Notional interest on interest-free tenancy security deposits is...

Notional interest on interest-free tenancy security deposits is not taxable merely because deposits were received: absent a contractual right to interest or evidence that rent was suppressed or substituted, no real income accrues. Capital introduced by an identified partner through verified bank accounts cannot be added in the firm's hands merely because the partner's antecedent source remains doubtful, unless the funds are shown to belong to the firm. A cash-deposit addition must exclude amounts already treated as partner capital, while unreconciled balances require cash-book verification. Expenditure disallowance under section 14A requires exempt income in the relevant year; ad hoc business-expense disallowance also fails without identified non-business expenditure or record defects.