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
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.