added notional interest at the rate of 6 per cent on the deposits which is prevailing on the fixed deposits at the relevant point of time. Accordingly, the Assessing Officer has worked out the notional interest of Rs. 9,84,000, and added the same as income under the head "income from house property". 4. The assessee, being aggrieved by the stand of the Assessing Officer, carried the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling rate of interest on fixed deposit. It is not clear from the assessment order as to under which provisions, the addition on account of notional interest has been made by the Assessing Officer. For computing annual letting value for the purpose of section 22 of the Act, the Assessing Officer has to first determine the sum for which the property might reasonably be expected to let from year to year as per the provisions of section 23(1)(a) of the Act. According to the provisions of section 23(1)(a), for determining the fair rent value, the Assessing Officer has to consider various factors into account which includes the standard rent, the municipal value of the property as the case may be and other effecting factors like the benefit availed by the assessee other than the annual rent received or receivable. Therefore, for computation of annual letting value, the Assessing Officer has to first do the exercise of arriving at the fair rent of the property in question and, thereafter, the same has to be compared with the annual rent received or receivable by the assessee. If the annual rent received or receivable is more than the fair rent as computed under clause (a) than the annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard rent or the fair rent. However, section 23(1)(b) only applies to cases where the actual rent received is more than the reasonable rent under section 23(1)(a) and it is for this reason that section 23(1)(b) contemplates that in such cases the annual value should be decided on the basis of the actual rent received. As stated hereinabove, in this case, the Department has invoked section 23(1)(b) which, as stated hereinabove, proceeds on the basis that the actual rent received by the assessee is more than the reasonable rent under section 23(1)(a). The Tribunal has also found that the actual rent received by the assessee, even without taking into account the notional interest, was more than the annual value determinable under section 23(1)(a) of the Act. This finding of fact has not been challenged by the Department in this appeal. On the contrary, the Department has contended that in this case section 23(1)(b) was applicable. They have not relied on the provisions of section 23(1)(a). The question as to whether notional interest could have been taken into account under section 23(1)(a) does not arise in this appeal and we do not wish to go into that question in this appeal. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the fair rent, the actual rent would be the annual value of the property. In the circumstances, the value of the notional advantage, like notional interest in this case, will not form part of actual rent received as contemplated by section 23(1)(b). At the cost of repetition it may be mentioned that under section 23(1)(a), the Assessing Officer has to decide the fair rent of the property. While deciding the fair rent, various factors could be taken into account. In such cases various methods like contractors method could be taken into account. If on comparison of the fair rent with the actual rent received, the Assessing Officer finds that the actual rent received is more than the fair rent determinable as above, then actual rent shall constitute the annual value under section 23(1)(b). Now, applying the above test to the facts of this case, we find a categorical finding of fact recorded by the Tribunal that the actual rent received by the assessee was more than the fair rent. Under the above circumstances, in view of the said finding of fact, we do not see any reason to interfere. Before concluding we may point out that under section 23(1)(b), the word 'receivable' denot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case that the same property has been let out at substantially lower rent to Deutsche Bank AG and subsequently to Bombay Stock Exchange. Admittedly, the assessee, apart from the rent received from Deutsche Bank AG and Bombay Stock Exchange, has received interest-free deposits from the tenants. As per the decision of the Bombay Bench of the Tribunal in the case of J.K. Investors (Bombay) Ltd. (supra), the benefit derived by the assessee from the interest-free deposit could be taken into consideration for determination of fair rental value under section 23(1)(a) of the Act. In my considered view, the benefit derived by the assessee from the interest-free deposit could not be more than the lending rate at which the deposits were available in the market at the particular point of time. Even if that is taken into account, the fair rental value of the property does not work out to the amount determined by the Assessing Officer and confirmed by the learned AM. I, therefore, partly agree with the learned AM that the ALV in this case cannot be limited to standard rent but I do not agree with him that the fair rent adopted by the Assessing Officer is justified. I partly agree with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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