High Court Of Delhi
CIT vs. Asian Hotels Ltd.
Section 23(1)(a), 28(iv), 260A
Asst. Year 1995-96, 2000-01
Madan B. Lokur & Dr. S. Muralidhar, JJ.
IT Appeal Nos. 794 & 998 of 2007
10th December, 2007
Counsel Appeared :
Ms. Prem Lata Bansal, for the Appellant: M.P. Rastogi & K.N. Ahuja, for the Respondent
JUDGMENT
Dr. S. Muralidhar, J. :
IT Appeal No. 794 of 2007 is an appeal by the Revenue against the judgment dt. 30th Nov., 2006 passed by the Income-tax Appellate Tribunal (‘Tribunal’) Delhi Bench “G”, New Delhi in ITA No. 1266/Del/2004 for the asst. yr. 2000-01. IT Appeal No. 998 of 2007 is an appeal by the Revenue against the order dt. 9th Feb., 2001 passed by the Tribunal in ITA No. 430/Del/1998 for the asst. yr. 1995-96. Since both the appeals raise an identical question, they are being disposed of by this common judgment.
2. The question sought to be urged by the Revenue in both appeals is as follows :
“Whether the Tribunal was justified in law in holding that the notional interest on refundable interest free deposit received by the assessee in respect of a shop let out on rent was neither taxable as business profit under s. 28(iv) of the IT Act, 1961 (‘Act’) nor income from house property under s. 23(1)(a) of the Act ?”
3. The assessee had received interest free deposit in respect of shops given on rent. Relying on the earlier assessment for the asst. yr. 1993-94, the Assessing Officer (AO) added to the assessee’s income notional interest on the interest free deposit at the rate of 18 per cent simple interest per annum on the ground that by accepting the interest free deposit, a benefit had accrued to the assessee which was chargeable to tax under s. 28(iv) of the Act. The notional interest added by the AO to the assessee’s income for the asst. yr. 1995-96 was Rs. 34,48,800 and for the asst. yr. 2000-01, Rs. 35,18,370. For the asst. yr. 2000-01, the Commissioner of Income-tax (Appeal) [‘CIT(A)’] reversed the order of the AO and held that since the interest free deposit would automatically result in an increase in the profits, any further addition of the notional income on such deposits was imaginary and unrealistic. The addition was, therefore deleted. Dismissing the further appeal by the Revenue, the Tribunal relied on its earlier decision in Bharat Hotels Ltd. vs. Dy. CIT (1995) 53 ITD 450 (Del) as well as the decision of this Court in Ravinder Singh vs. CIT (1993) 113 CTR (Del) 183 : (1994) 205 ITR 353 (Del) and upheld the order of the CIT(A). As regards the asst. yr. 1995-96, the CIT(A) concurred with the AO but the Tribunal allowed the assessee’s appeal and reversed the decision of the CIT(A) relying upon its order in the case of the assessee itself for the asst. yr. 2000-01. Mrs. Prem Lata Bansal, learned senior standing counsel for the Revenue refers to the relevant statutory provisions and submits that it is inconceivable that the assessee received the interest free deposit in respect of the premises let out on rent without any benefit accruing to it. The value of such benefit had been reasonably determined by the AO and, therefore, the subsequent order of the reversal of the Tribunal was incorrect in law. According to her the decision of the Tribunal in Bharat Hotels Ltd. (supra) was distinguishable on facts and the question that arose there does not arise for determination in the present cases. Ms. Bansal is right in her last submission. We may notice that the appeal filed by the Revenue in respect of Bharat Hotels Ltd. (IT Appeal No. 4969 of 2000) was admitted by this Court on 27th Nov., 2000 on certain questions which do not include the specific question that arises in the present appeals. However, for the reasons explained hereafter, we are unable to be persuaded to hold that the Tribunal erred in the view it took in the impugned orders. Secs. 23(1)(a) and 28(iv) of the Act read as under : “Annual value how determined—(1) For the purposes of s. 22, the annual value of any property shall be deemed to be— (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in cl. (a), the amount so received or receivable; or (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in cl. (a), the amount so received or receivable. Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.—For the purposes of cl. (b) or cl. (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise.” “Sec. 28 —Profits and gains of business or profession.
The following income shall be chargeable to income-tax under the head “Profits and gains of business or profession”— (i) to (iii) xxxxxx (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;” A plain reading of the provisions indicates that the question of any notional interest on an interest free deposit being added to the income of an assessee on the basis that it may have been earned by the assessee if placed as a fixed deposit, does not arise. Sec. 28(iv) is concerned with business income and is distinct and different from income from house property. It talks of the value of any benefit on perquisite, “whether convertible into money or not” arising from “the business or the exercise of a profession.” It has been explained by this Court in Ravinder Singh (supra) that s. 28 (iv) can be invoked only where the benefit or perquisite is other than cash and that the term “benefit or amenity or perquisite” cannot relate to cash payments. In the instant case, the AO has determined the monetary value of the benefit stated to have accrued to the assessee by adding a sum that constituted 18 per cent simple interest on the deposit. On the strength of Ravinder Singh, it must be held that this rules out the application of s. 28(iv) of the Act. Sec. 23(1)(a) is relevant for determining the income from house property and concerns determination of the annual letting value of such property. That provision talks of “the sum for which the property might reasonably be expected to let from year to year.” This contemplates the possible rent that the property might fetch and not certainly the interest in fixed deposit that may be placed by the tenant with the landlord in connection with the letting out of such property. It must be remembered that in a taxing statute it would be unsafe for the Court to go beyond the letter of the law and try to read into the provision more than what is already provided for. The attempt by learned counsel for the Revenue to draw an analogy from the WT Act, 1957 is also to no avail. It is an admitted position that there is a specific provision in the WT Act which provides for considering of a notional interest whereas s. 23(1)(a) contains no such specific provision.
We therefore, find no infirmity in the order of the Tribunal and are of the view that no subsequent (sic.- substantial) question of law arises. The appeals are dismissed.
[Citation: 323 ITR 490]
