DCIT, New Delhi V. M/s. Theta Investment Pvt. Ltd., New Delhi

ITA 4532/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65540 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 29-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SUMANA SEN
• Assessee Lawyers: P RADEEP DINODIA R K KAPOOR
• Keywords: Business income; Fair market value; Notional interest

Judgement Text

ITA NO. 4532/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A. NO. 4532/DEL/2011 A.Y. : 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-16(1), NEW DELHI VS. M/S THETA INVESTMENT PVT. LTD., 703, ROHIT HOUSE-3, TOLSTOY MARG, NEW DELHI - 110001 (PAN/GIR NO. : AAACT 2635H) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. PRADEEP DINODIA, R.K. KAPOOR, CA DEPARTMENT BY : MRS. SUMANA SEN, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIX, NEW DEL HI DATED 11.7.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (A) ERRED IN DIRECTING THE ALV OF THE PROPERTY BE ADOPTED AT ` 1,14,689/- AS AGAINST ` 12,17,145/- ADOPTED BY THE ASSESSING OFFICER IN HIS ORDER U/S. 143(3). ITA NO. 4532/DEL/2011 2 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED THAT THE VALUE OF THE PROPERTY FOR THE PURPOS E OF INCOME TAX IS ASSESSABLE U/S. 23(1) AND THE AMOUNT IT WILL FETCH IN THE OPEN MARKET IS THE ALV WHICH WAS LUCIDLY DISCUSSED IN THE ASSESSMENT ORDER. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING THE ADDITION OF ` 21,00,000/- ADD ED TO THE ANNUAL LETTING VALUE BEING THE NOTIONAL INTERES T ON INTEREST FREE SECURITY DEPOSITED BY THE ASSESSEE. 4) THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING O F APPEAL. 3. APROPOS ISSUE OF COMPUTATION OF ALV OF THE PROPER TY IN THIS CASE ASSESSING OFFICER OBSERVED THAT ASSE SSEE HAD A FLAT IN MUMBAI. A PERUSAL OF THE RECORDS SHOWED THAT TH E ASSESSEE COMPANY HAD DECLARED ` 1,14,689/- AS RATABLE VALUE S INCE A.Y. 2005-06 AS PER THE MUNICIPAL RATES AND SHOWN IT UNDER INC OME FROM HOUSE PROPERTY. THE DETAILS OF THE PROPERTY ARE AS UNDER :- ADDRESS OF THE PROPERTY AREA VALUE AS PER BOOKS GALA /FLAT NO. 202 & 213, 2 ND FLOOR, KAMANWALA CHAMBERS, MAHIM(W), MUMBAI 1900 SQ.FT. ` 81,08,196/- ITA NO. 4532/DEL/2011 3 3.1 FURTHER, IT WAS FOUND BY THE ASSESSING OFFICER THAT ASSESSEE HAS TAKEN SECURITY DEPOSIT OF ` 1.75 CRORES AGAINST THE RENTED PROPERTY. ASSESSING OFFICER OBSERVED THAT THE BOOK VALUE OF THE PROPERTY IS ONLY 81,08,196/- ON THE ONE HAND, BUT THE SECURITY DEPOS IT CANNOT BE COMPARED AT ALL TO THE RATE OF THE PROPERTY, AND W AS MORE THAN TWO TIMES AT ` 1.75 CRORES, ASSESSEE IN THIS REGARD, SUBMITTED BEFORE THE ASSESSING OFFICER THAT ASSESSEE HAS TAKEN RENTAL I NCOME ON THE BASIS OF MUNICIPAL CORPORATION VALUE IN THE ABSENCE OF A NY RENTAL INCOME RECEIVED FROM THE LESSEE, DUE TO ON-GOING DISPUTE WI TH THE PARTY. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS ASKED THE PA RTY TO REFUND THE SECURITY DEPOSIT ON MANY OCCASIONS. HOWEVER, DUE T O POOR FINANCIAL POSITION OF THE COMPANY, THE PARTY IS UNABLE TO REF UND THE SECURITY DEPOSIT. ASSESSING OFFICER OBSERVED THAT SUBMISS ION OF THE ASSESSEE ARE NOT TENABLE. HE NOTED THAT SINCE THE ASSESSEE COMPANY HAS NOT GIVEN ANY IDEA OF THE MARKET VALUE OF THE PROPERTY, TO ARRIVE AT THE RATEABLE VALUE AS PER THE PREVAILING MARKET RATE, A COMMISSION WAS SENT TO THE ACIT, CIRCLE 18(3), MUMBAI, TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY FOR THE PURPOSES OF RENT. T HE CRUX OF THE SUBMISSION OF THE ACIT, MUMBAI WAS AS FOLLOWS:- 7. AFTER ESTABLISHING ` 17,10,000/- AS ANNUAL RENT , AT PRESENT, FOLLOWING WILL BE THE ANNUAL RENT SINCE A.Y. 2004-05, ASSUMING THERE IS 12% APPRECIATION IN RENT EVERY YEAR, THAT IS AGAIN QUITE UNDER-ESTIMATED AND THUS REASONABLE. SL.NO. ASSESSMENT YEAR ANNUAL RENT (RS.) 1 2004-05 7,73,518/- ITA NO. 4532/DEL/2011 4 2 2005-06 8,66,340/- 3 2006-07 9,70,300/- 4 2007-08 10,86,737/- 5 55 5 2008 2008 2008 2008- -- -09 0909 09 12,17,145/ 12,17,145/ 12,17,145/ 12,17,145/- -- - 6 2009-10 13,63,202/- 7 2010-11 15,26,787/- 8 2011-12 17,10,000/- (EMPHASIS SUPPLIED) 8. THE ABOVE RATES, CAN BE TAKEN WITHOUT ANY EXCEPTION, AS FAIR MARKET RENT UNDER THE PROVISION OF SECTION 23(1)(A). FURTHER THIS IS ALS O TO ADD THAT NO STANDARD RENT IS APPLICABLE IN THE INSTANT CASE AS IS ALSO ADMITTED BY THE AUTHORIZED PERSON OF THE ASSESSEE COMPANY IN RESPONSE TO THE NOTICE U/S. 131 OF THE INCOME TAX ACT, 1961. ON THE BASIS OF ABOVE DISCUSSION AND CONSIDERING THE REPORT AS AFORESAID, ASSESSING OFFICER HELD THAT O NLY ANNUAL RATEABLE VALUE FOR THE PURPOSE OF SECTION 23(1)(A) WAS BEING TAKEN AT ` 12,17,145/-. SINCE ASSESSEE COMPANY HAS SHOWN ` 1,14,689/- AS RATEABLE VALUE AND OFFERED THE SAME AS INCOME FROM HOUSE PROPERTY, THE ADDITION UNDER THE HEAD IN COME FROM HOUSE PROPERTY WAS RESTRICTED TO ` 11,02,456/-. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) HELD AS UNDER:- THE BASIC QUESTION THAT NEEDS TO BE ANSWERED IN TH ESE GROUNDS IS THAT CAN THE ASSESSING OFFICER SUBSTITU TE THE MARKET RENTAL VALUE AND ADOPT THE SAME AS ALV IF THE PROPERTY IS LYING VACANT AND APPELLANT HAS ADMITTEDL Y ITA NO. 4532/DEL/2011 5 RECEIVED NO RENT OR IN THE OTHER SITUATION WHERE TH E PROPERTY IS NOT LET OUT, HOW THE ALV OF THE PROPERTY IS TO BE DETERMINED FOR THE PURPOSE OF TAXATION. THE LD. AUTHORISED REPRESENTATIVE HAS EXPLAINED THE LEGAL PROVISIONS AND POSITION AND FURTHER ARGUED THAT THE ALV IS TO BE DETERMINED IN THE LIGHT OF THE FOLLOWING DECISION S:- A) C.I.T. VS. C.P. SARATHY MUDALIAR 83 ITR 170 (SC) B) JOHN TINSON & CO. LTD. VS. C.I.T. 157 TAXMAN 410 (DEL.) C) ACIT VS. M/S MAYUR RECRETIONAL & DEVELOPMENT LTD. (I.T.A. NO. 6101/DEL/1996, A.Y. 1993-94, DATED 28.3.2008) D) C.I.T. VS. MONI KUMAR SUBHA (2011-TIOL-200- HON'BLE HIGH COURT DEL-ITAT-LB) THE POSITION WHICH THUS EMERGES FROM THE READING OF THE RELEVANT PROVISIONS OF SECTION 23 AND THE RATIO LAI D DOWN IN THEIR JUDGEMENTS BY THE HONBLE APEX COURT AS WELL AS HONBLE JURISDICTIONAL HIGH COURT IS THAT THE ANNU AL VALUE OF THE PROPERTY WHICH IS LET OUT DURING THE RELEVANT Y EAR WOULD BE THE HIGHEST OF THE FOLLOWING THREE SUMS:- I) MUNICIPAL VALUATION. II) THE FAIR RENT DETERMINED BY THE RENT CONTROL ACT. III) THE ACTUAL RENT RECEIVED BY THE OWNER. IN THIS CASE, THE ASSESSEE HAS NOT RECEIVED ANY RE NT BECAUSE OF DISPUTES. HENCE, THE RENTAL VALUE AS P ER THE MUNICIPAL AUTHORITIES IS TO BE ADOPTED AS ALV. IN ITA NO. 4532/DEL/2011 6 VIEW OF THE ABOVE DISCUSSION THE ASSESSING OFFICER IS HEREBY DIRECTED TO ADOPT ` 1,14,689/- BEING THE VAL UE FIXED BY MUNICIPAL AUTHORITIES AS ALV. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. 7. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ASSES SEE HAS ADOPTED THE CORRECT METHOD. FURTHER, ASSESSEES SUBMISSION IN THIS REGARD IS THAT FROM ASSESSMENT YEAR 1998-99 TO 2007-08, THE I NCOME OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE REVENUE. FURTHE R, THE LD. COUNSEL SUBMITTED THAT SECTION 25A DULY PROVIDES FOR SITUA TION WHERE UNREALIZED RENT ALLOWED AS DEDUCTION IS REALIZED SU BSEQUENTLY. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE REFERRED THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C. I.T. VS. VINAY BHARAT RAM & SONS (HUF) & ORS VIDE ORDER DATED 20.11.2002. IN THIS CASE PURSUANT TO THE ASSESSMENT BY THE ASSESSING OFFICE R, ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) AND THE LD. COMMISSIONER OF INCOME TAX (A) HAS REMANDED THE MATTER BACK TO THE ASSESSING OFFICER WITH THE FOLLOWING D IRECTIONS:- THE ASSESSING OFFICER IS DIRECTED TO RE-DETERMINE THE ANNUAL VALUE OF THE PROPERTY IN ACCORDANCE WITH MY FINDINGS, HE WILL LIMIT THE SAME TO THE HIGHER OF TH E FOLLOWING (A) THE MUNICIPAL VALUATION, (B) THE FAIR RENT DETE RMINABLE UNDER THE RENT CONTROL ACT, AND (C) THE ACTUAL REN T PAID (SIC) BY THE ASSESSEE. THIS DIRECTION, I FEEL FAIR LY AND REASONABLY GIVES EFFECT TO THE PRONOUNCEMENTS OF TH E SUPREME COURT ON THE SUBJECT FROM TIME TO TIME. ITA NO. 4532/DEL/2011 7 7.1 THE DIRECTIONS GIVEN BY THE LD. COMMISSIONER OF I NCOME TAX (A) WAS AFFIRMED BY THE TRIBUNAL. FURTHER, HONBLE HIG H COURT HAS HELD IN THIS CASE THAT IT DID NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE TRIBUNAL. 7.2 ON THE BASIS OF AFORESAID DISCUSSIONS, WE FIND THAT THE ANNUAL VALUE OF THE PROPERTY, WHICH WAS LET OUT DURING T HE RELEVANT YEAR WOULD BE THE HIGHER OF THE FOLLOWING :- (A) MUNICIPAL VALUATION, (B) THE FAIR RENT DETERMINABLE U NDER THE RENT CONTROL ACT, AND (C) THE ACTUAL RENT PAID. SINCE , IN THIS CASE, ASSESSEE HAS NOT RECEIVED ANY RENT BECAUSE OF DISPUTES, THE RENT AL VALUE THROUGH MUNICIPAL AUTHORITIES WAS TO BE ADOPT ED AS ALV. 7.3 WE FURTHER FIND THAT FROM ASSESSMENT YEAR 1998- 99 TO 2007-08 THE INCOME OFFERED BY THE ASSESSEE WAS ACCEPTED BY THE REVENUE. THERE IS NO CHANGE IN FACTS IN THE PRESENT ASSESSME NT YEAR. HENCE, ADOPTING A DIFFERENT YARD STICK IN CURRENT ASSESSME NT YEAR IS NOT JUSTIFIED. 7.4 FURTHERMORE, WE FIND THAT SECTION 25A DULY PROVI DES FOR SITUATION WHERE UNREALIZED RENT ALLOWED AS DEDUCTIO N IS REALIZED SUBSEQUENTLY. IN SUCH A SITUATION THE AMOUNT SO REA LIZED SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE INCOME FROM HOUSE PROPERTY FOR THE PREVIOUS YEAR. ITA NO. 4532/DEL/2011 8 7.5 WE FURTHER NOTE THAT BASIS OF DETERMINATION OF R ENTAL VALUE ADOPTED BY THE ASSESSING OFFICER IS NOT PROPER. ASSESSING OFFICER ESTIMATED THE VALUE IN A.Y. 2011-12 AT ` 17,10,000/ -. THEREAFTER, IT HAS BEEN ASSUMED THAT THERE WAS 12% INCREASE ANNUALLY IN THE RENT. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). ACCORDINGLY, WE UPHOLD THE SAME. 9. APROPOS ISSUE OF DELETION OF ADDITION OF ` 21,0 0,000/- ADDED TO THE ANNUAL LETTING VALUE ON THIS ISSUE ASSESSING OFFICER OPINED THAT NOTI ONAL INTEREST ON SECURITY DEPOSIT OF ` 1.75 CRORES SHOULD BE TREATED AS PART OF THE RENT. RENT RECEIVED FOR THE WHOLE YEAR WAS ONLY ` 1,14,68 9/- AND THE PROPERTIES BOOK VALUE WAS ` 81,08,196/-. ASSESSEE IN THIS REGARD SUBMITTED THE FOLLOWING BEFORE THE ASSESSING OFFICE R. 5. IT MAY FURTHER BE NOTED THAT COMPANY HAS TAKEN INTO ACCOUNT THE RATEABLE VALUE OF THE FLAT AT KAMANWALA CHAMBERS IN ABSENCE OF RECEIPT OF ANY RENTALS. IT MAY KINDLY BE NOTED THAT NO PART OF NOTIONAL INTEREST ON SECURITY DEPOSIT CAN BE SUBSTITUTED FOR RENTAL INCOME SINCE THE AMOUNT IS RE-PAYABLE BY THE COMPANY. IT MAY FURTHER BE NOTED THAT THERE ARE VARIOUS JUDGEMENTS ON THE CAPTIONED SUBJECT WHERE THE JUDICIAL AUTHORITIES HAVE HELD THAT NOTIONAL INTEREST CANNOT BE ITA NO. 4532/DEL/2011 9 ADDED TO ARRIVE THE ANNUAL VALUE FOR THE PURPOSE OF COMPUTING THE INCOME FROM THE HOUSE PROPERTY. MIDLAND INTERNATIONAL LTD. VS. DY. C.I.T. (2007), 13 SOT, 149/109 ITD 198 (DELHI) WHEREIN IT WAS HELD THAT ELEMENT OF NOTIONAL INCOME BY CALCULATING INTEREST RECEIVABLE ON THE INTEREST FREE SECURITY DEPOSIT COULD NOT BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE ANNUAL VALUE OF THE PROPERTY AS THE SAME IS NOT CONTEMPLATED UNDER THE PROVISIONS OF SEC. 23. 10. ASSESSING OFFICER DID NOT FIND THE ABOVE SUB MISSIONS ACCEPTABLE. HE HELD THAT INTEREST ON SECURITY DE POSIT WAS AN IMPORTANT FACTOR FOR CONSIDERATION WHILE DETERMINING THE FAIR RENT WITHIN THE MEANING OF SECTION 23(1)(A) OF THE ACT. ASSESSING OFFICER FURTHER OPINED THAT SECTION 23(1)(A) OF THE ACT ST ATES THAT ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE THE SUM FOR WHI CH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR . HE OPINED THAT IN A CASE, LIKE THIS, THERE WOULD BE REASONABLE EXP ECTATION THAT THE PROPERTY WOULD FETCH HIGHER RENT THAN THE CONTRACTU AL RENT. HE HELD THAT NOTIONAL INTEREST SHOULD BE TAKEN INTO CONSIDE RATION TO ARRIVE AT THE RENTAL VALUE WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FOR YEAR TO YEAR. ACCORDINGLY, ASSESSING OF FICER COMPUTED THE SUM OF ` 21 LACS, CALCULATED ON THE BASIS OF PREVAIL ING MARKET RATE OF LOAN AT THE RATE OF 12% PER ANNUM, AS NOTIONAL INTER EST, WHICH WOULD ITA NO. 4532/DEL/2011 10 HAVE BEEN EARNED BY THE ASSESSEE ON THE AFORESAID S ECURITY DEPOSIT KEPT WITH THE ASSESSEE BY THE TENANT. ACCORDINGLY, ASSESSING OFFICER MADE THE ADDITION OF ` 21 LACS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ASSESSING OFFICER FURTHER FOUND THAT T HE ISSUE OF ADDITION OF NOTIONAL INTEREST ON INTEREST FREE FIXED SECURITY D EPOSIT AS PART OF THE ACTUAL RENT RECEIVED OR RECEIVABLE U/S. 23(1)(A) WA S SUB-JUDICE AS THE MATTER HAD BEEN REFERRED BY THE HIGHER BENCH BY THE DELHI HIGH COURT IN THE CASE OF C.I.T. VS. MONI KUMAR SUBBA IN I.T. A PPEAL NO. 803 OF 2007 & 499 & 1113 OF 2008 VIDE ORDER DATED 16.8.201 0. 11. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT THIS ISSUE WAS DECIDED IN FAVOUR OF T HE TAX PAYER IN THE CASE OF C.I.T. VS. MONI KUMAR SUBBA. HENCE, HE DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT HONBLE JURISDICTIONAL HIG H COURT IN THE CASE CITED ABOVE WHILE REFERRING THE MATTER TO A LARGER BENCH HAS HELD AS UNDER:- 18. SECTION 23(1)(A) OF THE ACT STATES THAT ANNUAL VALUE OF THE PROPERTY SHALL BE DEEMED TO BE THE SAME FOR WHIC H THE PROPERTY MIGHT REASONABLY BE ACCEPTED TO LET FROM Y EAR TO YEAR. IN A CASE LIKE THIS, THE ASSESSING OFFICER MIGHT ULTIMATELY FORM AN OPINION THAT THERE WOULD BE REASO NABLE EXPECTATION THAT THE PROPERTY WOULD FETCH HIGHER RE NT THAN THE CONTRACTUAL RENT, EVEN WHEN THE CONTRACTUAL REN T IS MORE THAN THE ANNUAL VALUE FIXED BY THE MCD. THE QUESTION WOULD BE AS TO WHETHER IN SUCH CIRCUMSTANCE S, HE MAY IGNORE THE ANNUAL VALUE FIXED BY THE MUNICIPAL ITA NO. 4532/DEL/2011 11 AUTHORITIES AND COME TO A CONCLUSION THAT THE PRO PERTY WOULD REASONABLY FETCH A RENT, WHICH IS MORE THAN T HE ACTUAL RENT RECEIVED? TO PUT IN OTHERWISE, CAN THE ASSESSING OFFICER, IN SUCH CIRCUMSTANCES, TAKE INTO CONSIDERATION THE NOTIONAL INTEREST TO ARRIVE AT TH E SAME WHICH THE PROPERTY MIGHT REASONABLY BE ACCEPTED TO L ET FOR YEAR TO YEAR? IF SO, THE NEXT QUESTION WOULD BE WHE THER IT CAN BE DONE IN ALL CASES OR IN SOME GLARING CASES LIKE THE PRESENT ONE WHERE SECURITY DEPOSIT IS NOT EQUIVALE NT TO SIX MONTHS TO THREE YEARS OF RENT BUT COMPLETELY DISPROPORTIONATE TO THE ACTUAL CONTRACTUAL RENT? E VEN IF THE NOTIONAL INTEREST IS NOT TO BE ADDED, CAN SUCH A HU GE INTEREST FREE SECURITY DEPOSIT (WHICH DOES NOT APPE AR TO HAVE ANY RATIONALE WITH THE AGREED RENT) BE TOTALLY IGNORED WHILE DETERMINING THE FAIR RENT WHICH THE PROPERTY MIGHT BE REASONABLY BE EXPECTED TO YIELD? OR ELSE, IN A CASE LIKE THIS, CAN IT BE INFERRED THAT THE TENANT PAID PART RENT BY GIVING INTEREST FREE DEPOSIT AND AGREED RENT IS NOT WHAT REFLECTED IN THE LEASE DEED, BUT PART OF ITS IS HID DEN IN THE FORM OF SECURITY? 19. THESE ASPECTS WERE NOT CONSIDERED BY THE CAL CUTTA HIGH COURT OR THIS COURT IN THE AFOREMENTIONED CASE S, AS SUCH ABNORMAL CIRCUMSTANCES DID NOT EXIST IN THOSE CA SES. WE ARE, THEREFORE, OF THE OPINION THAT THE QUESTIO NS POSED ABOVE, SHOULD BE ANSWERED BY A LARGER BENCH. WE ACCORDINGLY, DIRECT THAT THE MATTER BE PLACED BEFOR E HONBLE THE CHIEF JUSTICE FOR CONSTITUTING FULL BEN CH TO CONSIDER THESE ASPECTS TOUCHING THE INTERPRETATION THAT ITA NO. 4532/DEL/2011 12 NEEDS TO BE GIVEN TO SECTION 23(1)(A) OF THE INCOME TAX ACT. 13. THEREAFTER, WE FIND THAT IN THE SAID CASE OF C.I.T. VS. MONI KUMAR SUBBA 333 ITR 38 (FB), THE HONBLE JURISDICTIONAL H IGH COURT HAS HELD THAT IF THE ASSESSING OFFICER FINDS THAT THE ACT UAL RENT RECEIVED IS LESS THAN THE FAIR/MARKET RENT BECAUSE THE ASSESSEE HAS RECEIVED AN ABNORMALLY HIGH INTEREST-FREE SECURITY DEPOSIT AND BECAUSE OF THAT, THE ACTUAL RENT RECEIVED IS LESS THAN THE RENT WHICH TH E PROPERTY MIGHT FETCH, HE CAN UNDERTAKE NECESSARY EXERCISE IN THAT BEHALF. HOWEVER, THE NOTIONAL INTEREST ON THE INTEREST FREE SECURIT Y CANNOT BE TAKEN AS THE DETERMINATIVE FACT OR TO ARRIVE AT A FAIR RENT. THUS, THE RATEABLE VALUE, IF CORRECTLY DETERMINED UNDER THE MUNICIPAL LA WS CAN BE TAKEN AS THE ANNUAL LETTING VALUE UNDER SECTION 23(1)(A) OF THE ACT. 14. WE FURTHER FIND THAT HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF C.I.T. VS. ASIAN HOTELS LTD. 323 ITR 490 HAS HEL D THAT NOTIONAL INTEREST FROM SECURITY DEPOSIT RECEIVED BY THE LAND LORD FROM THE TENANT IS NEITHER TAXABLE AS BUSINESS INCOME U/S. 28 (IV) NOR AS INCOME FROM HOUSE PROPERTY U/S. 23(1)(A). THUS, WE FIND TH AT RATIO FROM THE AFORESAID CASE LAWS CLEARLY SPECIFIED THAT NO NOTIO NAL INTEREST ON SECURITY DEPOSIT RECEIVED FROM THE TENANT SHOULD BE ADDED TO THE RENTAL INCOME. RESPECTFULLY FOLLOWING THE PRECEDEN T, AS ABOVE, WE DO ITA NO. 4532/DEL/2011 13 NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (A) AND ACCORDINGLY, WE UPHOLD THE SAME. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/9/2012. SD/- SD/- [ [[ [C.M. GARG C.M. GARG C.M. GARG C.M. GARG] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 28/9/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES