SH. MONI KUMAR SUBBA,NEW DELHI vs. ACIT, NEW DELHI

Assessee by : Sh. Satyajeet Goel, CA Revenue by: Sh. P. Dam Kanunjna, Sr. DR Date of Hearing 23/06/2016 Date of pronouncement 29/06/2016 O R D E R PER PRASHANT MAHARISHI, A. M.

Page 2 of 5 head income from house property. Both these additions were challenged by the assessee before the Ld. CIT (A) who in turn confirmed those additions and therefore assessee is in appeal before us. 4. The 1st ground of appeal divided into three parts is against the addition of Rs. 52.33 Lacs in respect of rented property at 267, Masjid Moth , and Adhichini in New Delhi. Assessee has let out these properties to one of the company where assessee has made some investment. The rental income from their properties is Rs. 1.80 Lacs whereas security deposit of Rs. 10.78 crore is received by the assessee. Out of the above amount of security deposit 2.20 crores has however been refunded therefore there is a net balance of 7.27 crores outstanding as security deposit from those sister concern. Therefore Ld. assessing officer after making enquiry determined the annual let out value of the property at Masjid Ward to Rs. 77.76 Lacs. With respect to the other property at Shri Adhichini Arbindo Marg, where the annual let out value was shown to be Rs. 60,000 in the return of income of the assessee and as per the enquiry report actual rent receivable by the assessee from 4 floors of that property was Rs. 2.6 Lacs per month. Therefore, ALV of the property was determined at Rs. 7.20 Lacs against Rs. 60,000 shown by the assessee and net addition of Rs. 6.60 Lacs was made to the declared rental income of the assessee. As the assessee showed income of the 656185/- and income from house property in that addition of Rs. 5233200/-was made to the income of the assessee. Assessee challenged this addition before Commissioner of Income Tax (Appeals) unsuccessfully. Therefore assessee has preferred this appeal before us on this ground.

5. Ld. AR of the assessee submitted before us that this issue is already decided in favour of the assessee by the decision of Hon’ble Delhi high court wherein it has been held that the though assessee is taking inordinately large sum as interest-free deposit compared to agreed monthly rent but the Moni Kumar Subba Vs. ACIT, (Assessment Year: 2009-10)

Page 3 of 5 addition of notional interest thereon is not proper and fair rent must be determined. Therefore he submitted that this ground of appeal is squarely covered in favour of the assessee.

6. The Ld. departmental representative relied on the orders of lower authorities and submitted that this decision has not been accepted by the revenue.

7. We have carefully considered the rival contentions and we have also perused the order of the Hon’ble Delhi high court – full bench reported at 333 ITR 38 (Del) dealing with the identical issue with respect to the same properties where issues have been decided by the Hon’ble high court in favour of the assessee. Therefore respectfully following the decision of the Hon’ble high court we decide ground No. 1 in favour of the assessee reversing the order of the lower authorities deleting addition of Rs. 52.33 Lacs been made in respect of rented properties. Therefore ground No. 1 of the appeal is allowed.

8. Ground No. 2 of the appeal is against an addition of Rs. 11.23 Lacs as deemed dividend. During the year the assessee has received an advance of Rs. 11.23 Lacs from M/s Suba Microsystems private limited a closely held company controlled by the assessee through his minor son having shareholding of more than 67.14%. This transaction attracts the provisions of section 2 (22)(e) of the income tax act as the company possesses sufficient a cumulative profits. Before the assessing officer assessee submitted that assessee holds less than 10% shares in that company and his minor son is holding shares of 67.14%. The 2nd argument was that the assessee received rent from that particular company as per the lease agreement and aforesaid company maintains a current account in the name of the assessee and this amount is subsequently adjusted from the monthly rental income receivable by the assessee from the company. In view of this assessee contended that the provisions of deemed dividend does not attract Moni Kumar Subba Vs. ACIT, (Assessment Year: 2009-10)

Page 4 of 5 in the case of the assessing as it is current account and business transaction. However ld AO rejected the contention of the assessee and made an addition to the income of the assessee on account of deemed dividend. The matter was carried before the Ld. CIT (A) who confirmed the addition as according to him the companies controlled by the assessee through the shareholding of his minor son.