Shree Salasar Builders & Developers, Cuttack V. ITO, Ward-02, , Cuttack

ITA 239/CTK/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0971 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 23-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D K SHETH
• Keywords: Set aside
• Section: 201

Judgement Text

, . . , , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH , CUTTACK , BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ./ ITA NO. 239 / CTK /20 1 9 ( / ASS ESSMENT YEAR : 20 10 - 20 1 1 ) M/S SHREE SALASAR BUILDER AND DEVELOPERS, PARAS PLAZA, TINIKONIA BAGICHA CUTTACK VS. ITO, WARD - 2(1), CUTTACK ./ ./ PAN/GIR NO. : A BJFS 5146 D ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI D.K.SHETH , AR /REVENUE BY : SHRI SUBHENDU DATTA , DR / DATE OF HEARING : 11 / 12 /201 9 / DATE OF PRONOUNCEMENT 16 / 12 /201 9 / O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) , CUTTACK , DATED 28.06.2019 FO R THE ASSESSMENT YEAR 2010 - 2011, ON THE FOLLOWING GROUNDS : - 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE COMPUTING OF INCOME FROM HOUSE PROPERTY SHOULD NOT HAVE BEE N MADE IN THE HANDS OF THE APPELLANT FIRM. 2. FOR THAT THE LEARNED AO SHOULD HAVE ALLOWED DEDUCTION OF INTEREST ON BORROWED CAPITAL AS CLAIMED AND THE DISALLOWANCE OF RS.16,72,066/ - IS ARBITRARY AND UNLAWFUL AND OTHER WISE BAD - IN - LAW. 2. BRIEF FACTS OF T HE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM LETTING OUT BUILDING ON RENT IN THE NAME AND STYLE OF M/S SHREE SALASAR BUILDERS & DEVELOPERS AND FILED ITS RETURN OF INCOME ELECTRONICALLY ON 29.11.2010 DISCLOSING NIL INCOME. THEREAFTER THE CASE OF THE AS SESSEE ITA NO. 239 /CTK/201 9 2 WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED BY THE AO U/S.143(3) /254 OF THE ACT. AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND THE CIT(A) HAS UPHELD THE ACTION OF AO. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE T RIBUNAL. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PARTNERS FIRM HAS OFFERED CAPITAL GAIN IN THE RESPECTIVE RETURN OF INCOME FOR A.Y.2010 - 2011 ONLY AND IF THE SAME AMOUNT IS AGAIN TAXED IN THE HANDS OF THE PARTNERSHIP FIRM, THEN IT WOULD AMOUNT T O DOUBLE TAXATION, THEREFORE, RELIEF MAY KINDLY BE GRANTED TO THE ASSESSEE. LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE FIRM IS IN EXISTENCE AND FILED RETURN OF INCOME AT NIL AND DID NOT SHOWN ANY INCOME FROM SALE OF HOUSE PROPERTY. LD. COUNSEL FURTHER SUBMITTED THAT THE AO TREATED THE INCOME AND EXPENDITURE AS INCOME FROM BUSINESS AND THE LD. CIT(A) TREATED THE SAME INCOME AS INCOME FROM HOUSE PROPERTY AND HELD THAT THE SAME IS ASSESSABLE IN THE HANDS OF THE FIRM IGNORING THE FACT THAT THE PARTNERS OF THE FIRM HAVE SHOWN SAME INCOME FROM HOUSE PROPERTY IN THEIR RESPECTIVE RETURNS. LD. COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT IN THE FIRST ROUND OF PROCEEDINGS, THE TRIBUNAL SET ASIDE THE ISSUE WITH A DIRECTION TO VERIFY AS TO WHETHER THE SHARES OF T HE PARTNERS ARE ASCERTAINABLE AND DEFINED AS PER PARTNERSHIP DEED BUT THE AO DID NOT COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL AND REPEATED THE SAME ASSESSMENT ORDER WHICH WAS PASSED IN THE FIRST ROUND OF PROCEEDINGS. 4. LD. COUNSEL FURTHER SUBMITTED THA T THE AO REPEATED THE ASSESSMENT ORDER WITH TOTAL INCOME WITHOUT FOLLOWING THE DIRECTIONS OF THE TRIBUNAL AND ITA NO. 239 /CTK/201 9 3 THE LD. CIT(A) ALSO CONFIRMED THE SAME WITHO UT ANY REASONABLE AND GOOD CAUSE. THEREFORE, ORDERS OF THE AUTHORITIES BELOW IN THE SECOND ROUND OF PR OCEEDINGS MAY KINDLY BE QUASHED DELETING THE ADDITION. 5. REPLYING TO THE ABOVE, LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT AS PER PARTNERSHIP DEED, DATED 01.09.2007, COPY OF WHICH IS PLACED ON RECORD, THE SHARE OF THE BOTH PARTNERS IN THE PARTNE RSHIP FIRM IS EQUAL AND 50 - 50% BUT SINCE THE FIRM IS IN EXISTENCE AND CONTINUOUSLY FILING RETURN OF INCOME, THEREFORE, AS PER THE PROVISIONS OF SECTION 26 OF THE INCOME TAX ACT, 1961, THE INCOME FROM SALE OF HOUSE PROPERTY WHICH WAS KEPT IN THE FORM OF FIR M SHOULD BE TAXED IN THE HANDS OF THE FIRM ONLY AND NOT IN THE HANDS OF THE PARTNERS. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, FIRST OF ALL, I MAY POINT OUT THAT UNDISPUTEDLY THE PROPERTY WHICH WAS SOLD AND ON WHICH CAPITAL GAIN AROSE WAS I N THE NAME OF PARTNERSHIP FIRM AND AS PER PARTNERSHIP DEED THE SHARES OF BOTH THE PARTNERS ARE EQUAL AND 50 - 50%. FURTHER AS PER THE PROVISIONS OF SECTION 26 OF THE I.T.ACT., WHERE THE PROPERTY CONSISTING OF BUILDINGS OR BUILDINGS AND LANDS APPURTENANT THER ETO IS OWNED BY TWO OR MORE PERSONS AND THEIR RESPECTIVE SHARES ARE DEFINITE AND ASCERTAINABLE, SUCH PERSONS SHALL NOT IN RESPECT OF SUCH PROPERTY BE ASSESSED AS AN ASSOCIATION OF PERSONS, BUT THE SHARE OF EACH SUCH PERSON IN THE INCOME FROM THE PROPERTY A S COMPUTED IN ACCORDANCE WITH SECTIONS 22 TO 25 SHALL BE INCLUDED IN HIS TOTAL INCOME. FROM THE COPY OF THE ORDER OF THE SMC BENCH OF THE TRIBUNAL, DATED 28.10.2016, I ALSO OBSERVE THAT THE TRIBUNAL TOOK COGNIZANCE OF DECISION OF HONBLE ITA NO. 239 /CTK/201 9 4 KARNATAKA HIGH COURT IN THE CASE OF SHAKTI FARM HOUSE VS. DCIT (2010) 323 ITR 661 (KARN.) , WHEREIN THEIR LORDSHIP HELD THAT IF THE FIRM IS IN EXISTENCE THEN THE INCOME FROM SALE OF HOUSE PROPERTY HAS TO BE ASSESSED TO TAX AS A FIRM BY LOOKING INTO THE TERMS AND CONDITIONS OF THE PARTNERSHIP DEED. 7. IN VIEW OF THE FOREGOING DISCUSSIONS AND THE FACTS NOTED BY ME IN THE PRESENT CASE, IT IS AMPLY CLEAR THAT THE PROPERTY WAS IN THE NAME OF PARTNERSHIP FIRM AND CAPITAL GAIN ACCRUED ON SALE OF SUCH PROPERTY HAS TO BE ASSESSED IN THE HANDS OF THE FIRM AND NOT IN THE HANDS OF THE PARTNERS ESPECIALLY WHE N THE FIRM IS IN EXISTENCE. IN CASE WHERE THE FIRM HAS DISSOLVED THEN THE INCOME ACCRUED ON SALE OF PROPERTY OF PARTNERSHIP FIRM MAY BE ASSESSED IN THE RATIO OF PROFIT TAXABLE BETWEEN THE PARTNERS BUT WHEN THE FIRM IS IN EXISTENCE AND CONTINUOUSLY FILING R ETURN OF INCOME THEN THE INCOME FROM SALE OF HOUSE PROPERTY HAS TO BE ASSESSEE IN THE HANDS OF THE FIRM ONLY. HOWEVER, THE PARTNERS OF THE FIRM ARE ENTITLED TO GET THEIR RESPECTIVE SHARES AS AGREED BETWEEN THEM AS PER PARTNERSHIP DEED. BUT THE CAPITAL GAIN INCOME HAS TO BE ASSESSED IN THE HANDS OF THE FIRM ONLY. THEREFORE, THE CONTENTION OF LD. AR IS NOT ACCEPTABLE AND I UPHOLD THE FINDINGS OF AO AS WELL CIT(A) THAT THE INCOME FROM HOUSE PROPERTY ON SALE OF PROPERTY HAS TO BE ASSESSEE IN THE HANDS OF THE FI RM ONLY. 8. BEFORE PART WITH THE ORDER, I MAKE IT CLEAR THAT THE AO IS REQUIRED TO TAKE CARE OF THE FACT THAT IF ON THE SAME CAPITAL GAIN TAX HAS BEEN ASSESSED AND COLLECTED FROM THE PARTNERS THEN HE WOULD TAKE CARE OF THAT ITA NO. 239 /CTK/201 9 5 SITUATION AND ENSURE THAT THERE SHOULD BE NO DOUBLE TAXATION ON THE SAME AMOUNT AND HE IS ALSO DIRECTED TO DO THE NEEDFUL TO ENSURE THE SAME. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED WITH SPECIFIC DIRECTIONS TO THE AO AS NOTED ABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON 16 / 12 / 201 9 . SD/ - ( CHANDRA MOHAN GARG ) / JUDICIAL MEMBER CUTTACK ; DATED 16 / 12 /201 9 . . / PKM , S R.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - . M/S SHREE SALASAR BUILDER AND DEVELOPERS, PARAS PLAZA, TINIKONIA BAGICHA CUTTACK 2. / THE RESPONDENT - ITO, DHENKANAL WARD, DHENKANAL 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT , CUTTACK 6. / GUARD FILE. //TRUE COPY//