ITO 14(2)2, MUMBAI V. PATTANI OPTICAL & CONTACT LENS, CLINIC, MUMBAI

ITA 4335/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7176 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 17-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARANJEET SINGH
• Assessee Lawyers: N V SHETH
• Keywords: Depreciation; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.4334/MUM/2009 ASSESSMENT YEAR: 2005-2006 ITA NO.4335/MUM/2009 ASSESSMENT YEAR: 2006-2007 INCOME TAX OFFICER 14(2)-2 EARNEST HOUSE, 3 RD FLR. NARIMAN POINT, MUMBAI 400 021. VS. M/S. PATTANI OPTICAL & CONTACT LENS CLINIC 425, PATTANI HOUSE, KALBADEVI RD., MUMBAI 400 002. PAN : AAAFP8247L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARANJEET SINGH (D.R.) RESPONDENT BY : SHRI N.V. SHETH (A.R.) O R D E R PER D. MANMOHAN, V.P. THESE TWO APPEALS WERE FILED AT THE INSTANCE OF TH E REVENUE. ISSUE INVOLVED IN BOTH THE APPEALS BEING COMMON, WE PROPO SE TO DISPOSE OF THESE APPEALS BY A COMMON ORDER, FOR THE SAKE OF CONVENIE NCE. 2. THE CASE OF THE ASSESSEE BEFORE THE ASSESSING OF FICER WAS THAT INTEREST PAID TO PARTNERS ON THE CAPITAL, ON THE BASIS OF RE VALUATION OF THE SHOP, IS ALLOWABLE AS DEDUCTION. 3. FACTS IN SHORT ARE THAT THE ASSESSEE, A RETAIL T RADER, IS A PARTNERSHIP FIRM. DURING THE PREVIOUS YEAR RELEVANT TO ASSESS MENT YEAR 2000-01 THE ASSESSEE APPEARS TO HAVE GOT REVALUATION DONE FOR T HE SHOP AT RS.1.43 CRORES AND THE SAME WAS SHOWN IN THE SCHEDULE OF FIXED ASS ET. NO DEPRECIATION WAS CLAIMED ON THE REVALUATION AMOUNT. HOWEVER, B ASED UPON REVALUATION, CREDIT BALANCE OF THE PARTNERS CAPITAL ACCOUNT HAS GONE UP AND INTEREST WAS PAID BY THE FIRM TO THE PARTNERS @12% P.A. AS MUTUA LLY AGREED UPON. ITA NO.4334/MUM/2009 ITA NO.4335/MUM/2009 2 ACCORDING TO THE ASSESSING OFFICER, NOTIONAL VALUE OF THE SHOP HAS TO BE REDUCED FROM THE PARTNERS CAPITAL ACCOUNT IN WHICH EVENT THERE WOULD BE NEGATIVE BALANCE IN THE CAPITAL ACCOUNT OF THE PART NERS AND THUS THE QUESTION OF CLAIMING DEDUCTION TOWARDS INTEREST DOE S NOT ARISE. ACCORDINGLY AMOUNT CLAIMED AS DEDUCTION TOWARDS INTEREST WAS DI SALLOWED BY THE ASSESSING OFFICER. 4. ON AN APPEAL FILED BY THE ASSESSEE, THE LEARNED CIT(A) FOLLOW THE DECISION OF ITAT J BENCH, MUMBAI, FOR THE ASSESSM ENT YEAR 2000-01, TO SET ASIDE THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. LEA RNED COUNSEL PLACED BEFORE US A COPY OF THE ORDER OF THE ITAT J BENCH , MUMBAI IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2000-01 (ITA NO.1027/M UM/04) AND RELIED ON UPON THE FOLLOWING FINDINGS. THE LEARNED CIT(A) HAS CLEARLY RECORDED A FINDING THAT INTEREST HAS BEEN PAID TO THE PARTNERS ON THE CREDIT BALANCE S AS APPEARING IN THE CAPITAL ACCOUNTS, WHICH IS AUTHORI SED BY THE SUPPLEMENTARY PARTNERSHIP DEED DATED 01.04.1998. THE INTEREST IS ALSO WITHIN THE PERMISSIBLE LIMITS OF S ECTION 40(B). THE REVALUATION OF ASSETS WAS FOR BUSINESS PURPOSE AND THERE WAS NO ALLEGATION THAT IT WAS ANY DEVICE FOR TAX AV OIDANCE. THE INTEREST PAID TO THE PARTNERS HAS BEEN ASSESSED IN THEIR CASES. CONSIDERING THE ENTIRE FACTS, WE CONFIRM TH E ORDER OF THE LEARNED CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. SINCE THE VIEW TAKEN BY THE LEARNED CIT( A) IS IN CONSONANCE WITH THE VIEW TAKEN BY THE ITAT J BENCH, MUMBAI (SUPRA ), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE FIRST APPELLAT E AUTHORITY AND HENCE APPEALS FILED BY THE REVENUE ARE HEREBY DISMISSED. PRONOUNCED ACCORDINGLY, ON THIS THE 30 TH MARCH, 2010. SD/- (A.L. GEHLOT) (ACCOUNTANT MEMBER) SD/- (D. MANMOHAN) (VICE PRESIDENT) MUMBAI, DATED 30 TH MARCH, 2010. ITA NO.4334/MUM/2009 ITA NO.4335/MUM/2009 3 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMBA I 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.4334/MUM/2009 ITA NO.4335/MUM/2009 4 DATE INITIALS 1. DRAFT DICTATED ON 25.03.10 PS 2. DRAFT PLACED BEFORE AUTHOR 25.03.10 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/VP 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/V P 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER