HIGH COURT OF DELHI

Commissioner of Income-tax

v.

Asian Hotels Ltd.

MADAN B. LOKUR AND DR. S. MURALIDHAR, JJ.

IT APPEAL NOS. 794 AND 998 OF 2007

DECEMBER 10, 2007

Section 28(iv), read with section 23 of the Income-tax Act, 1961 - Business income - Value of any benefit or perquisite, arising from business or exercise of profession - Assessment years 1995-96 and 2000-01 - Whether notional interest on interest-free deposit can be added to income of assessee under section 28(iv) on basis that it may have been earned by assessee if placed as a fixed deposit - Held, no - Assessee received interest-free deposit in respect of shops given on rent - Assessing Officer added notional interest on said deposit in assessee’s income on ground that by accepting interest-free deposit, a benefit had accrued to assessee which was charge­able to tax under section 28(iv) - However, on second appeal, Tribunal held that notional interest on refundable interest free deposit received by assessee in respect of a shop let out on rent was neither taxable as business profit under section 28(iv) nor as income from house property under section 23(1)(a) - Whether Tribunal was justified - Held, yes

Facts

The assessee-company received interest-free deposit in respect of shops given on rent. For the relevant assessment years, the Assessing Officer added notional inter­est on the said deposit to the assessee’s income on the ground that by accepting the interest-free deposit, a benefit had accrued to the assessee which was charge­able to tax under section 28(iv). On appeal, the Commissioner (Appeals) deleted the addition for the assessment year 2000-01 but concurred with the Assessing Officer for the assessment year 1995-96. On second appeal, the Tribunal held that 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 section 28(iv)  nor income from house property under section 23(1)(a).

On revenue’s appeal :

Held

A plain reading of the provisions of section 28(iv) 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. Section 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 the High Court in Ravinder Singh v. CIT [1994] 205 ITR 353/[1993] 71 Taxman 336 (Delhi) that section 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 Assessing Officer had 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 the case Ravinder Singh (supra), it must be held that this rule out the applica­tion of section 28(iv). [Para 8]

Section 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 on 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 the revenue to draw an analogy from the Wealth-tax Act, 1957 was also to no avail. It is an admitted position that there is a specific provision in the Wealth-tax Act which provides for considering of a notional interest whereas section 23(1)(a) contains no such specific provision. [Para 9]

Therefore, there was no infirmity in the order of the Tribunal and no question of law arose from its order. [Para 10]

Thus, the appeal was to be dismissed. [Para 11]