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2015 (10) TMI 1510 - ITAT PUNE

2015 (10) TMI 1510 - ITAT PUNE - TMI - Nature of rent received from the company - benefit or perquisite or rent itself - Additions made u/s 2(24)(iv) - AO taxed under the same under the head Income From Other Sources - AO alleged that the property has been let out an exorbitant rent of ₹ 10,82,121/- per annum against which the assessee has also simultaneously obtained interest-free deposit which is adjustable towards rent charges. - Held that:- Section 2(24)(iv) of the Act will normally co .....

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((iv). This is not some kind of benefit bestowed gratuitous and without consideration. Accordingly, we subscribe to the view taken by the CIT(A) and decline to interfere with his order cancelling the addition made in taxing the rental income under section 2(24)(iv) of the Act. - Decided against revenue.

Additions made u/s 2(24)(v) for Notional Interest - CIT(A) deleted the addition - Held that:- Interest-free deposit in letting out the property is not anything unusual in common parlan .....

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r of the assessee on similar facts. Respectfully following the binding precedents, this issue regarding the chargeability of notional interest on interest-free deposits is also decided in favour of the assessee. - ITA No.1946/PN/2013 - Dated:- 8-10-2015 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Dheeraj Kumar Jain For The Respondent : Shri Nikhil Pathak ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal filed by the Revenue is against the order of CIT(A .....

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deleting the additions made u/s 2(24)(v) for Notional Interest. 3. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Hon ble CIT, as per the circumstances of the case. 4. The appellant prays to file any of the additional evidence appropriate to the grounds taken in appeal. 3. The relevant facts, in brief, are that the assessee is an individual deriving income from rent, capital gains and interest etc.. The assessment was originally com .....

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additions to the returned income comprises of : (i) Rent receipt of ₹ 10,82,121/- treated as benefit under section 2(24)(iv) of the Act and taxed under the head income from other sources and thus denying the benefit of standard deduction to the Assessee amounting to ₹ 3,24,636/- under section 24 of the Act; and, (ii) Addition towards notional interest of ₹ 12,56,210/- (on the unadjusted rent deposit) as benefit in terms of section 2(24)(iv) of the Act. 4. During the course of r .....

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10,82,121/- per annum against which the assessee has also simultaneously obtained interest-free deposit which is adjustable towards rent charges. The Assessing Officer observed that M/s JISL is a legal entity in which the husband of the assessee and other relatives are holding substantial interest. Accordingly, the Assessing Officer held that the gross rent receipt of ₹ 10,82,121/- is taxable income under section 2(24)(iv) of the Act as against the aforesaid income declared under section 2 .....

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out of a bungalow at Jalgaon and therefore rental income derived from letting out of the ownership bungalow is liable to be taxed under section 22 of the Act and consequently rent income of ₹ 7,57,485/- (net of deduction of ₹ 3,24,636/-) offered by the assessee is correct and the action of the Assessing Officer in holding the rent income as benefit or perquisite under section 2(24)(iv) instead of taxing the same under section 22 of the Act is contrary to the legal provisions of the .....

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tical income. There is no justification in making another addition towards notional interest on such interest free deposits. The CIT(A) also observed that in the subsequent assessment year 2007-08, no additions have been made on account of notional interest by the same Assessing Officer in the re-assessment proceedings under section 147 of the Act. He, therefore, cancelled the additions made by the Assessing Officer as uncalled for. 7. Aggrieved by the order of the CIT(A), the Revenue is in appe .....

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efit derived from company in the form of rent is taxable as income under section 2(24)(iv) of the Act. Thereafter, he submitted that the interest-free deposit of staggering amount has been given in the nature of benefit to the assessee for which interest embedded therein is chargeable under section 2(24)(iv) of the Act. Accordingly, he pleaded for upholding the action of the Assessing Officer on this score also. 9. The Ld. Authorized Representative for the assessee, on the other hand, relied upo .....

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operty , it cannot be taxed under any other provisions of the Act including section 2(24)(iv) of the Act. The rent has been offered for taxation under section 22 of the Act and deduction has been claimed under section 24 of the Act as entitled to the assessee. The Assessing Officer has sought to deny the statutory deduction under S. 24 by resorting the section 2(24)(iv) of the Act, which is not permissible in law. He next contended that the Assessing Officer on the one hand contends that the ren .....

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He submitted that in view of the long line of judicial precedents, notional interest-free deposit is not taxable in law. The action of the Assessing Officer is contrary to theory of real income. Therefore, he pleaded that the order of the CIT(A) is in accordance with law and deserves to be upheld. He further relied upon the decision of the Pune Bench of the Tribunal in the case of Shri Bhavarlal Hiralal Jain & Others in ITA No.735/PN/2013 and others, order dated 28.11.2014 placed in the Pape .....

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as invoked section 2(24)(iv) of the Act in preference to section 22 of the Act. 11. For the sake of ready reference section 2(24)(iv) of the Act is reproduced as under :- 2. In this Act, unless the context otherwise requires,- xxxxxxxxxx (24) income includes - (i) xxxx (ii) xxxx xxxx (iv) the value of any benefit of perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the .....

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advance security deposits to its directors or relatives against the valuable consideration i.e. for obtaining house property on rent. As per section 22 of the Act, on the other hand, annual value of the property consisting of any building or lands of appurtenant thereto of which the assessee is the owner is chargeable to income-tax under the income from house property subject to certain deductions as provided under section 24 of the Act. Therefore, the rental income derived from ownership proper .....

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ssessee only if it is obtained from the company which was otherwise payable by the director or other person. In short, section 2(24)(iv) of the Act will normally come into play only when the company in which the directors or its relatives have taken advantage in respect of any obligation which the director and their relatives are expected to discharge. In the present facts, section 2(14)(iv) has no application. The agreement has been entered into with the company for which rent has been paid and .....

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