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TMI Blog2017 (9) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 87,39,287. The case was selected for scrutiny and accordingly notices u/s 143(2) and 142(1) of the Act along with questionnaire were issued. In response, the authorized representative of the assessee appeared from time to time and furnished relevant details, as called for. The assessment was completed u/s 143(3) determining total income at Rs. 1,13,47,483 inter alia making additions towards disallowance of interest paid on borrowed capital and estimation of notional rent on interest free security deposit. 3. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). Before CIT(A), the assessee filed elaborate written submissions and argued that the AO was erred in disallowing interest paid on loan borrowed from TCG Urba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of interest paid on borrowed capital from TCG Urban Infrastructure Holdings Ltd, estimation of notional rent on interest free security deposit and addition of rent accrued but not due. The CIT(A) further observed that the assessee has borrowed capital from TCG Urban Infrastructure Holdings Ltd for the purpose of purchase of property which is allowable deduction u/s 24(b) of the Income-tax Act, 1961. The AO disallowed interest in spite of the assessee furnished necessary evidence in the form of agreement between lender and the assessee and also certificate issued by the lender, which categorically proves that the loan was borrowed for the purpose of purchase of property. The AO neither brought on any cogent material nor gave any find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in estimating notional interest on interest free deposits. As regards addition towards rent accrued, but not due, the CIT(A) observed that the assessee has accounted for rent accrued but not due by following AS-9 issued by ICAI, however, such rent is not accrued to the assessee for the relevant financial year. Accordingly, he directed the AO to delete addition made towards rent accrued, but not due. Aggrieved by the CIT(A)'s order, the revenue is in appeal before us. 5. The first issue that came up for our consideration is that addition of Rs. 1,48,34,926 towards interest paid on borrowed capital from TCG Urban Infrastructure Holdings Ltd. The facts which relate to the impugned addition are that the assessee has purchased a property f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. We further observe that the assessee has furnished copy of agreement between M/s TCG Urban Infrastructure Holdings Ltd and assessee and also interest certificate issued by M/s TCG Urban Infrastructure Holdings Ltd which confirms that the assessee has borrowed loan for the purpose of purchase of property. We further observe that the assessee's main activity is renting out properties. On verification of financial statements filed by the assessee for the relevant assessment year, the assessee's assets represent investment in purchase of property which was substantially financed by loan borrowed from UCO Bank and M/s TCG Urban Infrastructure Holdings Ltd. The assessee's main source of income is from lease rentals from the said properties. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee that actual rent received for the relevant financial year is more than the municipal rateable value or standard rent of the property and as per the provisions of section 23(1)(b), the ALV of the property has to be determined which is a sum for which the property might reasonably be expected to let from year to year or the actual rent received or receivable by the owner in respect of such property. The assessee further contended that the actual rent received is more than the sum for which the property might reasonably be expected to let from year to year. Therefore, the AO was erred in estimating the notional interest on interest free deposit by relying upon the decision of ITAT Delhi Bench which is rendered totally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent as contemplated in section 23(1)(b) of the Act. In this case, the actual rent received by the assessee is more than the fair rent of the property. The assessee has let out its property for a monthly rent of Ras.50 per sq.ft. Therefore, we are of the considered view that the AO was erred in estimating notional interest on security deposit by following the decision of Delhi ITAT cited supra which was totally rendered under different set of facts. Hence, considering the facts and circumstances of the case and also following the decision of Hon'ble Bombay High Court in the case of CIT vs J.K. Investors (Bom) Ltd (supra), we are of the view that notional interest on security deposit cannot be included in the actual rent received or receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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