IDHAYAM INFRAHEIGHTS PVT LTD,NEW DELHI vs. DCIT CENTRAL CIRCLE , FARIDABAD

Heard both the parties at length. Case files perused.

It emerges during the course of hearing that the assessee/appellant herein is aggrieved against the learned CIT(A)’s action upholding the assessment findings adding notional rent(s) of Rs.34,00,000/- and Rs.29,12,000/-; respectively, reading as under:

Ground of appeal no. 1 and 2

1 The appellant had a rent agreement with M/s Takshila Educational Society commencing from 01.04.2019 @ Rs 5,000/- per month and had earlier paid Rs.4,00,00,000/- as security to the appellant, M/s Idhayam Infraheights Pvt. Ltd. The appellant has argued non applicability of the section 23(1) for calculation of annual value of property and also section 28 as business income. The appellant further states that order is arbitrary and illegal based on juri iction also. The case was centralized by PCIT-1, Kolkata as per powers as per law and signatures of ACIT [Hqrs] for PCIT-1, Kolkata is valid in the eyes of law and no infirmity is found on this ground. Moreover, the appellant participated in the reassessment proceedings without raising any sort of objection. Further, the issue of validity of the communications by PCIT not containing DIN number if any has been stayed by Hon'ble Supreme Court in the case of Brandix Mauritius Holding Ltd.

2 Regarding basis of making addition, it is seen that department has unearthing the transaction through a rent agreement, which was seized during the search and the transaction mentioned in the agreement itself prove that it is very much incriminating in nature. The AO has incorporated pictures of luxurious property measuring 325 sq. yards situated in Defence Colony, New Delhi fetching merely Rs.5,000/- which is far less that the actual fair rent.

4 The appellant has relied on various case laws including Asian Hotels case, but appellant's facts are different as discussed above. I also place reliance on the decision in the case of Sobha Interiors (P.) Ltd Vs DCIT [2016] 76 taxmann.com 275 (Bangalore - Trib.), wherein the Hon'ble tribunal held that while computing ALV of house property let out by assessee, notional interest on interest free security deposit has to be taken into consideration - Held, yes [In favour of revenue]. [2009] 27 SOT 133 (Mumbai) the rent fixed in agreement was found to be abnormally low as compared to market rent and it was concluded that the rent agreement between assessee-company and 'R' was generated as a device not only to reduce tax liability of assessee- company but also with a view to allow 'R' to enjoy fruits of property of assessee-company and the addition made on account of deemed rent added was sustained.

5 The onus was upon the appellant to furnish a satisfactory explanation for the same; such onus has not been discharged during appellate proceedings as well. Therefore, it is held that the AO was justified in making such addition.

Ground of appeal No. 5 is general in nature.

In result, both the appeals are hereby dismissed.”

1 This is what leaves the assessee aggrieved.

I have given my thoughtful consideration to the assessee’s and the Revenue’s respective vehement submissions. It is made clear that what all both the learned authorities have done is to add notional interest on the assessee’s interest free security deposit(s) amounting to Rs.4,00,00,000/-, as deemed rent u/s 23(1) of the Act which is over and above the actual rent agreed between the parties amounting to Rs.5,000/- per month. That being the case, the Revenue could hardly dispute that case law (2011) 333 ITR 38 (Delhi) (FB) CIT Vs. Moni Kumar Subba has already settled the very issue in the assessee’s favour and against the department that such a notional interest could not form part of the actual rent u/s 23(1) of the Act. I accordingly draw strong support therefrom to reverse both the learned lower authorities’ action adding the impugned notional interest income as income from house property in the assessee’s hands.

No other ground or argument has been pressed.