Nominal interest on the deposit that is not taken into account when calculating the total rental income: AAAR [Read Order]
– – January 16, 2021 at 1:19 p.m.
The Karnataka Authority of Advance Rule (AAAR) ruled in amending the AAR order that the notional interest on the deposit should not be included in the calculation of total rental income.
The complainant, M / s Midcon Polymers Pvt. Ltd. operates in the field of commercial property leasing and related business deals. The complainant intends to enter into a commercial contract for the rental of real estate with educational institutions in Bangalore.
The contract is based on the reserved monthly rent and the refundable deposit / security deposit. According to the terms of the contract, the deposit received will be refunded without interest at the end of the lease.
The prepayment refund in no way determines the amount of the rent or the improvement of the services. The complainant also exempts the statutory taxes levied by the BBMP on the property, and the property tax paid in this way is not related to the provision of services.
In this context, the complainant turned to the AAR to take a decision on the question of whether the applicant can apply for the deduction of property taxes and other statutory charges for the purpose of determining the value of the rental income and for the conversion To arrive at the total rental income, notional interest on the deposit should be taken into account. Whether the applicant is eligible for tax exemption under the general exemption of Rs 20 lakhs.
According to the annual activity report, the applicant cannot deduct property taxes and other statutory charges to determine the value of rental income. The fictitious interest on the deposit is only taken into account when determining the total rental income if it affects the value of the provision of the RIS service, i.e. the monthly rent.
“The applicant is eligible for tax exemption under the general tax exemption of Rs 20 lakhs, provided that their annual sales, including monthly rent and notional interest, if it affects the value of the delivery, does not exceed the threshold.” added to the AAR.
However, the Coram consists of DP Nagendra Kumar and MSSrikar, who notified the AAR’s order and are of the opinion that, for the purpose of determining the value of the rental income, the complainant should use the amount paid as property tax to the city administration or other statutory charges imposed under This tax is levied, cannot be deducted. Currently applicable laws with the exception of CGST, SGST, IGST and Compensation Cess, provided that they are invoiced separately by the complainant.
The AAAR also took the view that the notional interest on the deposit should not be taken into account when determining the total rental income.
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