TMI Blog2023 (10) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... rest paid on borrowed capital while computing the income under the head income from house property. The observations of the CIT (Appeals) that the interest claimed in the computation has already been allowed by the AO is totally misplaced as AO has not allowed the assessee to carry forward the loss under the head income from house property which is mainly paid on borrowed capital. Thus we direct AO to allow interest on borrowed capital as claimed by the assessee and the same shall be carried forward under the head income from house property. Notional interest on interest free security deposit - As various Courts have held a consistent view that notional interest cannot form part of actual rent. Hence, there is no justification to take a different view that what has been stated in Asian Hotels Limited [ 2007 (12) TMI 274 - DELHI HIGH COURT] - Ratio of the decisions squarely applies to the facts of the assessee s case. Thus, we reverse the findings of the ld. CIT (Appeals) on this issue and hold that no notional interest on interest free security deposit can be added to the ALV of the property while computing income from house property. Appeal of assessee allowed. - S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing calculation of notional Interest amount and needs to be deleted in view of GOA No.4. Tax effect is Rs. 54,044. 3. Briefly stated the facts are that the assessee filed return of income on 4.08.2018 declaring total income of Rs. NIL . In the return of income filed the assessee has shown rental income for 5- 1/2 months at Rs. 71,44,500 and claimed standard deduction of Rs. 21,43,350/- @ 30% and also claimed interest of Rs. 7,08,02,251/- paid on housing loan which resulted in loss of Rs. 6,58,00,101/- under the head income from house property. In the return of income filed the assessee claimed TDS of Rs. 11,69,100/- on the entire rent received including rent received in advance i.e. for the period from 1.04.2018 to 15.08.2018 amounting to Rs. 45,46,500/-. In the scrutiny assessment the Assessing Officer added Rs. 84,43,500/- to the income from house property on the ground that assessee claimed TDS of Rs. 4,54,650/- on the advance rent received but not reflected in the return of income for this assessment year. 4. The assessee carried the matter before the ld. CIT (Appeals). The ld. CIT (Appeals) sustained the addition the extent of Rs. 45,46,500/- under the head income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit received, the ld. Counsel submits that the assessee received interest free refundable security deposit of Rs. 38,97,000/- being three months rent at monthly rent of Rs. 12,99,000/-. The ld. Counsel placing reliance on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Moni Kumar Subba [(2011) 333 ITR 38 (Del) (FB)] submits that the ld. CIT (Appeals) erred in directing the Assessing Officer to add notional interest on security deposit to the ALV of the property. The ld. Counsel also placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Asian Hotels Ltd. [(2008) 168 Taxman 59 (Del)]. Assessee prays that the addition of notional interest be directed to be deleted. 8. The ld. DR strongly placed reliance on the orders of the authorities below. 9. Heard rival submissions perused the orders of the authorities below. In so far as the interest on borrowed capital is concerned, we see no valid reason for disallowing the interest paid on borrowed capital to the banks. The evidences furnished by the assessee in the form of statement of accounts and certificates issued by the banks, sanctioning and disbursing the housing loan to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, if deposited, was neither taxable as profit or gain from business or profession under Section 28(iv) of the Act or income from house property under Section 23(1)(a) of the Act. Rationale given in this behalf was as under: A plain reading of the provisions indicates that the question of any notional interest on an interest free deposit being added to the income of an assessed on the basis that it may have been earned by the Assessee if placed as a fixed deposit, does not arise. Section 28 (iv) is concerned with business income and is distinct and different from income from house property. It talks of the value of any benefit on perquisite, whether convertible into money or not arising from the business or the exercise of a profession. It has been explained by this Court in Ravinder Singh that Section 28 (iv) can be invoked only where the benefit or perquisite is other than cash and that the term benefit or amenity or perquisite cannot relate to cash payments. In the instant case, the AO has determined the monetary value of the benefit stated to have accrued to the assessed by adding a sum that constituted 18% simple interest on the deposit. On the strength of Ravinder S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for. We may also record that even the Bombay High Court in the case of Commissioner of Income Tax Vs. J. K. Investors (Bombay) Ltd., [(2001) 248 ITR 723 (Bom.)] categorically rejected the formula of addition of notional interest while determining the fair rent in the following manner: ..........Before concluding we may point out that under Section (23)(1)(b), the word receivable denotes payment of actual annual rent to the assessee. However, if in a given year a portion of the actual annual rent is in arrears, it would still come within Section (23)(1)(b) and it is for this reason that the word receivable must be read in the context of the word received in Section(23)(1)(b). In the light of the above interpretation, notional interest cannot form part of the actual rent as contemplated by Section (23)(1)(b) of the Act. We once again repeat that whether such notional interest could form part of the fair rent under Section (23)(1)(a) is expressly left open. 12. It is, thus, manifest that various Courts have held a consistent view that notional interest cannot form part of actual rent. Hence, there is no justification to take a different view that what has been stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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