ITO, Jaipur V. SH. RISHI PODDAR MITHILA, Jaipur

ITA 1110/JPR/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99573 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: MANISH AGARWAL CA DHK
• Keywords: Business expenditure; Principle of natural justice; Proportionate interest; Question of law; Notional interest

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 1110/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ITO WARD-2(4) JAIPUR CUKE VS. SHRI RISHI PODDAR MITHILA D-118-119, YASHODA PATH, SHYAM NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ACLPP 3774 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO.14/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 1110/JP/2011) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI RISHI PODDAR MITHILA D-118-119, YASHODA PATH, SHYAM NAGAR, JAIPUR CUKE VS. THE ITO WARD-2(4) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ACLPP 3774 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 18/12/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS A SET OF REVENUE APPEAL AND CROSS OBJECTION BY THE ASSESSEE ARISING OUT OF THE ORDER OF LD. CIT(A)- I, JAIPUR DATED 10-10-2011 FOR THE ASSESSMENT YEAR 2008-09. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 2 2.1. BY A SOLITARY GROUND THE DEPARTMENT HAS CHALL ENGED THE ACTION OF CIT(A) IN DELETING THE ADDITION OF RS. 14,49,838/- MADE AS NOTIONAL INTEREST ON INTEREST FREE ADVANCES TO M/S SHRERIT A UTO PVT. LTD. AND SMT. RUCHI PODDAR. 2.2 BY A SOLITARY GROUND THE ASSESSEE HAS AGITATED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 14,04,221/ - MADE ON ACCOUNT OF NET NOTIONAL RENTAL INCOME IN RESPECT OF PROPERTY U SED FOR THE PURPOSE OF BUSINESS OF PARTNERSHIP FIRM OF THE ASSESSEE. 3.1 ADVERTING TO REVENUE APPEAL, LD. DR RELIED ON T HE ORDER OF AO AND CONTENDS THAT THE DELETION MADE BY LD. CIT(A) IS WI THOUT ANY BASIS. 3.2 LD. COUNSEL FOR ASSESSEE IN REPLY VEHEMENTLY CO NTENDS THAT THE ADDITION OF NOTIONAL INTEREST AS MADE BY LD. AO WAS ARBITRARY AND MADE BEHIND THE BACK OF ASSESSEE AND AGAINST THE PRINCIP LES OF NATURAL JUSTICE AS ASSESSEE WAS NEVER ASKED ANY QUESTION IN THIS BEHAL F DURING THE ENTIRE COURSE OF ASSESSMENT PROCEEDINGS. GROUND NO.1.1 WAS SPECIFICALLY RAISED IN FORM NO 35 AND ALSO MENTIONED IN WRITTEN SUBMISS IONS FILED BEFORE LD. CIT(A) ON PB PAGE NO. 1. 3.3 LD. CIT(A) APPRECIATED ALL THESE FACTS AND SUBM ISSION MADE BY THE ASSESSEE AND AFTER TAKING NOTICE OF HONBLE SUPREME COURT JUDGMENT IN ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 3 THE CASE OF S A BUILDERS 288 ITR 1, DELETED THE ADD ITION ON ACCOUNT OF NOTIONAL INTEREST BY OBSERVING FOLLOWING OBSERVATIO NS: 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE AR. I FIND MERIT IN THE SUBMISSION OF THE AR. IN SO FAR AS THE ASSESSEE HAS SUBSTANTIA L INTEREST IN THE COMPANY IN THE COMPANY SHRERIT AUTO (P) LTD., J AIPUR, AND IS ALSO ITS DIRECTOR. THE COMPANY HAS STARTED I TS BUSINESS IN FEBRUARY, 2007. IT IS ALSO A GENERAL PRACTICE TH AT BANKS DO NOT GIVE LOANS TO NEW COMPANIES BUT TO THE DIRECTOR S. IT IS HELD THAT THE LOAN TAKEN FROM THE BANK BY THE ASSES SEE AND ADVANCED TO THE COMPANY WAS FOR BUSINESS PURPOSE AN D IS, THEREFORE, COVERED BY THE FINDING OF THE APEX COURT IN INTEREST @ 15% ON THIS LOAN IS DIRECTED TO BE DELE TED. SIMILARLY, THE NOTIONAL INTEREST @ 15% WAS CALCULAT ED AT RS. 42,011/- ADVANCED TO MS. RUCHI PODDAR. THOUGH THE BUSINESS JUSTIFICATION OF THIS ADVANCE HAS NOT BEEN MENTIONED BY THE AR, IT IS SEEN FROM THE BALANCE THAT THE ASS ESSEE HAD ENOUGH CASH IN HAND TO ADVANCE THIS LOAN, THEREFORE , THE NOTIONAL INTEREST ON THIS ADVANCE IS ALSO DIRECTED TO BE DELETED. THUS, THE IMPUGNED ADDITION OF RS. 14,49,8 38/- ON ACCOUNT OF INTEREST ON LOAN AND ADVANCES IS DIRECTE D TO BE DELETED. 3.4 IT IS FURTHER CONTENDED THAT M/S. SHERIT AUTO ( P) LTD. WAS A NEWLY STARTED COMPANY IN FEBRUARY, 2007, ASSESSEE AS A DI RECTOR HOLDS SUBSTANTIAL INTEREST AND SHAREHOLDER. ALL THE DIREC TORS AGREED TO ADVANCE INTEREST FREE LOANS OUT OF THEIR OWN SOURCES TO ENS URE PROPER FUNCTIONING OF THE COMPANY AND DAY TO DAY WORKING CAPITAL REQUI REMENTS. BESIDES ASSESSEE HAS TAKEN LOAN FROM BANK AND SAME WAS ADVA NCE TO M/S. K.P. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 4 AUTOMOTIVES (P) LTD. ANOTHER COMPANY IN WHICH THE A SSESSEE IS A DIRECTOR AND SHAREHOLDER, ON SUCH LOAN THE ASSESSEE HAS CHAR GED INTEREST AND INTEREST PAID HAS BEEN SET OFF AGAINST THE INTEREST RECEIVED AS LOAN TAKEN WAS ADVANCED TO THE COMPANY. ASSESSEE HAD AMPLE OWN FUNDS AS OBSERVED BY LD. CIT(A), INTEREST FREE ADVANCE WAS G IVEN TO SMT. RUCHI PODDAR OUT OF THESE OWN FUNDS WITHOUT USING ANY BOR ROWED FUNDS. WITHOUT SEEKING ANY EXPLANATION FROM ASSESSEE, LD. AO SUO MOTU MADE AN ADDITION OF RS. 14,49,838/- AS NOTIONAL INTEREST @ 15% THEREON BY WRONGLY MENTIONING THAT ASSESSEE HAS FAILED TO FURN ISH ANY EXPLANATION/JUSTIFICATION IN THIS BEHALF. A PERUSAL OF THE ASSESSEES STATEMENT OF ASSETS AND LIABILITIES AS ON 31.03.200 8 (APB 7) REFLECTS THAT THE ASSESSEE HAD SUFFICIENT AVAILABLE INTEREST FREE CAPITAL BALANCE OF RS. 2,47,67,618.29/- OUT OF WHICH LOANS WERE ADVANCED T O M/S. SHRERIT AUTO (P) LTD. AND SMT RUCHI PODDAR. SINCE THE AMOUNT GIV EN AS INTEREST FREE ADVANCE (I.E. RS. 96,65,578/-) IS MUCH LESSER THAN THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE SHAPE OF CAPITAL (I.E. RS. 2,47,67,618.29), THEREFORE, IT CANNOT BE ASSUMED TH AT THE ASSESSEE UTILIZED ANY INTEREST BEARING FUNDS FOR IMPUGNED ADVANCES. E VEN OTHERWISE, LD. AO HAS FAILED TO MAKE ANY ANALYSIS OF FINANCIAL FIG URES OR EFFORT TO ESTABLISH THE NEXUS BETWEEN THE BORROWED FUND AND I NTEREST FREE ADVANCES. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 5 ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS THROUGH OUT THE YEAR ENOUGH TO COVER IMPUGNED INTEREST FREE ADVANCES AND NO NOTION AL INTEREST CAN BE ATTRIBUTED OR ASSUMED. LD. CIT(A) HAS RIGHTLY DELET ED THE DISALLOWANCE WHICH ORDERS DESERVES TO BE UPHOLD ON THIS COUNT. F URTHER RELIANCE IS PLACED ON FOLLOWING CASES:- (I) 304 ITR 123 CIT VS. MOTOR SALES LTD. INTEREST ON BORROWED CAPITAL--INTEREST-FREE ADVANCE S MADE BY ASSESSEE--FINDING THAT THERE WAS NO DIVERSION OF BO RROWED FUNDS FOR NON-COMMERCIAL PURPOSES--NO PART OF INTER EST COULD BE DISALLOWED--INCOME-TAX ACT, 1961, S. 36(1) (III). THE ASSESSEE CLAIMED DEDUCTION OF INTEREST PAID ON THE LOAN TAKEN BY IT AT RS. 52,46,521. IT HAD NOT CHARGED IN TEREST ON THE SUNDRY DEBTORS EVEN THOUGH IT WAS PAYING INTERE ST. THE ASSESSING AUTHORITY COMPUTED A NOTIONAL INTEREST AT RS. 22,11,906 ON THE AMOUNT OF LOANS ADVANCED BY THE AS SESSEE TO OTHER PERSONS. AFTER DEDUCTING INTEREST OF RS. 8 ,02,795 THE ASSESSING AUTHORITY ADDED A SUM OF RS. 14,09,111. I N APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) DELETED TH E ADDITION WHICH ORDER WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT :_ HELD, _ DISMISSING THE APPEAL, THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD FOUND THAT THE ASSESSEE HAD PAID-UP CAPITAL/RESERVE/SURPLUS OF RS. 6.10 CRORES ON WHICH NO INTEREST WAS BEING PAID AND THER EFORE THE INTEREST-FREE ADVANCES MADE BY IT WERE COVERED. THE TRIBUNAL HAD ALSO RECORDED A FINDING THAT THE ASSES SEE HAD NOT DIVERTED ANY BORROWED FUNDS ON WHICH INTEREST W AS PAID FOR NON-COMMERCIAL PURPOSES AND THEREFORE, THERE WA S NO QUESTION OF DISALLOWANCE OF INTEREST OUT OF THE INT EREST PAID BY THE ASSESSEE. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 6 (II) CIT VS. HOTEL SAVERA 239 ITR 795 (MAD.): WHETHER THE INTEREST FREE ADVANCES ARE MADE OUT OF OWN FUND S OR OUT OF FUNDS BORROWED, PRESUMPTION ARISES THAT THE MONE Y ADVANCED CAME OUT OF ITS OWN FUNDS. (III) 142 TAXMAN 681 (ALL.) CIT VS. RADICO KHAITAN LTD. (ALLAHABAD ):- SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961 - IN TEREST ON BORROWED CAPITAL - ASSESSMENT YEAR 1990-91 - ASSESS EE- COMPANY HAD ADVANCED LOAN OF RS. 17.19 LAKHS TO ITS SISTER CONCERN - IT HAD BORROWED HUGE SUM FROM BANK AND FI NANCIAL INSTITUTIONS AND CLAIMED DEDUCTION ON AMOUNT OF INT EREST PAID ON BORROWED CAPITAL - ASSESSING OFFICER DISALLOWED AMOUNT TOWARDS PROPORTIONATE INTEREST ON SAID ADVANCES - T RIBUNAL DELETED DISALLOWANCE OF INTEREST ON GROUND THAT THE RE WAS SUFFICIENT FUND AVAILABLE WITH ASSESSEE-COMPANY IN FORM OF SHARE CAPITAL RESERVE AND SURPLUS OTHER THAN BORROW ED MONEY FOR DIVERTING A SUM OF RS. 17.19 LAKHS TO ITS SISTE R CONCERN - WHETHER IN VIEW OF FINDINGS RECORDED BY TRIBUNAL, A SSESSEE- COMPANY WAS ENTITLED TO FULL ALLOWANCE OF AMOUNT OF INTEREST PAID BY IT ON BORROWED CAPITAL - HELD, YES (IV) 114 TTJ 124 COMET HANDICRAFTS VS. ACIT (ITAT, DELHI BENCH): -BUSINESS EXPENDITURE INTEREST ON B ORROWED CAPITAL INTEREST FREE LOANS FOR NON BUSINESS PURP OSES LOANS AND ADVANCES OF RS. 9.85 LACS WERE GIVEN TO F RIENDS AND RELATIVES OUT OF PARTNERS OWN CAPITAL OF RS. 3 .05 CRORES WHICH WAS FREE OF INTEREST CREDIT FACILITIES WERE SANCTIONED FOR THE PURPOSE OF ASSESSEES EXPORT BUSINESS AND T HE BORROWED FUNDS WERE UTILIZED IN THE COURSE OF BUSIN ESS ITSELF THUS, NO PART OF INTEREST PAID TO THE BANK COULD BE DISALLOWED. (V) 313 ITR 340 CIT VS. RELIANCE UTILITIES & POWER LTD. (BOM.):- INTEREST ON BORROWED CAPITAL INVESTMENTS BY ASSESSEE FINDING THAT INVESTMENTS WERE FROM INTER EST FREE ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 7 FUNDS AVAILABLE WITH ASSESSEE BORROWED CAPITAL US ED FOR PURPOSES OF BUSINESS INTEREST DEDUCTIBLE INCOME TAX ACT, 1961, S. 36(1)(III). (VI) 298 ITR 298 MUNJAL SALES CORPORATION VS. CIT & OTHERS (SC):- HELD ALSO, THAT SINCE THE OPENING BALANCE OF THE PROFITS OF THE ASSESSEE FIRM AS ON APRIL 1, 199 4, WAS RS. 1.91 CRORES, AND THE PROFITS WERE SUFFICIENT TO COV ER THE LOAN GIVEN TO A SISTER CONCERN OF RS. 5 LACS ONLY, THE A PPELLATE TRIBUNAL OUGHT TO HAVE HELD THAT THE LOAN GIVEN WAS FROM THE ASSESSEES OWN FUNDS. (VII) R.D. JOSHI & CO. VS. CIT, 251 ITR 332 (MP): B URDEN TO PROVE NEXUS BETWEEN THE BORROWED FUNDS AND INTER EST FREE ADVANCES IS ON THE REVENUE. (VIII) MALWA COTTON SPINNING MILLS VS. ACIT 89 ITD 65 (CHD.) (TM): WHERE OWN CAPITAL AND CURRENT YEARS P ROFITS ARE MORE THAN INTEREST FREE ADVANCES, IT PROVES ABS ENCE OF NEXUS BETWEEN BORROWED FUNDS AND INTEREST FREE ADVA NCE. (IX) ACIT VS. CHANDRA PRAKASH, 27 TAX WORLD 328 (JA IPUR BENCH): NEXUS BETWEEN INTEREST BEARING FUNDS AND INTEREST FREE ADVANCES HAS TO BE ESTABLISHED BEFORE DISALLOW ING INTEREST ON NOTIONAL BASIS. ASSESSEES CROSS OBJECTION : 4.1 LD. COUNSEL SUBMITTED THAT THE ASSESSEE FAMILY RUNS A PARTNERSHIP FIRM M/S K.P. & COMPANY, JAIPUR IS OWNER OF PROPERT Y SITUATED AT D-6, SHYAM NAGAR, JAIPUR THE SAID FIRM CONSISTS OF FOLLO WING SIX PARTNERS: ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 8 THE BUSINESS OF THE SAID FIRM IS BEING CARRIED IN T HE PREMISES OWNED AND CONTRIBUTED TO FIRM BY THE PARTNERS INCLUDING THE A SSESSEE FOR LAST SEVERAL YEARS. AS THE USER OF PREMISES IS PROVIDED AS DEEME D CAPITAL CONTRIBUTION, NO RENT HAS BEEN EVER CHARGED ON FIRM SINCE INCEPTI ON OF FIRM. THE LD. AO WITHOUT APPRECIATING ALL THESE FACTS, MADE THE I MPUGNED ADDITION FOR NOTIONAL RENT OF THE PROPERTY SOLELY RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF COMMISSIONER OF INC OME TAX VS. K.N. GURUSWAMY (1984) 146 ITR 34. HOWEVER LD. AO HAS CON VENIENTLY IGNORED VARIOUS OTHER DECISIONS OF HONBLE HIGH CO URTS ON SIMILAR ISSUE WHICH FAVOURED ASSESSEES CONTENTIONS. SECTION 22 R ELIED ON BY LD. AO READS AS UNDER: S. NO. NAME OF PARTNER PARTICULARS 1. SHRI RISHI PODDAR APPELLANT 2. SHRI K.K. PODDAR FATHER OF APPELLANT 3. SMT. SARLA PODDAR MOTHER OF APPELLANT 4. SHRI SHASHANK PODDAR BROTHER OF APPELLANT 5. SMT. AARTI PODDAR WIFE OF SHRI SHASHANK PODDAR 6. SMT. RUCHI PODDAR WIFE OF APPELLANT ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 9 THE ANNUAL VALUE OF PROPERTY CONSISTING OF ANY BU ILDINGS OR LANDS APPURTENANT THERETO OF WHICH THE ASSESSEE IS THE OWNER, OTHER THAN SUCH PORTIONS OF SUCH PROPERTY AS HE MAY OCCUPY FOR THE PURPOSES OF ANY BUSINESS OR PROFESSI ON CARRIED ON BY HIM THE PROFITS OF WHICH ARE CHARGEAB LE TO INCOME-TAX, SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS A SETTLED PROPOSITION OF LAW THAT A PARTNERSH IP FIRM IS NO SEPARATE LEGAL ENTITY AND IT IS ONLY A COMPENDIOUS EXPRESSIO N FOR ALL THE PARTNERS WHO BEAR JOINT AND SEVERAL LIABILITIES OF THE FIRM. SECTION 22 DOES NOT IMPLY THAT THE OCCUPATION MUST BE STRICTLY IN THE C APACITY OF NARROW CONNOTATION OF OWNERSHIP AND IN NO OTHER CAPACITY L IKE BENEFICIAL OWNER, DEEMED OWNER ETC. INCLUDING OWNERSHIP AS A SHARING PARTNER. HONBLE GUJARAT HIGH COURT HAS RELIED UPON THE FOLLOWING PA SSAGE FROM THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V . R. M. CHIDAMBARAM PILLAI [1977] 106 ITR 292 (PAGE 299) : NEVERTHELESS, THE GENERAL CONCEPT OF A PARTNERSHIP, FIRMLY ESTABLISHED IN BOTH SYSTEMS OF LAW, STILL IS THAT A FIRM IS NOT AN ENTITY OR PERS ON IN LAW BUT IS MERELY AN ASSOCIATION OF INDIVIDUALS AND A FIRM NAME IS ONLY A COLLECTIVE NAME OF THOSE INDIVIDUALS WHO CONSTITUTE THE FIRM. IN OTHER WORDS , A FIRM NAME IS MERELY AN EXPRESSION, ONLY A COMPENDIOUS MODE OF DESIGNATING THE PERSONS WHO HAVE AGREED TO CARRY ON BUSINESS IN PARTNERSHIP. SECTION 4 OF THE PARTNERSHIP ACT DEFINES A PARTNERS HIP AS A RELATION BETWEEN PERSONS WHO HAVE AGREED TO SHARE THE PROFIT S OF THE BUSINESS ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 10 CARRIED ON BY ALL OR ANY OF THEM, ACTING FOR ALL. I T IS FURTHER PROVIDED THEREIN THAT THE PERSONS WHO HAVE ENTERED INTO PART NERSHIP WITH OTHERS ARE CALLED INDIVIDUALLY PARTNERS AND COLLECTIVELY A FIRM AND THE NAME UNDER WHICH THEIR BUSINESS IS CARRIED ON IS CALLED THE FIRM NAME. IT HAS BEEN HELD THAT THERE IS NO RELATIONSHIP OF MASTER A ND SERVANT BETWEEN A PARTNER WHO CARRIES ON THE FIRMS BUSINESS AND THE FIRM. A FIRM IS NOT AN EMPLOYER OF PARTNERS AND SIMILARLY PARTNERS ARE NOT EMPLOYEES OF THE FIRM. THE PARTNERS ARE THE CO-OWNERS IN THE FIRMS PROPERTY. IT IS FURTHER SUBMITTED THAT THE JUDICIAL OPINION OF THE KARNATAK A HIGH COURT IN CASE OF CIT VS. K.N. GURUSWAMI (1984) 146 ITR 34 (KARNATAKA ) IS BASED ON THE MEANING ASSIGNED TO THE PHRASE THE OCCUPATION, WH ICH MEANS OCCUPATION AS OWNER OR HIS OWN OCCUPATION. THE OTHE R HIGH COURTS HAVE GIVEN A BROADER MEANING TO THE PHRASE OCCUPATION AND HAVE HELD THAT OCCUPATION WILL ALSO INCLUDE OCCUPATION BY THE OWNER ALONG WITH OTHER PERSONS. THUS, CONDITIONS TO CLAIM EXEMPTION UNDER SECTION 22 OF THE ACT HAVE BEEN SATISFIED, THUS THE ASSESSEE IS E LIGIBLE TO CLAIM EXEMPTION U/S 22 WITH REGARD TO THE PROPERTY IN OCC UPATION OF A FIRM IN WHICH THE ASSESSEE IS ALSO ONE OF THE PARTNERS. THE LD. CIT(A) HAS SUSTAINED THE ADDITION MERELY ON THE GROUND THAT SL P PREFERRED BY THE ASSESSEE AGAINST THE JUDGMENT ON HONBLE KARNATAKA HIGH COURT IN CASE ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 11 OF CIT VS. K.N. GURUSWAMI WAS DISMISSED WHICH ACCOR DING TO HIM MAKES IT LAW OF THE LAND. LD. CIT(A) HAS FAILED TO APPRECIATE THAT LEGAL EFFECT OF DISMISSAL OF SLP CANNOT BE HELD TO BE DET ERMINATION OF A QUESTION OF LAW BY THE HONBLE SUPREME COURT. HON BLE MADRAS HIGH COURT IN CASE OF CIT VS. JAGANNATHAN (K.M.) (1989) 180 ITR 0191 HAS EXPLAINED THE EFFECT OF DISMISSAL OF SLP BY FOLLOWI NG OBSERVATIONS: PROPERTY--EXEMPTION OF INCOME FROM HOUSE PROPERTY- - PORTION OF PROPERTY OCCUPIED FOR PURPOSES OF BUSINE SS-- FIRM CARRYING ON BUSINESS IN BUILDING OWNED BY ASSE SSEE PARTNER--PARTNER ENTITLED TO EXEMPTION UNDER SECTIO N 22-- INCOME-TAX ACT, 1961, S. 22--INDIAN PARTNERSHIP ACT , 1932, S. 4. APPEAL TO SUPREME COURT--DISMISSAL OF SPECIAL LEAVE PETITION--CANNOT BE CONSTRUED AS AFFIRMATION OF DEC ISION AGAINST WHICH SPECIAL LEAVE WAS SOUGHT. THE RATIO OF THIS CASE IS DIRECTLY APPLICABLE TO AS SESSEES ISSUE IN QUESTION. OTHER JUDICIAL PRECEDENTS WHICH SUPPORT THE ASSESSE ES CASE ARE AS UNDER: (I) 276 ITR 601 CIT VS. MUSTAFA KHAN (ALL.) HOUSE PROPERTY--EXEMPTION--PROPERTY OWNED BY ASSESS EE AND OCCUPIED FOR PURPOSES OF HIS BUSINESS--PARTNER IN FIRM-- PROPERTY OWNED BY PARTNER OCCUPIED BY FIRM--PARTNER ENTITLED TO EXEMPTION--INCOME-TAX ACT, 1961, S. 22. (II) 215 ITR 289 CIT VS. SHRI CHAMPALAL JEEVRAJ (MA D.) PROPERTY--FIRM--HUF--EXEMPTION UNDER SECTION 22 IN RESPECT OF PROPERTY USED FOR BUSINESS PURPOSES--KAR TA OF ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 12 HUF PARTNER IN FIRM IN REPRESENTATIVE CAPACITY--PRO PERTY BELONGING TO HUF OCCUPIED BY FIRM FOR CARRYING ON BUSINESS--EXEMPTION UNDER SECTION 22 AVAILABLE TO H UF-- INCOME-TAX ACT, 1961, S. 22. (III) 119 ITR 303 CIT VS. RASIKLAL BALABHAI (GUJ.) INCOME FROM PROPERTY--EXEMPTION OF INCOME FROM PROP ERTY USED FOR ASSESSEE'S BUSINESS--INDIVIDUAL ASSESSEE O WNING GODOWN USED BY PARTNERSHIP IN WHICH HE IS PARTNER-- FALLS WITHIN EXEMPTION--ANNUAL LETTING VALUE OF GODOWN CA NNOT BE INCLUDED IN ASSESSEE'S TOTAL INCOME--INCOME-TAX ACT , 1961, S. 22. (IV) 181 ITR 256 CIT VS. P.M. THOMAS (KER.) INCOME FROM PROPERTY--FIRM--EXEMPTION OF INCOME FRO M PROPERTY USED BY ASSESSEE FOR PURPOSES OF BUSINESS- -PARTNER OWNING HOUSE PROPERTY USED BY PARTNERSHIP IN WHICH HE IS PARTNER--PARTNER ENTITLED TO EXEMPTION IN RESPECT O F PROPERTY OCCUPIED BY FIRM FOR PURPOSES OF BUSINESS--INCOME-T AX ACT, 1961, S. 22. (V) 186 ITR 749 CIT VS. SYED ANWAR HUSSAIN (PATNA) INCOME FROM PROPERTY--EXEMPTION OF INCOME FROM PROP ERTY USED FOR ASSESSEE'S BUSINESS--INDIVIDUAL ASSESSEE O WNING HOUSE USED BY FIRM IN WHICH HE IS PARTNER--FALLS WI THIN EXEMPTION--ANNUAL LETTING VALUE OF HOUSE CANNOT BE INCLUDED IN ASSESSEE'S TOTAL INCOME--INCOME-TAX ACT, 1961, S . 22. (VI) 211 ITR 799 CIT VS. RABINDRANATH BHOL (ORISSA) PROPERTY--EXEMPTION--HOUSE PROPERTY USED FOR PURPOS ES OF BUSINESS--BUSINESS OF FIRM CARRIED ON IN PREMISES B ELONGING TO PARTNER--PARTNER ENTITLED TO EXEMPTION UNDER SEC TION 22-- INCOME-TAX ACT, 1961, S. 22. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 13 4.2 LD. COUNSEL CONTENDS THAT IN VIEW OF CLEAR FACT S, CIRCUMSTANCES AND CATENA OF JUDICIAL PRONOUNCEMENTS ASSESSEE IS ELIG IBLE FOR EXEMPTION U/S 22 OF THE INCOME TAX ACT, 1961 QUA THE IMPUGNED PRO PERTY USED BY ASSESSEE AS A PARTNER IN THE FIRM AND THE ADDITION AS SUSTAINED BY THE LD. CIT(A) DESERVES TO BE DELETED. 4.3 LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELO W ON THIS ISSUE. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADVERTING TO REVENUE APPEAL, I T EMERGES FROM THE RECORD THAT LD. AO WHILE MAKING THE ADDITION QUA NO TIONAL INTEREST DID NOT ASK ANY EXPLANATION FROM ASSESSEE AND ADDED IT, SAM E IS IN STARK VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THIS GRIEVANCE WA S AGITATED BY RAISING A SPECIFIC GROUND OF APPEAL AND WRITTEN SUBMISSIONS F ILED BY THE ASSESSEE. LD. CIT(A) HAS DULY EXAMINED THE FINANCIAL STATEMEN TS AND OBSERVED THAT ASSESSEE OWNED SUFFICIENT OWN FUNDS, THE INTEREST F REE ADVANCE TO M/S. SHERIT AUTO (P) LTD. IN WHICH ASSESSEE HAD SUBSTANT IAL INTEREST AS A DIRECTOR AND TO HELP THIS NEWLY STARTED COMPANY A C OMMERCIAL DECISION WAS TAKEN BY ALL DIRECTORS TO PROVIDE SUCH ADVANCE. BEING AN ADVANCE FOR BUSINESS PURPOSES, LD. CIT(A) RIGHTLY APPLIED HONB LE SUPREME COURT JUDGMENT IN THE CASE OF S A BUILDERS(SUPRA). BESIDE S ASSESSEE HAS DEMONSTRATIVELY EXPLAINED THAT HE HAD SUFFICIENT FU NDS AND THERE EXISTED ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 14 BUSINESS EXPEDIENCY IN SUCH INTEREST FREE ADVANCE. SIMILARLY THE ADVANCE TO MS. RUCHI PODDAR IS EXPLAINED TO BE OUT OF AMPLE OWN FUNDS. IN THESE FACTS AND CIRCUMSTANCES , WE FIND NO INFIRMITY IN T HE ORDER OF LD. CIT(A) ON THIS ISSUE WHICH IS REINFORCED BY THE OTHER JUDI CIAL PRONOUNCEMENTS CITED BY THE ASSESSEE WHICH ARE MENTIONED ABOVE. CO NSEQUENTLY REVENUE GROUND AND APPEAL IS DISMISSED. 5.1 ADVERTING TO ASSESSEES CO, IT IS SETTLED PROPO SITION OF LAW THAT A PARTNERSHIP FIRM IS A COMPENDIOUS NAME GIVEN TO GRO UP OF PARTNERS AND IS NOT A JUDICIAL ENTITY. ASSESSEE AND OTHER PARTNERS ALLOWED THE FIRM TO CARRY ON THEIR BUSINESS SINCE PAST WHICH HAS BEEN ACCEPTE D BY DEPARTMENT EARLIER. ALLOWING THE USE OF PARTNERS PROPERTY BY F IRM IS AN ACCEPTABLE MODE AS A DEEMED CONTRIBUTION OF CAPITAL. THIS IMPL IES THAT PROPERTY HAS BEEN USED BY ASSESSEE FOR BUSINESS AS BY LEGALLY FI RM IS A COLLECTIVE TERM FOR PARTNERS. ASSESSEES CONTENTION ON THIS COUNT D ESERVES MERIT. APROPOS BLANKET RELIANCE BY AUTHORITIES BELOW ON K.N. GURU SWAMI AND SLP DISMISSAL IGNORING ALL OTHER JUDGMENTS CITED ABOVE IS NOT JUSTIFIED. HONBLE MADRAS HIGH COURT IN KAGGANANTHAN K M (SUPR A) HAS SUCCINCTLY EXPLAINED THE LEGAL EFFECT OF SLP DISMISSAL AND ON SIMILAR FACTS DECIDED THE ISSUE IN FAVOR OF THE ASSESSEE. ITA NO.1110/JP/2011 ITO, WARD- 2(4), JAIPUR VS. SHRI RISH I PODDAR MITHILA, JAIPUR . 15 5.2 IN VIEW OF THE FACTS, CIRCUMSTANCES AND JUDICIA L PRECEDENTS CITED ABOVE WE HOLD THAT THE IMPUGNED ADDITION UNDER THE HEAD HOUSE PROPERTY INCOME CANNOT BE MADE, THE SAME IS DELETED. ASSESSE ES CO IS ALLOWED. 6.0 IN THE RESULT, REVENUE APPEAL IS DISMISSED AND ASSESSEES CO IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/12 /2015. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 /12/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO:- 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 2(4), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- SHRI RISHI PODDAR MITHILA, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 1110/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR