Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) (CIT(A)) directing the Assessing Officer to delete the 12% interest charged by him, on the interest free deposit received by the assessee, to determine the ALV of the rented property ignoring the well settled judicial principle that what is important is the real nature of transactions in the relied on case supra and not the facts?
Held by High Court
(a) Mr. Kotangale, the learned counsel appearing for the Revenue very fairly states that this issue stands concluded against the Revenue and in favour of the respondent assessee by the decision of this Court in CIT v/s. Tiptop Typography 368 ITR 330.
(b) In the above view, there is no reason for us to examine the impugned order of the Tribunal. Accordingly, the question as proposed does not give rise to any substantial question of law. Thus not entertained.
In the case of CIT v/s. Tiptop Typography 368 ITR 330 Bombay High Court held as follows in respect of addition for Notional Interest :-
Notional rent on the security deposit cannot be taken into account for the determination of the annual value. If the transaction itself does not reflect any of the aforestated aspects, then, merely because a security deposit which is refundable and interest free has been obtained, the AO should not presume that this sum or the interest derived therefrom at Bank rate is the income of the assessee till the determination or conclusion of the transaction. The AO ought to be aware of several aspects and matters involved in such transactions. It is not necessary that if the license is for three years that it will operative and continuing till the end. There are terms and conditions on which the leave and license agreement is executed by parties. These terms and conditions are willingly accepted. They enable the license to be determined even before the stated period expires. Equally, the licensee can opt out of the deal. A leave and license does not create any interest in the property. Therefore, it is not as if the security deposit being made, it will be necessarily refundable after the third year and not otherwise. Everything depends upon the facts and circumstances in each case and the nature of the deal or transaction. These are not matters which abide by any fixed formula and which can be universally applied. Today, it may be commercially unviable to enter into a lease and, therefore, this mode of inducting a ‘third party’ in the premises is adopted. This may not be the trend tomorrow. Therefore, we do not wish to conclude the matter by evolving any rigid test;