CIT & Anr. v. Shastha Pharma Laboratories (P) Ltd.

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The Tax PublishersITA Nos. 83 & 84 of 2007 2013 TaxPub(DT) 1749 (Karn-HC) : (2014) 056 (I) ITCL 0180 : (2013) 355 ITR 0316 : (2013) 262 CTR 0352 : (2013) 216 TAXMAN 0073 : (2013) 088 DTR 0115 Income Tax Act, 1961 --Income from house property--Annual Value Treatment of interest on interest free security deposits--The issue arose as to Whether the notional interest on lease rent deposit is to be added to the actual rent agreed to be paid between the parties for the purpose of determining the annual letting value of the property under section 23. *Held :* The addition of notional interest on the interest, free security deposit to the rent agreed upon was not permissible in law. It was open to the assessing authority to take note of the amount of advance paid which gives an indication of the fair rent of the property that fetches in the market. But, the interest accrued on such deposit could not be added to the agreed rent, so as to make a fair rent or market rent. Income Tax Act, 1961 Section 23(1)(a) In the Karnataka High Court N. Kumar & B. Manohar, J.J. CIT & Anr. v. Shastha Pharma Laboratories (P) Ltd. ITA Nos. 83 & 84 of 2007 A.Ys. 1998-99 and 1997-98 24 April, 2013 Petitioner by : K.V. Aravind & M. Thirumalesh Respondent by : S. Parthasarathi, S. P. Bhat & L. Basavaiah JUDGMENT *N. Kumar, J.* The Revenue has preferred these two appeals against the order passed by the Tribunal, dated 11-8-2006, in ITA No. 106/Bang/2003 and ITA No. 604/Bang/2005, wherein the Tribunal has held that notional interest on the advance received cannot be added to the actual rent paid, but the annual rental value has to be determined independently. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA Nos. 83 & 84 of 2007
2013 TaxPub(DT) 1749 (Karn-HC) : (2014) 056 (I) ITCL 0180 : (2013) 355 ITR 0316 : (2013) 262 CTR 0352 : (2013) 216 TAXMAN 0073 : (2013) 088 DTR 0115

Income Tax Act, 1961

--Income from house property--Annual Value Treatment of interest on interest free security deposits--The issue arose as to Whether the notional interest on lease rent deposit is to be added to the actual rent agreed to be paid between the parties for the purpose of determining the annual letting value of the property under section 23. Held : The addition of notional interest on the interest, free security deposit to the rent agreed upon was not permissible in law. It was open to the assessing authority to take note of the amount of advance paid which gives an indication of the fair rent of the property that fetches in the market. But, the interest accrued on such deposit could not be added to the agreed rent, so as to make a fair rent or market rent.

Income Tax Act, 1961 Section 23(1)(a)

In the Karnataka High Court

N. Kumar & B. Manohar, J.J.

CIT & Anr. v. Shastha Pharma Laboratories (P) Ltd.

ITA Nos. 83 & 84 of 2007

A.Ys. 1998-99 and 1997-98

24 April, 2013

Petitioner by : K.V. Aravind & M. Thirumalesh

Respondent by : S. Parthasarathi, S. P. Bhat & L. Basavaiah

JUDGMENT

N. Kumar, J.

The Revenue has preferred these two appeals against the order passed by the Tribunal, dated 11-8-2006, in ITA No. 106/Bang/2003 and ITA No. 604/Bang/2005, wherein the Tribunal has held that notional interest on the advance received cannot be added to the actual rent paid, but the annual rental value has to be determined independently.