HIGH COURT OF
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 as
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 been 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). [
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. [
Therefore, there was no
infirmity in the order of the Tribunal and no question of law arose from its
order. [
Thus, the appeal was to
be dismissed. [
Case
review
Ravinder Singh v. CIT [1994] 205 ITR 353/[1993] 71
Taxman 336 (
Cases
referred to
Bharat Hotels Ltd. v. Dy. CIT [1995] 53 ITD 450 (
Ms. Prem Lata Bansal for the Appellant. M.P. Rastogi
and K.N. Ahuja for the Respondent.
nn