TMI Blog2014 (4) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is offered by the assessee in the rental income - applying the rate of 8% without examining the facts and without giving the findings, it is not appropriate to say that that the security deposit has earned interest income from the bank. The assessee’s failure to file the basis showing the justification for arriving at the monthly rent of Rs. 11 lakhs for the premises also cannot be appreciated - certain basic things are missing and it is required to remand the matter to the files of the AO - Lower authorities have not provided any discussion on whether the said sum of Rs. 1.32 Crs includes portion attributable to the interest segment on the security deposit - thus, all the three appeals are remitted back to the AO for examining the reasonableness of the computation of the monthly rent of Rs. 11 lakhs per month as offered by the assessee and in what way the same amounts to deflation of rent qua the other premises in the vicinity – Decided in favour of Assessee. - I.T.A. No.394/M/2011, I.T.A. No.393/M/2011, I.T.A. No.1529/M/2011 - - - Dated:- 28-2-2014 - Shri D. Karunakara Rao And Shri Vivek Varma,JJ. For the Appellant : Shri Girish Dave Mr. Mahav Khandelwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation, the assessee s name is Bombay Brush Co. Pvt.Ltd., and the same was changed to Powergas Information Technology Services Private Limited in 2003. In the year 2006, it was changed to Aker Kvaerner Powergas Systems Private Limited. Again, in the year 2008 the assessee s name was changed to Aker Powergas Systems Private Limited. 4. Referring to the above mentioned grounds, at the outset, Ld Counsel for the assessee mentioned that the grounds raised in all these three appeals are identical and the issues is one and the same for all these assessment years i.e., the sustainability of addition of notional interest on security deposits for the purpose of computing the income from house property u/s 23(1)(a) of the Income Tax Act, 1961. Assessee also raised other grounds without prejudice to the earlier one. It is also mentioned that the judgment of the Hon ble Delhi High Court in the case of Moni Kumar Subba vide ITA No.499 of 2008 is distinguishable on facts. In connection with the above issue, assessee submitted the following facts of the case that led to addition on account of notional interest in all the three assessments years under consideration. 5. Briefly stated, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n interest free deposits is required to be considered for determining the ALV, CIT (A) relied on certain decisions of the Tribunal i.e., (i) Baker Technical (2009) 31 DTR (Mum) (TM) (Trib) dated 12.8.2009; (ii) Smt. Rita A. Parekh (2006) 10 SOT 779 (Mum) and (iii) Reebok India Co 209 CTR 458 (Del). Further, CIT (A) distinguished the judgments relied on by the assessee by stating that the said judgments could not reach to a conclusion that the notional interest on interest free deposits should be completely ignored for the purpose of determining the ALV of the property. Finally, CIT (A) came to a conclusion that the ALV was required to be considered u/s 23(1)(a) of the Act by considering the fact of notional interest on such interest free deposits received by the assessee and upheld the decision of the AO. Aggrieved with the decision of the CIT (A), assessee is in appeal before the Tribunal by raising the above mentioned grounds. 7. During the proceedings before us, Ld Counsel for the assessee mentioned that this is the case where the ratable value of the property for the AY 2005-2006 is Rs. 33, 44,595/-. However, assessee, in compliance to the rental agreement dated 16.10.2003, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dd that in place like Delhi, this has now become redundant inasmuch as the very basis of fixing property tax has undergone a total change with amendment of the Municipal Laws by Amendment Act, 2003. Now the property tax is on unit method basis. 20. In the present case, the Assessing Officer added notional interest on the interest free security for arriving at annual letting value. Since that was not permissible, the effect would be that such assessment was rightly set aside by the CIT(A) and the Tribunal. Therefore, the orders would not call for any interference. These appeals are, thus, dismissed on this ground. Once we hold this, the very basis adopted by the Assessing Officer to fix annual letting value was wrong and therefore, no further exercise in fact is required by us in these appeals. 8. Relying on the above, Ld Counsel argued stating that the AO is barred from making additions on account of notional interest on the security deposit. However, the conclusions of the judgments are already discussed above. He also mentioned that, while dismissing the appeal of the assessee, CIT (A) relied heavily on the Division Bench judgment of the Delhi High Court in the case of Mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucing balance of the interest free security deposit. Further, he mentioned that the AO is of course not barred from making additions on account of notional interest, when there is a material and evidence for ascertaining that the ALV of the properties is much higher than the disclosed ones. He also mentioned that this is the case where the ratable values or municipal values are inapplicable because rent offered by the assessee is much higher. Now it is the question on reasonableness of the market value of the rent of the property. Further, he mentioned that in the absence of non-furnishing of the basis for arriving at Rs. 11 lakhs per month, the AO s addition applying the rate of 8% on the reducing balances of the interest free security deposits is justified. Without prejudice, Ld DR argued stating that for want of working of the reasonableness and the verification of the facts relating to the rent of Rs. 11 lakhs per month, the matter can be remanded to the files of the AO. 11. We have heard both the parties and perused the orders of the Revenue Authorities as well as the precedents placed before us. This is the case where the assessee received Rs. 11 lakhs per month as rent an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High Court in the case of CIT vs. Anil Kuimar Bhatia [2013] 352 ITR 493 (Delhi) and read out the observation of the Hon ble Delhi High Court on the role of the Tribunal which is relevant for the proposition that the Tribunal ought to have examined the case set up by the assessee without putting on blinkers and should have scratched the surface instead of simply accepting the assessee's stand. On legal front, CIT (A) confirmed the addition made by the assessee merely relying on the Division Bench decision in the case of Moni Kumar (supra) without awaiting the Full Bench judgment of the same Court in the same case. The other decisions relied upon by the Ld Counsel were also subsequent in time, therefore, we remand all these three appeals to the files of the AO for a limited purpose of examining the reasonableness of the computation of the monthly rent of Rs. 11 lakhs per month as offered by the assessee and in what way the same amounts to deflation of rent qua the other premises in the vicinity. AO should consider all the relevant factors wile coming to the reasonable conclusions on the reasonableness of the rent. Further, we reject the basis of the AO in thrusting no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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