2011 (9) TMI 1106

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....ssessee had taken huge interest free deposit and thereby kept the annual letting value of the property lower than he market value. 2. On the facts and in circumstances of the case and in law, the CIT(A) erred in deleting the addition of notional interest without appreciating that the annual letting value of the property of the assessee is to be determined in accordance with the provisions of section 23(1)(a) and the question of taxing the notional income u/s. 23(1)(a) has been kept open for consideration by the Hon'ble High Court in the case of CIT vs. J.K. Investors (Bombay) Ltd. (2000) 112 Taxman 107(Mum)." 2. The Assessee is a company. It is engaged in the business of letting out properties and dealing in real estate. The Ass....

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....t a lesser rent and the huge interest free security deposit has adversely influenced, the letting out value of the premises. He worked out notional interest on such interest free security deposit at 12% P.a. on the interest free security deposit of Rs. 59.48 lacs which was a sum of Rs. 7,13,760/-. He added the said sum of Rs. 7,13,760/- to the actual rent received of Rs. 3,74,724 and determined the annual value of the property at Rs. 10,88,484/-. The determination of annual value as above was done by the AO by making a reference to the provisions of Sec.23(1)(a) of the Income Tax Act, 1961 (the Act). The Hon'ble Bombay High Court in the case of CIT Vs. J.K. Investors (Bombay) Ltd. 248 ITR 723 (Bom) has taken the view that while computing an....

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....& ITA No.1240 of 2010 judgment dated 30.3.201, the facts before the Full Bench of the Hon'ble Delhi High Court were the assessee let out house property for which she received a rent of Rs. 6.95 lakhs and an interest-free security deposit of Rs. 10.78 crores. The property was not subject to the Rent Control Act. The AO held that in computing the annual rent u/s 23(1)(a), the notional interest on the security deposit (Rs. 30.41 lakhs) had to be added. This was reversed by the CIT (A) & Tribunal. On appeal by the department, the matter was referred to a Full Bench. The Full bench held: (i) S. 23 (1)(a) requires determination of the "fair rent" being "the sum for which the property might reasonably be expected to let from year to year"....