Mata Vaishno Estates, Karnal V. ITO, Karnal

ITA 1486/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3845 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 24-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Revised return
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER & SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 1486/DEL/2011 ASSESSMENT YEAR: 2007-08 MATA VAISHNO ESTATES, VS. INCOME TAX OFFICER, SCO 24-25, WARD-2, SECTOR-14, UE KARNAL. KARNAL. AAKFM5237D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURJEET SINGH, CA RESPONDENT BY : SMT. MONA MOHANTY, SR. DR ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 23.12.2010 FOR A.Y . 2007-08. GROUNDS OF APPEAL READ AS UNDER: - 1. BECAUSE THE ACTION FOR UPHOLDING ASSESSMENT AT AMOUNT OF RS. 10,28,553/- IS BEING CHALLENGED ON FACTS AND LAW SI NCE HAVING DECLINED TO APPRECIATE THE TRUE AND CORRECT CHARACT ER OF THE TRANSACTION AND THE INTENTION FOR ENTERING INTO THE VENTURE OF THE PARTNERSHIP. 2. BECAUSE THE ACTION IN THE UNDER CHALLENGE ON FAC TS AND LAW FOR HAVING RETURNED THE FINDINGS OF THE FACTS AGAINST T HE ASSESSEE WHICH HAS RESULTED INTO MULTIPLE TAXATION QUA THE S AME AMOUNT OF TRANSACTIONS AND MORE SO WITHOUT THE EXAMINING THE ASSESSMENT ITA NO. 1486/D/2011 2 STATUS IN THE HANDS OF THE PARTNERS FROM THE PRECED ING ASSESSMENT YEARS TO THE SUBSEQUENT ASSESSMENT YEARS . 3. BECAUSE THE ACTION IN THE UNDER CHALLENGE ON FAC TS AND LAW SINCE THE CHARGE IS ON THE INCOME CONSIDERING THE FA CTS AND CIRCUMSTANCES OF THE CASE AND THE CHARGEABILITY OF THE INCOME IS A DIFFERENT CONCEPT THEN THE DISTRIBUTION OF THE SH ARE AMONGST THE PARTNERS. 4. BECAUSE THE ACTION IN THE UNDER CHALLENGE ON FAC TS AND LAW SICNE THE ALTERNATIVE PLEADINGS HAVING BEEN ADVANCED HAVE BEEN IGNORED FOR CONSIDERATION AND THE LEGITIMATE CLAIM HAS NOT BEEN ADJUDICATE U/S 40(B)(IV) OF THE ACT MORE SO WHEN TH E RESPONDENT DEPARTMENT IS SUPPOSED TO FOLLOW THE CBDT CIRCULAR NO. 14(XL- 35 OF 1995) DT. 11.04.1955. 5. BECAUSE THE ACTION IN THE UNDER CHALLENGE ON FAC TS AND LAW PRAYING FOR ALLOWANCE OF THE DEDUCTION OF RS. 9,38, 987/-. 2. THE ASSESSEE HAS CLAIMED THE STATUS OF FIRM WHIC H HAS BEEN GRANTED TO THE ASSESSEE. THE ASSESSEE IS OWNER OF A PROPERTY FROM WHICH RENT EARNED HAS BEEN SHOWN AS INCOME FROM PRO PERTY. IT FILED RETURN OF INCOME AT RS. 41,590/-. GROSS RENT HAS B EEN RECEIVED BY THE ASSESSEE FROM HAFFED OF A SUM OF RS. 25,20,000/-. AFTER GRANTING THE DEDUCTIONS, NET INCOME FROM PROPERTY HAS BEEN ASSES SED AT RS. 9,89,208/-. THE COMPUTATION MADE BY THE AO WITH RE GARD TO HOUSE PROPERTY INCOME IS AS FOLLOW: - INCOME FROM PROPERTY AS SHOWN RENT RECEIVED FROM HAFED 25,20,000/- LESS DEDUCTION U/S 24(A) @ 30% 7,56,000 /- 17,64,000/- LESS INTEREST U/S 24(B) ITA NO. 1486/D/2011 3 INTEREST PAID TO C.B.I. 427462/- INTEREST PAID TO OTHERS 347330 /- (INTEREST PAID TO PARTNERS 774792/- @ RS. 938987/- AND BANK CHARGES @ RS. 47976/- ARE DISALLOWED AS DISCUSSED IN PARA 7 ) NET INCOME FROM PROPERTY 989208/- 3. ADDING A SUM OF RS. 39,345/- RECEIVED BY THE ASS ESSEE ON ACCOUNT OF INTEREST ON INCOME TAX REFUND, THE TOTAL INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT A SUM OF RS. 10,28,55 3/-. THE AO WHILE COMPUTING INCOME FROM HOUSE PROPERTY DID NOT ALLOW THE INTEREST PAID TO PARTNERS AS ACCORDING TO AO THE CAPITAL OF THE PARTNER IS NOT A BORROWED CAPITAL AND IT IS ONLY INVESTMENT BY THE P ARTNERS. HE REQUIRED THE ASSESSEE TO EXPLAIN AS TO HOW THE INTEREST PAID TO PARTNERS WAS AN ALLOWABLE DEDUCTION. ACCORDING TO AO WHILE COMPUTI NG INCOME FROM PROPERTY THE DEDUCTIONS STATED U/S 24 ARE ONLY TO B E ALLOWED. IN RESPONSE TO SUCH QUERY THE ASSESSEE SUBMITTED REPLY DATED 3 RD AUGUST, 2009 AND IT WAS SUBMITTED THAT INTEREST PAID TO PAR TNERS HAS BEEN CLAIMED U/S 40(B)(IV) OF THE INCOME TAX ACT, 1961 ( ACT). IT WAS SUBMITTED THAT SUCH PAYMENT OF INTEREST IS AUTHORIZ ED BY AND IS IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED W HICH DOES NOT EXCEED THE PRESCRIBED LIMIT OF RATE OF INTEREST OF 12% PER ANNUM. REFERENCE WAS MADE TO VARIOUS DECISIONS TO CLAIM TH AT SUCH INTEREST PAID IN ACCORDANCE WITH PARTNERSHIP DEED IS AN ALLO WABLE DEDUCTION. 4. IN THE ALTERNATIVE IT WAS CLAIMED THAT IF THE IN TEREST PAID TO PARTNERS IS NOT ALLOWED THEN RENTAL INCOME SHOULD BE ASSESSE D IN THE STATUS OF AOP AND AFTER DEDUCTING THE STATUTORY DEDUCTION OF 30% ANNUAL REPAIR ITA NO. 1486/D/2011 4 AND INTEREST ON BORROWED CAPITAL, THE REST OF THE I NCOME SHOULD BE DIVIDED AMONGST THE CO-OWNERS AND THE ASSESSEE MAY BE ALLOWED TO FILE REVISED RETURN OF MEET THE ENDS OF THE JUSTICE. TH E AO REFUSE TO ACCEPT SUCH CLAIM OF THE ASSESSEE AS ACCORDING TO AO THE I NCOME IS IN THE NATURE OF HOUSE PROPERTY INCOME AND WHAT IS MENTION ED IN SEC. 24 IS ONLY TO BE ALLOWED OUT OF SUCH INCOME. NO DEDUCTIO N MENTIONED U/S 28 TO 43B IS ALLOWABLE TO THE ASSESSEE. THE AO OBSERV ED THAT ASSESSEE HAS CLAIMED THE STATUS OF FIRM AND RETURN IS ALSO F ILED IN THE STATUS OF FIRM. IT DOES NOT CARRY ON ANY BUSINESS, DEDUCTIONS MENTI ONED U/S 28 TO 43B IS NOT ALLOWABLE. THEREFORE, INTEREST PAID TO PARTNER S IS NOT ELIGIBLE TO BE DEDUCTED U/S 40(B) OF THE ACT. HE ALSO REJECTED TH E CLAIM OF THE ASSESSEE FOR ITS ASSESSMENT AS AOP AS ACCORDING TO AO THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED UNDER THE PROVISI ONS OF INDIAN PARTNERSHIP ACT AND IT IS EVIDENCED BY PARTNERSHIP DEED DATED 20 TH SEPTEMBER, 2001. ONCE A FIRM IS VALIDLY CONSTITUTE D BY VIRTUE OF A VALID PARTNERSHIP DEED, THE ASSESSEE CANNOT BY ITS OWN VO LITION CHANGE THE STATUS OF THE FIRM TO AOP. THE PARTNERSHIP CAN BE DISSOLVED ONLY IN THE CIRCUMSTANCES LISTED IN THE INDIAN PARTNERSHIP ACT. THE STATUS OF THE ASSESSEE CANNOT BE CHANGED BY FILING THE REVISED RE TURN. THEREFORE, THE ASSESSEE CANNOT CLAIM THAT IT MAY BE ALLOWED TO FIL E REVISED RETURN. THE REVISED RETURN DOES NOT WASH AWAY THE ORIGINAL RETU RN AND FOR THIS PROPOSITION HE HAS RELIED UPON VARIOUS JUDICIAL PRO NOUNCEMENTS AND IN THIS MANNER LD. AO HAS REJECTED THE CLAIM OF THE AS SESSEE FOR DEDUCTION OF INTEREST PAID TO PARTNERS. ITA NO. 1486/D/2011 5 5. BEFORE CIT(A), THE ASSESSEE DID NOT APPEAR. THE LD. CIT(A) HAS GIVEN VARIOUS OPPORTUNITIES TO THE ASSESSEE AND IN ABSENCE OF RESPONSE FROM ASSESSEE HE HAS DECIDED THE APPEAL ON MERITS. LD. CIT(A) HAS OBSERVED THAT THE SUBMISSION OF THE ASSESSEE IN THE APPEAL ARE ONLY REPETITION OF THE ARGUMENTS SUBMITTED BEFORE THE AO . THE ASSESSEE HAS FAILED TO ADDRESS/REBUT THE FINDINGS MADE BY THE AO IN HIS ORDER FOR REJECTING THE CLAIM OF INTEREST PAID TO THE PARTNER S. THE STATUTORY DEDUCTIONS WHICH ARE AVAILABLE TO ASSESSEE HAVE ALR EADY BEEN ALLOWED BY THE AO. FURTHER DEDUCTIONS CLAIMED BY THE ASSES SEE ARE NOT ALLOWABLE. IN THIS MANNER HE HAS APPROVED THE ACTI ON OF AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 6. LD. AR OF THE ASSESSEE HAS PRODUCED BEFORE US SY NOPSIS OF SUBMISSIONS. ACCORDING TO HIS FIRST SUBMISSION, TH E PARTNERSHIP FIRM WAS CONSTITUTED ON 20 TH SEPTEMBER, 2001 AND THE NATURE OF BUSINESS IS MENTIONED AS CONSTRUCTION OF GODOWN AND GIVE IT ON RENT TO THE HARYANA GOVERNMENT INSTITUTIONS. IT IS FURTHER SUBMITTED B Y LD. AR THAT ACCORDING TO THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF KESHAV G. RAVJI & COMPANY VS. CIT 183 ITR 1 FOR MAKING A DISALLOWAN CE FOR THE INTEREST PAID BY A PARTNERSHIP FIRM TO A PARTNER U/S 40(B) T HE INTEREST, IN TURN, PAID BY THE PARTNER ON HIS BORROWINGS FROM THE FIRM SHOU LD BE TAKEN ACCOUNT OF AND DEDUCTED AND ONLY THE BALANCE IS TO BE DISAL LOWED U/S 40(B). HE SUBMITTED THAT CAPITAL OF THE PARTNERS AND OTHER LO ANS WERE USED FOR THE PURCHASE/CONSTRUCTION OF LAND AND BUILDING GIVEN ON RENT. THE CAPITAL BY THE PARTNER CAN BE INTRODUCED IN THE FORM OF SHARES , DEBENTURE, LOANS ITA NO. 1486/D/2011 6 WHICH ARE SOFT LOANS. INTEREST IS EXTRICABLY LINKE D TO SUCH TRANSACTION AND FULFILLS THE TEST OF NEXUS AND CHARACTER. INTEREST PAID TO PARTNERS HAS BEEN INCLUDED IN THE PARTNERS INCOME WHICH IS EVID ENT FROM THE COPIES OF RETURN WHICH ARE FILED AT PAGES 18 TO 116 OF THE PA PER BOOK. SECTION 24(B) ENTITLED THE ASSESSEE TO CLAIM INTEREST PAYAB LE ON THE BORROWINGS MADE FOR THE PURPOSE OF PURCHASE, CONSTRUCTION, REP AIR ETC. PARTNERSHIP FIRM IN THE NAME OF THE PARTNERS HAD CONSTRUCTED TH E GODOWN ON A LAND AS PER SPECIFICATIONS OF HARYANA WARE HOUSING CORPO RATION/FOOD CORPORATION OF INDIA AND RECEIVED RENT FROM THE LEA SE IN THE NAME OF THE FIRM. THE PARTNERSHIP FIRM HAS CONSTRUCTED THE GOD OWN FROM BORROWED CAPITAL ON WHICH THE INTEREST HAS BEEN PAID TO PART NERS LIKE OUTSIDE PARTIES, HENCE, IT IS ALLOWABLE U/S 24(B). IN THE ALTERNATIVE IT HAS BEEN SUBMITTED THAT INCOME SHOULD BE ASSESSED IN THE STA TUS OF AOP AND SHOULD BE ALLOWED TO BE DIVIDED AMONGST THE CO-OWNE RS. FOR SUCH CONTENTION RELIANCE HAS BEEN PLACED BY LD. AR ON TH E DECISION OF MADRAS ITAT IN THE CASE OF KANDA SWAMI SHOPPING COMPLEX AN D LODGING VS. ACIT 54 ITD 55 (MAD.). THUS, CONCLUDING HIS ARGUME NTS IT WAS SUBMITTED BY LD. COUNSEL THAT EITHER THE DEDUCTION OF INTEREST PAID TO THE PARTNERS SHOULD BE ALLOWED OR IN THE ALTERNATIVE TH E RENTAL INCOME SHOULD BE ASSESSED IN THE STATUS OF AOP THE PARTNERS BEING CO-OWNER THEREOF. 7. ON THE OTHER HAND, RELYING UPON THE ORDER OF AO AND CIT(A), IT WAS PLEADED BY LD. DR THAT THE RELIEF SOUGHT BY THE ASSESSEE NOT BEING ACCORDING TO THE PROVISIONS OF THE ACT HAS RIGHTLY BEEN DENIED AND ITA NO. 1486/D/2011 7 APPEAL FILED BY THE ASSESSEE HAS NO MERIT AND, THER EFORE, SHOULD BE DISMISSED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ASSESSEE FIRM IS CO NSTITUTED BY A VALID PARTNERSHIP DEED AND IN EARLIER YEARS ALSO IT HAS B EEN ASSESSED IN THE STATUS OF FIRM. IT HAS NOT BEEN SHOWN BY THE ASSES SEE THAT PARTNERSHIP FIRM WAS DISSOLVED AND THE ASSETS STANDING IN THE B ALANCE SHEET WERE DIVIDED AMONGST THE PARTNERS. IN THIS VIEW OF THE SITUATION, WE HOLD THAT LD. AO AND CIT(A) HAVE RIGHTLY HELD THAT ASSESSEE C ANNOT BE ASSESSED IN THE STATUS OF AOP AND THE PARTNERS OF IT CANNOT BE ASSESSED AS CO- OWNER. TO DETERMINE THE STATUS OF AN ASSESSEE, IT HAS TO BE SEEN THAT WHAT IS ITS CONSTITUTION AND HOW IT HAS BEEN FORMED . THE FIRM IS CONSTITUTED VIDE INSTRUMENT OF PARTNERSHIP DEED IN WRITING WHICH DETERMINE THE EXISTENCE OF THE PARTNERS, THEIR SHAR ES AND THEIR INTER-SE RELATIONSHIP AND THE CLAUSE REGARDING SHARE RATIO O F PARTNERS IN THE PROFITS AND LOSSES. IN THE PRESENT CASE PARTNERSHIP DEED H AS BEEN EXECUTED AMONGST THE PARTNERS OF THE ASSESSEE FIRM AND ALL T HE TERMS AND CONDITIONS ARE STATED IN THE SAME. FOR THIS REFERE NCE CAN BE MADE TO THE COPY OF PARTNERSHIP DEED PLACED BY THE ASSESSEE AT PAGES 1 TO 3 OF THE PAPER BOOK. THE PARTNERSHIP DEED IS DATED 20 TH SEPTEMBER, 2001. IT HAS DESCRIBED THE TERMS AND CONDITIONS AGREED AMONG ST THE PARTNERS AND THEIR PROFIT AND LOSS SHARING RATIO. ON THE BA SIS OF THE SAID PARTNERSHIP DEED THE ASSESSEE HAS BEEN GRANTED REGI STRATION. IT MAY ALSO BE MENTIONED HERE THAT EVEN THE LAND HAS BEEN PURCHASED ON 25 TH ITA NO. 1486/D/2011 8 SEPTEMBER, 2001 I.E. AFTER THE CONSTITUTION OF THE FIRM AND IT HAS BEEN PURCHASED IN THE NAME OF FIRM NAMELY MATA VAISHNO E STATES THROUGH ITS PARTNER OMESH KUMAR S/O SHRI VISHAMBAR DAYAL. THUS , RIGHT FROM THE BEGINNING THE ASSESSEE HAS CLAIMED THE STATUS OF FI RM AND NOW ASSESSEE CANNOT CONTEND THAT IT SHOULD BE ASSESSED IN THE STATUS OF AOP AND THE PARTNERS SHOULD BE ASSESSED AS CO-OWNER S. IN VIEW OF THIS DISCUSSION THE ALTERNATIVE CONTENTION OF THE ASSESS EE IS REJECTED. 9. NOW WE HAVE TO EXAMINE THAT WHETHER OR NOT ASSES SEE IS ENTITLED TO GET BENEFIT OF INTEREST PAID TO THE PARTNERS. T HE PAYMENT OF INTEREST TO PARTNERS IS GOVERNED BY THE PROVISION OF SEC. 40(B) READ AS UNDER: - AMOUNTS NOT DEDUCTIBLE 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTE D IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION, (A) [(B) IN THE CASE OF ANY FIRM ASSESSABLE AS SUCH, - (I) TO (III). (IV) ANY PAYMENT OF INTEREST TO ANY PARTNER WHICH I S AUTHORIZED BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSHIP DEED IN SO FAR AS SUCH AMO UNT EXCEEDS THE AMOUNT CALCULATED AT THE RATE OF [TWELV E] PER CENT SIMPLE INTEREST PER ANNUM; 10. SECTION 40 DESCRIBES CERTAIN AMOUNTS WHICH CANN OT BE DEDUCTED WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEA D PROFIT AND GAINS OF BUSINESS OR PROFESSION CLAUSE (B) OF SEC. 40 RE GULATES THE AMOUNTS ITA NO. 1486/D/2011 9 PAID BY A FIRM TO THE PARTNERS. SUB CLAUSE (IV) OF CLAUSE (B) OF SEC. 40 PUT A RESTRICTION ON THE INTEREST PAID TO THE PARTN ERS WHICH WILL BE ALLOWABLE ONLY IN A CONDITION WHEN IT IS AUTHORIZE BY AND IS IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER DATE OF SUCH PARTNERSHIP DEED IN SO FAR AS SU CH AMOUNT EXCEEDS THE AMOUNT CALCULATED THE RATE OF 12% SIMPLE INTERE ST P.A. TO CLAIM THIS AMOUNT, FIRSTLY; THE INCOME SHOULD BE ASSESSABLE UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE ASSESSEE IN ITS RETURN HAS NOT SHOWN ANY INCOME UNDER THE HEAD BUSINESS OR PROFES SION. THE INCOME OF THE ASSESSEE AS PER RETURN OF INCOME IS C OMPUTED ONLY UNDER TWO HEADS NAMELY INCOME FROM PROPERTY AND INCOME FROM OTHER SOURCES. INCOME FROM OTHER SOURCES REPRESENTS ONL Y INTEREST ON INCOME TAX REFUND. THEREFORE, THERE IS NO INCOME UNDER TH E HEAD INCOME FROM BUSINESS OR PROFESSION. THE CALCULATION OF INCOME FROM HOUSE PROPERTY AS SUBMITTED BY THE ASSESSEE IN ITS RETURN OF INCOM E IS AS FOLLOW: - INCOME FROM PROPERTY (1) RENT RECEIVED (FROM HAFED) 2520000.00 LESS DEDUCTION U/S 24(A) @ 30% 756000.00 1764000.00 LESS INTEREST U/S 24(A) INTEREST & CHARGES PAID TO C.B.I. 475438.00 INTEREST PAID TO OTHERS 1286317.16 1761755.16 NET INCOME FROM PROPERTY 2244.84 (COPY OF RETURN IS PLACED AT PAGE 36 OF THE PAPER B OOK). 11. THE DETAILS OF INTEREST AS INCORPORATED IN PROF IT AND LOSS ACCOUNT AND INTEREST ACCOUNT AS DESCRIBED AT PAGE 38 OF THE PAPER BOOK IS AS UNDER: - ITA NO. 1486/D/2011 10 M/S MATA VAISHNO ESTATE, OPP KRISHAN MANDIR SEC-14, KARNAL PROFIT & LOSS A/C FOR THE YEAR ENDED ON 31.03.2007 PARTICULARS AMOUNT PARTICULARS AMOUNT TO BANK CHARGES 47976.00 BY STORAGE CHARGES 25200 00.00 TO INTEREST ACCOUNT 1286317.16 BY INTEREST O N I.T. REFUND 39345.00 TO BANK INTEREST 427462.00 TO LEGAL EXPENSES 5000.00 TO NET PROFIT TRANSFER TO PARTNERS CAPITAL A/C SH. UMESH KUMAR (20%) 158517.97 SMT. MANJU BINDAL (14%) 110962.58 SMT.MINAKSHI GOEL (18.5%) 180777.88 SH. YOGESH KUMAR (16.5%) 180777.82 SMT. SHANTI DEVI (16.5%) 180777.82 SH. AMIT KUAMR (18.5%) 180777.82 TOTAL 2559345.00 TOTAL 2559345.00 DETAIL OF INTEREST A/C M/S RAM SARUP SUNAL KUMAR RIVI 128046.00 TO P&L A/C 1286617.16 M/S GUPTA ENTERPRISES, INDRI 105837.00 SH. RAMES LAL 113447.00 SH. UMESH KUMAR 168938.74 SMT.MANJU BINDAL 386554.86 SMT. MINAKSHI GOEL 139427.00 SH.YOGESH KUMAR 105885.52 SMT.SHANTI DEVI 69865.52 SH. AMIT KUMAR 69865.52 1286317.16 1286317.16 12. THUS, IT CAN BE SEEN THAT ASSESSEE HAS CLAIMED INTEREST PAID TO PARTNERS INCLUDING INTEREST PAID TO OTHERS FROM INC OME FROM HOUSE PROPERTY. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT RENTAL INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM BUSI NESS OR PROFESSION AS THAT ISSUE WILL GO AGAINST THE ASSES SEE AND ASSESSEE WILL LOOSE THE BENEFIT OF 30% STANDARD DEDUCTION ON ACCO UNT OF REPAIR AND MAINTENANCE OF THE PROPERTY. IF IT IS INCOME FROM HOUSE PROPERTY THEN THE DEDUCTIONS ADMISSIBLE UNDER THAT SECTION ARE ON LY ALLOWABLE. THOUGH IT HAS BEEN THE CLAIM OF THE ASSESSEE THAT P ARTNERS CAPITAL WAS ITA NO. 1486/D/2011 11 ALSO UTILIZED FOR THE PURPOSE OF PURCHASE OF THE PR OPERTY HENCE DEDUCTION SHOULD BE ALLOWED U/S 24(B). BUT ASSESSEE HAS NOT ESTABLISHED ANY NEXUS TO SHOW THAT FIRM BORROWED THE SAID AMOUNT FR OM PARTNERS FOR THE PURCHASE OF THE PROPERTY. CONTRIBUTION OF CAPITAL BY THE PARTNERS IS AN INITIAL STEP TO CONSTITUTE A FIRM WHICH CANNOT BE T ERMED AS AMOUNT BORROWED BY THE FIRM FOR PURCHASE OF THE PROPERTY. LOOKING FROM ANY ANGLE THE CLAIM OF THE ASSESSEE DOES NOT HAVE THE S UPPORT OF ANY PROVISION OF LAW. 13. NOW WE DISCUSS THE CASE LAW RELIED UPON BY LD. AR OF THE ASSESSEE. FIRST RELIANCE HAS BEEN PLACED ON THE DE CISION IN THE CASE OF KESHAV RAVJI & COMPANY V. CIT. THE DECISION IN THA T CASE HAS NO RELEVANCE AT ALL TO THE FACTS OF THE PRESENT CASE. HENCE, ASSESSEE CANNOT DRAW ANY SUPPORT FROM THE SAID DECISION. 14. THE DECISION IN THE CASE OF KANDA SWAMI SHOPPIN G COMPLEX (SUPRA) ALSO DOES NOT SUPPORT THE CASE OF THE ASSES SEE. ACCORDING TO THE FACTS OF THE SAID CASE THE ASSESSEE WAS A FIRM OF THREE PARTNERS AND WAS CARRYING ON BUSINESS OF RUNNING A LODGE, THE IN COME FROM WHICH WAS ASSESSED TO TAX UNDER THE HEAD PROFIT AND GAINS OF BUSINESS RIGHT UPTO AND INCLUDING THE A.Y. 1987-88. DURING THE PREVIOU S YEAR RELEVANT TO A.Y. 1988-89 IT DISCONTINUED THE LODGING BUSINESS A ND LET THE ROOMS ON MONTHLY BASIS TO VARIOUS PARTIES, SUCH AS SMALL SHO P OWNERS, ADVOCATES AND OTHERS. CERTAIN ADDITIONS TO THE EXISTING BUIL DING WERE ALSO MADE AND THE PREMISES WERE LET OUT TO STATE BANK OF INDI A AND PNT ITA NO. 1486/D/2011 12 DEPARTMENT. THE ASSESSEE HAD DISCLOSED THE SAID IN COME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. BEFORE AO IT WAS THE CASE OF THE ASSESSEE THAT THE BUILDING IN QUESTION WAS EARLIER BEING USED AS A BUSINESS ASSET IN THE LODGING BUSINESS OF THE ASSES SEE. THEREFORE, IT WAS CLAIMED THAT SUCH INCOME SHOULD BE ASSESSED AS PROFIT AND GAINS OF THE BUSINESS. AS AGAINST THAT AO CHARGED THAT INCO ME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON THESE FACTS, IT W AS HELD THAT THE RENTAL INCOME EARNED BY THE ASSESSEE WAS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE QUESTION BEFORE TRIBUNAL WAS WHETHER THE INCOME EARNED BY THE ASSESSEE WAS INCOM E FROM HOUSE PROPERTY AND IT WAS HELD SO. THE TRIBUNAL ALSO NOT ICED THAT CIT(A) WHILE DENYING THE CLAIM OF THE ASSESSEE THAT IT IS INCOME FROM BUSINESS HAD ALSO CANCELLED THE ASSESSMENT OF THE FIRM AND HAD D IRECTED THE AO TO BRING TO TAX THE RENTAL INCOME IN THE HANDS OF RESP ECTIVE PARTNERS. THEREFORE, IT WAS HELD THAT THESE DIRECTIONS OF CIT (A) COULD NOT BE FAULTED. HERE THE FACTS OF THE PRESENT CASE ARE EN TIRELY DIFFERENT. IT HAS NEVER BEEN THE CLAIM OF THE ASSESSEE THAT THE INCOM E EARNED BY IT IS INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROF ESSION. THERE IS NO CANCELLATION OF THE REGISTRATION OF FIRM AS SUCH . THE FIRM HAS BEEN ASSESSED IN THE STATUS OF FIRM HENCE THE SAID CASE IS NOT AT ALL APPLICABLE TO THE FACTS OF PRESENT CASE. MOREOVER, THE DECISI ON OF TRIBUNAL REST UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF RAMLIK LAL SUNDER LAL VS. CIT 36 ITR 464 (BOM.) AND THE QU ESTION INVOLVED THEREIN WAS SIMPLE THAT WHETHER OR NOT THE ASSESSEE FIRM WAS ENTITLED FOR ITA NO. 1486/D/2011 13 REGISTRATION AS IT DID NOT CARRY ON BUSINESS. IN T HE PRESENT CASE THERE IS NO INVOLVEMENT OF SUCH QUESTION. 15. IN VIEW OF ABOVE DISCUSSION, WE FIND NO MERIT I N THE APPEAL FILED BY THE ASSESSEE AND THE SAME IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31.5.2011 SD/- SD/- (B.C. MEENA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 31.5.2011 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR