Shri Laxmi Kant Todi, Kolkata V. ITO, Ward - 35(3), Kolkata, Kolkata

ITA 341/KOL/2011

• Counselvise Citation: 34123514 RSA 2011
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2011
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK LD
• Assessee Lawyers: A K TULSYAN LD
• Keywords: Fair market value

Judgement Text

, B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B , CALCUTTA () BEFORE , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . !., '# , SHRI C.D. RAO, ACCOUNTANT MEMBER. $ / ITA NO. 341/KOL/2011 %& '(/ ASSESSMENT YEAR: 2006-07 SHRI LAXMI KANT TODI PAN: ABTPT 7710N INCOME-TAX OFFICER WARD 35(3), KOLKATA (*+ / APPELLANT ) - % - - VERSUS - . (-.*+/ RESPONDENT ) *+ / 0 '/ FOR THE APPELLANT: / SHRI A.K. TULSYAN, LD. AR -.*+ / 0 '/ FOR THE RESPONDENT: / SHRI A.K. PRAMANIK, LD.DR 1%2 / !# /DATE OF HEARING : 14-12-2011 3' / !# /DATE OF PRONOUNCEMENT :15-12-2011 '4 / ORDER . !., '# , ,, , SHRI C.D.RAO, ACCOUNTANT MEMBER.: ASSESSEE HAS FILED THIS APPEAL AGAINST ORDER DATED 27 TH DECEMBER, 2010 OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), KOLKATA FOR T HE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER:- 1. FOR THAT THE ORDER PASSED BY LD CIT(A) IS BAD BOTH FROM POINTS OF LAW AS WELL AS FACTS. 2. FOR THAT THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 6,46,804/- MADE BY THE A.O. AGAINST INTEREST PAID T O M/S. M.M. EXPORTS WITHOUT GOING THROUGH THE FACTS OF THE CASE AND EVI DENCE PLACED ON RECORDS. 3. FOR THAT THE CIT(A) ERRED IN CONFIRMING THE EST IMATION OF THE NOTIONAL RENT IN RESPECT OF PROPERTIES AT SALT LAKE, CHENNAI AND VRINDAVAN WITHOUT GIVING ANY COGENT REASONS THEREOF. ITA NO.341/KOL/2011-B-CDR 2 4. FOR THAT THE CIT(A) ERRED IN CONFIRMING THE EST IMATION OF THE FAIR RENT VALUE OF THE FLAT AT KHARDAH WITHOUT PROPER REASONI NG. 5. FOR THAT THE APPELLANT CRAVES THE RIGHT TO PUT, ADD, ALTER, ADDITIONAL GROUNDS AT THE TIME OF APPEAL. 3. GROUND NO.1 & 5 ARE GENERAL IN NATURE AND REQUIR E NO ADJUDICATION. THESE ARE DISMISSED. 4. AS REGARDING THE FACTS INVOLVED IN GROUND NOS.2, 3 & 4 ARE THAT WHILE DOING THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HAS DISALLOWED AN INTEREST AMOUNT OF RS.6,46,804/- PAID TO ONE OF THE PARTNERS I.E. M/S. M.M EXPORTS BY OBSERVING AS UNDER:- 4.1 THE ASSESSEE IS A PARTNER IN THE REGISTERED F IRM M/S M.M. EXPORTS. IT IS NOTICED THAT THE ASSESSEE HAS INVESTMENT IN PARTNER SHIP FIRM MIS M.M. EXPORTS AMOUNTING TO RS 1,12,50,000/- AND LIABILITY TO THE SAID FIRM OF RS 749/-. WHEN THE LIABILITY AND INVESTMENT IN M/S M.M. EXPORTS IS CLU BBED THEN IT IS NOTICED THAT THE ASSESSEE HAS NET INVESTMENT IN M/S M. M. EXPORTS IS RS 38,88,851/- IE [RS 1,12,50,000/- (-) RS 73,61,149/-]. THE ASSESSEE HAS CLAIMED AN EXPENSES OF RS6,46,804/- AS INTEREST PAYMENT TO THE FIRM. THE L D. A.R. OF THE ASSESSEE WAS ASKED TO EXPLAIN WHY THIS AMOUNT IS ALLOWABLE. THE LD. A.R. OF THE ASSESSEE HAS FILED A LETTER DATED 21/10/08 AND STATED AS FOLLOWS :- THE ASSESSEE IS ONE OF PARTNER IN M/S. M. M EXPORT S WHICH IS ASSESSED TO TAX WITH DCJT CIRCLE -42/ KOL. AS PER T HE RECTIFICATION DEED DATED 01/04/1 994 OF THE SAID FIRM, ALL THE PARTNER S HAVE TO CONTRIBUTE A FIXED CAPITAL AND THE SAME SHALL BE NOT ENTITLED T O ANY INTEREST. INTEREST ON THE CURRENT A/C SHALL HOWEVER BE LEVIED @15% AS PER THE SAID DEED WHICH IS ENCLOSED AS ANNEXURE HEREOF. 4.2 THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTA BLE AS ASSESSEE HAS NET INVESTMENT IN M/S M. M. EXPORTS IS RS 38,88,851/- I E [RS 1,12,50,000/- (-) RS 73,61,149/-]. IF ASSESSEE IS NOT CLAIMING INTEREST ON THE NET INVESTMENT IN THE FIRM THEN AT LEAST HE SHOULD NOT PAY INTEREST TO TH E FIRM. HENCE I DISALLOW RS 6,46,8041- AS INTEREST PAYMENT TO THE FIRM AND ADD RS 6,46,804/- TO THE TOTAL INCOME OF THE ASSESSEE.. 4.1 AS REGARDING THE OTHER ISSUES HE VALUED THE AN NUAL TOTAL VALUE OF THE PROPERTIES SITUATED AT (1) SALT LAKE KOLKATA, (2) SUBRAMANIAM STREET, CHEN NAI, (3) MADRAS, (4) KHARDAH, KOLKATA & (5) NANDAN VERTIKA BY TAKING INTO CONSIDERATION THE FAI R MARKET VALUE AS ASCERTAINED BY AN INSPECTOR DEPUTED BY THE ASSESSING OFFICER. 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME(AP PEALS) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON ALL THE ISSUES. 6. AGGRIEVED BY THIS, NOW THE ASSESSEE IS IN APPE AL BEFORE US. ITA NO.341/KOL/2011-B-CDR 3 7. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THE COPIES OF PARTNERSHIP DEED AND REFERRED THE CL AUSES 4(A) (I) & (II), (B) (I), (II) & (III) AND F URTHER CONTENDED THAT BASED ON THE TERMS OF THE PARTNERSHI P FIRM THE ASSESSEE HAS PAID AN AMOUNT OF RS. 6,46,804/- ON THE CREDIT BALANCE SHOWN IN THE CURR ENT ACCOUNT OF M/S. M.M EXPORTS. THEREFORE, THERE IS NO JUSTIFICATION ON THE PART OF THE REVENUE TO D ISALLOW THE SAME. 7.1 AS REGARDING THE OTHER ISSUES I.E. RENTAL VALUE , HE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) WAS NOT JUSTIFIED IN ACCEPTING THE PLEA OF THE ASSESSEE THAT WHEN THE HOUSE PROPERTIES OF THE ASSESSEE ARE VACANT, THEN THE RE VENUE WAS JUSTIFIED TO TAKE THE ANNUAL VALUE BASED ON THE ESTIMATION OF THE MUNICIPAL CORPORATIONS VA LUATION. IN SUPPORT OF THIS, HE FILED THE COPIES OF BIDHNNAGAR MUNICIPALITY, PROPERTY TAX-NOTICE FOR CU RRENT DEMAND AND ARREAR DEMAND, NOTICE- KHAS(HINDI), KOLKATA CITY DOT.COM-DETERMINATION OF ANNUAL VALUE AND THE COPY OF PARTNERSHIP DEED. THEREFORE, HE REQUESTED THE BENCH TO SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO ADO PT THE MUNICIPAL VALUATION AS PER MUNICIPAL CORPORAT ION CERTIFICATE ENCLOSED BY THE ASSESSEE. 8. ON THE OTHER HAND, LD. DR APPEARING ON BEHALF OF THE REVENUE HAS RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND FURTHER CONTENDED THAT THE ACTIONS OF THE REVENUE AUTHORITIES MAY BE UPHELD. 9.. AFTER HEARING THE RIVAL SUBMISSIONS, ON CAREF UL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT REGARDING PAYMENT OF INTERE ST TO THE CURRENT ACCOUNT MAINTAINED BY THE FIRM IN RESPECT OF PARTNERS, CHARGING OF INTEREST ON THE CR EDIT BALANCE IS ALLOWABLE EXPENDITURE. THEREFORE, W E SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DEL ETE THE ADDITION OF 6,46,804/- , WHICH WAS WRONGLY DI SALLOWED BY HIM. THIS GROUND OF THE ASSESSEE IS ALLOWED. 9.1 GROUND NOS. 3 & 4 REGARDING HOUSE PROPERTY OF T HE ASSESSEE WHICH IS VACANT, WE ARE OF THE VIEW THAT THE REVENUE WAS JUSTIFIED TO TAKE THE V ALUE AS PER MUNICIPAL VALUATION AND NOT THE FAIR MARKET VALUE OF RENT AS ADOPTED BY THE INSPECTOR. THEREFORE, WE SET ASIDE THIS ISSUE TO THE FILE OF ITA NO.341/KOL/2011-B-CDR 4 THE AO WITH THE DIRECTION TO TAKE THE ANNUAL VALUE OF THE VACANT HOUSE ON THE BASIS OF MUNICIPAL VALUATION. 9.2 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. '4 #1' 5 1% 6 7 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT.15-12- 2011 SD/- SD/- ( , ) ( MAHAVIR SINGH, JUDICIAL MEMBER) ( . !. , '# ) ( C.D. RAO ,ACCOUNTANT MEMBER ) ( (( (!# !# !# !#) )) ) DATE:15-12-2011 '4 / -8 9'8': / COPY OF THE ORDER FORWARDED TO: 1. . *+ / THE APPELLANT : SHRI LAXMI KANT TODI 22 MADAN MO HAN TOLLA STREET, KOL-5. 2 -.*+ / THE RESPONDENT- I.T.O W 35(3) 18 RABINDRA SARAN I, KOL-1. 3. 4% / THE CIT, 4. 4% ( )/ THE CIT(A), 5 . ;6 -% / DR, KOLKATA BENCH 6 . GUARD FILE . .8 -/ TRUE COPY, '4%1/ BY ORDER, < /ASSTT REGISTRAR . *PRADIP* => %?< @