2014 (1) TMI 746

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....count of notional interest on security deposit. 2.1 The relevant facts are that during the year under consideration, the assessee, a company engaged in the business of real estate and trading in TDR had let out its premises to M/s I- flex Solution Ltd and M/s Jet Airways Ltd and received a rent of Rs.35,55,291/- and Rs.61,24,604/- respectively. In this connection, the assessee had taken a deposit of Rs.75,00,000/- from M/s I-flex Solution Ltd and Rs.68,30,461/- from M/s Jet Airways Ltd by way of interest free security deposit. In the assessment completed u/s 143(3), the AO calculated a notional interest @ 12% of the interest free security deposits of Rs. 75 lacs and Rs.68,30,461/- taken by the assessee from the said parties and added an ....

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....nal interest on security deposit for computing the annual value of the property. In the absence of any difference in facts brought out by the Revenue for the year under consideration, we, following the said decision of the ITAT, delete the impugned addition made by the lower authorities on account of notional interest on security deposit for computing the annual value of the property. Accordingly, Ground no. 1 of the assessee's appeal is allowed. 3. Ground no. 2 of the assessee's appeal relate to the disallowance of Rs.2,82,935/- on account of the claim of depreciation. 3.1 The relevant facts are that the assessee, during the year under consideration, had claimed depreciation on Plant & Machinery amounting to Rs.2,82,935/-. However, i....

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.... Rs.47,43,092/- in the P & L Account on borrowed funds. However, in the assessment framed, the AO disallowed the impugned interest and added the same back to the total income of the assessee as there is no agreement with M/s Dosti Corporation and the entire arrangement appears to be sham. 4.2 On appeal, the Ld.CIT(A) deleted the addition made by the AO as evidence had been furnished by the assessee to prove the advances had been made for commercial consideration for making investments in flats for the purpose of business after noting that the loans had been advanced to the same parties for the A.Y. 2005- 06 also. Aggrieved by the impugned decision, the Revenue has raised these grounds in the appeal before us. 4.3 We have heard the riv....