Sri. Paul Noel Rodriques, Mangalore V. ACIT, Mangalore

ITA 646/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8499 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 22-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V CHANDRASHEKAR
• Section: 80C; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.646/BANG/2009 ASSESSMENT YEAR : 2006-07 SRI PAUL NOEL RODRIQUES, NO.15-3-695/7, CARMEL CORNER, SHIVA BAGH, NEW ROAD, KADRI, MANGALORE. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, MANGALORE. : RESPONDENT APPELLANT BY : SHRI V. CHANDRASHEKAR, ADVOCATE RESPONDENT BY : SMT. V.S. SREELEKHA, ADDL.CIT O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE CIT(APPEALS) ORDER DATED 20.3.2009. THE ASSESSMENT YEAR CONCERNE D IS 2006-07. 2. THE ASSESSEE IS AN INDIVIDUAL, DERIVING INCOME F ROM BUSINESS AND INCOME FROM OTHER SOURCES. FOR THE CONCERNED ASSES SMENT YEAR, HE FILED THE RETURN DECLARING INCOME OF RS.1,36,390. THE RE TURN WAS PROCESSED U/S. ITA NO.646/BANG/09 PAGE 2 OF 5 143(1) AND LATER THE ASSESSMENT WAS TAKEN UP FOR SC RUTINY BY ISSUANCE OF NOTICE U/S. 142(1) AND 143(2) OF THE ACT. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE WAS A PARTNER IN THE FIRM, M/S. UNITED CRE DITS AND INVESTMENTS, MANGALORE, ENGAGED IN THE BUSINESS OF MONEY LENDING AND ASSESSEE HAD RETIRED FROM THE SAID PARTNERSHIP ON 20.7.94. THE SAID FIRM WAS RECONSTITUTED AND CONTINUED BUSINESS WITH OTHER EXI STING PARTNERS. THE STATEMENT OF AFFAIRS OF THE ASSESSEE WAS SHOWING A LIABILITY OF RS.1,12,854 TOWARDS THE FIRM. THE AO AFTER PERUSING THE CLAUSE S IN RELEASE AND RECONSTITUTED DEED OF PARTNERSHIP DATED 20.7.94 (IN RESPECT OF M/S. UNITED CREDITS AND INVESTMENTS) WAS OF THE VIEW THAT ALL T HE DUES OF THE ASSESSEE HAD BEEN SETTLED AND THE ASSESSEE WAS NO MORE A DEB TOR TO THE FIRM. THEREFORE, HE CONCLUDED THAT LIABILITY SHOWN AGAINS T NAME OF M/S. UNITED CREDITS AND INVESTMENTS AT RS.1,12,854 IS ASSESSEE S INCOME AND SAME WAS ADDED TO THE TOTAL INCOME RETURNED. 4. THE AO ALSO DISALLOWED CLAIM OF DEDUCTION U/S. 8 0C AMOUNTING TO RS.14,000 FOR THE REASON, THE AMOUNT WAS NOT PAID F OR TUITION FEES, BUT WAS PAID TOWARDS ADMISSION FEES, SPECIAL FEES ETC. MOR E OVER, THE AO WAS OF THE VIEW, THE INSTITUTION IS NOT AN APPROVED INSTIT UTION AND THE FEES PAID IS NOT FOR FULL TIME EDUCATION. FOR THESE REASONS, CL AIM OF RS.14,000 U/S. 80C WAS DISALLOWED AND WAS ADDED TO TOTAL INCOME. 5. AGGRIEVED, ON APPEAL BEFORE THE CIT(APPEALS) IT WAS CONTENDED BY THE ASSESSEE, THAT LIABILITY APPEARING IN THE NAME OF M/S. UNITED CREDITS AND INVESTMENTS TO THE EXTENT OF RS.1,12,854 IS NOT HING BUT ACCUMULATED SHARE OF LOSS IN THE BOOKS OF ACCOUNTS OF THE FIRM AND REFLECTED IN THE ITA NO.646/BANG/09 PAGE 3 OF 5 ASSESSEES STATEMENT OF ACCOUNTS. IT WAS SUBMITTED THAT IT WAS NOT ANY BORROWING OR OTHER DEALINGS WITH THE FIRM. THEREFO RE, IT WAS CONTENDED, THE AOS TREATMENT OF THE SAME AS A NON-EXISTING LIABIL ITY, WHICH IS NOTHING BUT A CAPITAL LOSS AND TREATING THE SAME AS INCOME IS WRONG. 6. THE CIT(APPEALS) DISMISSED THE APPEAL OF THE ASS ESSEE BY OBSERVING AS FOLLOWS: 6. I FIND NO STRENGTH IN THE ABOVE ARGUMENT OF THE AUTHORISED REPRESENTATIVE. THE RECONSTITUTION DEED SPECIFICAL LY MENTIONS THAT THE APPELLANT HAS BEEN RELEASED AND MADE FREE OF THE AMOUNT REPRESENTING THE APPELLANTS SHARE OF LOSS ARISING O UT OF BUSINESS IN THE FIRM. IT SEEMS TO ME THE FIRM AS WELL AS THE A PPELLANT ARE INTENDING TO GET THE BENEFIT IN THEIR OWN WAY OF TH E SAME AMOUNT WHICH IS AGAINST THE PRINCIPLES OF TAXATION. THE B ENEFIT HAS ALREADY BEEN GIVEN TO THE FIRM AND THEREFORE THE NA TURAL COROLLARY IS TO COLLECT TAX FROM THE APPELLANT FROM THE SAME INCOME. 7. WITH REFERENCE TO CLAIM OF DEDUCTION U/S. 80C AM OUNTING TO RS.14,000, WE FIND THERE IS NO DELIBERATION OF THE ISSUE BY CIT(APPEALS). 8. THE LD. AR APART FROM REITERATING THE SUBMISSION S MADE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE AOS BASIS FO R HOLDING THAT THERE IS NO LIABILITY TOWARDS THE FIRM, M/S. UNITED CREDITS AND INVESTMENTS, IS AFTER PERUSAL OF THE CLAUSES IN THE RELEASE AND RECONSTIT UTED DEED OF PARTNERSHIP DATED 20.7.94. HE SUBMITTED, IF AT ALL IT IS TO BE TREATED AS NON- EXISTING LIABILITY, THE SAME HAS TO BE CONSIDERED F OR THE ASSESSMENT YEAR 1995-96 WHEN THE RELEASE AND RECONSTITUTED DEED OF PARTNERSHIP DATED 20.7.94 WAS DRAWN UP. ITA NO.646/BANG/09 PAGE 4 OF 5 9. THE LD. DR, ON THE OTHER HAND, SUPPORTING THE FI NDINGS/CONCLUSIONS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE AO BY REFERRING TO THE CLAUSES IN THE RELEASE AND RECONSTITUTED DEED OF PARTNERSHIP DATED 20.7.94 HAD CONCLUDED THAT ALL DUES OF THE ASSESSEE TOWARDS THE FIRM, M/S. UNITED CREDITS AND INVESTMENTS, WAS SETTLED. THEREFORE, THE ASSESSEE IS NOT A DEBTOR TO THE FIRM. AS RIGHTLY POINTED OUT BY THE LD. AR, THE DE BT HAD BECOME NON- EXISTENT IN THE YEAR 1994 AND SAME OUGHT TO HAVE BE EN ADDED IN THE A.Y. 1995-96. MORE OVER, WE FIND THE LIABILITY APPEARIN G IN THE NAME OF M/S. UNITED CREDITS AND INVESTMENTS IS AN ACCUMULATED SH ARE OF LOSS IN THE BOOKS OF THE FIRM AND REFLECTED IN THE ASSESSEES S TATEMENT OF ACCOUNTS. IT IS NOTHING BUT A CAPITAL LOSS AND THE QUESTION OF T REATING THE SAME AS INCOME DOES NOT ARISE. IN THESE CIRCUMSTANCES, WE HOLD THAT AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING A SUM OF RS.1 ,12,854 AS A LIABILITY WHICH IS NOT IN EXISTENCE AND ADDING THE SAME TO THE INCO ME DECLARED BY THE ASSESSEE. 11. AS REGARDS THE CLAIM OF DEDUCTION OF RS.14,000 U/S. 80C, WE FIND THE ASSESSEE IS NOT ENTITLED TO CLAIM THE DEDUCTION SIN CE THE AMOUNTS ARE NOT PAID AS TUITION FEES, BUT REPRESENT ADMISSION FEES, SPECIAL FEES, ETC. MORE OVER, THE FINDING OF THE AO THAT INSTITUTION IS NOT AN APPROVED INSTITUTION AND THE FEES PAID IS NOT FOR FULL TIME EDUCATION HAS NO T BEEN DISPELLED BY THE LD. AR BEFORE US. HENCE, THE DISALLOWANCE OF DEDUCTION U/S. 80C IS CONFIRMED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ITA NO.646/BANG/09 PAGE 5 OF 5 PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF MARCH, 2010. SD/- SD/- ( DR. O.K. NARAYANAN ) ( GEORGE GEORGE K. ) VICE PRESIDENT JUDICIAL MEMBER BANGALORE, DATED, THE 17 TH MARCH, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.