Idhayam Infraheights Pvt. Ltd. Vs DCIT (ITAT Delhi)
₹4 Cr Security Deposit Doesn’t Mean Income: ALV Must Be Real, Not Imagined- Security Deposit Can’t Generate Fictional Rent: Notional Interest ≠ Rent: Delhi ITAT Deletes ₹63L Deemed ALV Addition
Assessee challenged additions of ₹34,00,000 & ₹29,12,000 made by AO as notional rent u/s 23(1) on ground that it had received an interest-free security deposit of ₹4 Cr while charging a contractual rent of only ₹5,000 per month. AO & CIT(A) treated the deposit as a colourable device, applied SBI interest rate, & computed deemed rent on the theory that actual rent was abnormally low compared to Defence Colony market rates.
Tribunal held that such notional interest cannot be added to annual letting value, relying squarely on the Full Bench judgment CIT Vs Moni Kumar Subba (333 ITR 38) which conclusively held that notional interest on security deposit does not form part of “actual rent” for ALV computation. Tribunal observed that entire addition rested only on hypothetical interest & not on any cogent evidence of higher real rent. Accordingly, Tribunal reversed both lower authorities & deleted notional rent additions for both years.
FULL TEXT OF THE ORDER OF ITAT DELHI
These assessee’s twin appeals in ITA Nos. 6778 & 6779/Del/2025 for Assessment Years 2020-21 & 2021-22, arise against the CIT(A)-3, Gurgaon’s in case Nos. 10948/2019-20 and 10308/2020-21 both dated 11.08.2025, in proceedings u/s 147/143(3) of the Income Tax Act, 1961 (in short “the Act”), respectively.
