TMI Blog1998 (6) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... partners of the assessee-firm. He also noted that Jasbir Singh and Niranjan Kumar are trustees of the trust and Jasbir Singh is partner and Niranjan Kumar is son of a partner of the assessee-firm. The Gulab Beneficiary Trust was in fact formed on16th Oct., 1981at a time when the construction of the property was nearing completion. According to the AO the trust was formed simply to divert the income of the firm and to reduce its tax liability. The AO further noted that as per cl. (5) of the rent agreement, the tenant trust was authorised to assign, transfer, sublet, underlet or part with the possession of the rented property or any part thereof in favour of any person or persons and rent agreement shall be deemed as consent of the landlord assessee-firm in writing in support thereof. This also strengthened the AO s belief that the trust was formed only to divert the rental income. The AO further noted that during the year the trust received rental income of Rs. 2,68,800 whereas it paid rent to the assessee-firm only of Rs. 48,000. He also noted that immediately on receiving the property in question on rent the trust sublet the property in the financial year 1982-83 on a total rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the trust was formed in October, 1981 and the property was given on rent to the trust by the assessee-firm on1st May, 1982on monthly rent of Rs. 4,000 as per lease agreement executed. The trust subsequently sublet the property to various tenants and had been receiving the income from the property and the same has also been disclosed in the return filed for various assessment years. The Department has accepted the genuineness of the trust and assessed the income declared from subletting the said property. The assessment of the rent as received by the trust in the hands of the assessee-firm amounts to double taxation. He has also pointed out that assessments in the case of trust have been made on substantive basis and not on protective basis. The Department has also not taken any remedial action in the case of the trust. The learned counsel, therefore, pleaded that the rental income as received by the trust having already been assessed in the hands of the trust on substantive basis the assessment of the same income in the hands of the firm is not justified. 2.3 The learned counsel has further pointed out that the property was let out to the trust on annual rent of Rs. 48,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as borne out from the records are that Gulab Beneficiary Trust was formed by Ishwar Chand with the corpus of Rs. 5,000 as per trustdeed, dt.16th Oct., 1981. The trust received the possession of the said properties on lease from the assessee on monthly rent of Rs. 4,000 w.e.f.1st May, 1982as per lease agreement executed on3rd May, 1982. The assessee-firm has been receiving rent for the property from the trust @ Rs. 4,000 p.m. up to the current assessment year and the same has been disclosed and assessed by the Revenue for the asst. yr. 1983-84 to 1988-89. The trust further sublet the properties to various tenants and received rent as per details below: Asst. yr. Rent received 1983-84 1,02,900 1984-85 1,60,800 1985-86 1,76,700 1986-87 1,73,800 1987-88 2,24,700 1988-89 2,85,800 1989-90 2,26,300 Necessary statement of rental income as given by the trust is placed at pp. 40 to 46 of the paper-book. The trust has declared such rental income and the same along with certain other income stand assessed in the hands of the trust by the Department for various ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and which is as per settled law is not permitted unless fresh material is brought on record to prove otherwise. We, however, note that the Revenue has not brought on record any evidence during the course of present assessment proceedings to prove that the trust was not genuine or bogus and the arrangement made between the assessee-firm and the trust was a sham and it was done with the sole motive of deduction in the tax liability. The AO has rather made no enquiry or investigation from the settlor of the trust, witnesses of the trust deed, trustees, nature and size of the property involved, tenants, etc. and there being no enquiry and no fresh material brought on record, the present action of the Revenue to assess the rent received by the trust in the hands of the assessee-firm is not based on any solid material evidence but it is the result of change of opinion. Though the principle of res judicata does not apply to the tax matters, but the decision taken by the Revenue in earlier years cannot lightly be altered unless there is sufficient material to support and such material, as we find from the records, is lacking. 2.9 We now consider and discuss certain decisions cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made as under: . Rs. . (a) 4,000 Out of travelling expenses; (b) 4,000 Out of scooter maintenance expenses (c) 6,836 Out of machinery repairs expenses (d) 10,000 Out of freight expenses (e) 8,075 Under s. 43B being central sales-tax paid before the due date of filing the return and evidence of deposit produced during the course of assessment proceedings. (f) 5,000 Out of telephone expenses. (g) 14,555 Out of depreciation claimed. 3.1 We find that the assessee-firm is running an oil mill involving the processes of extracting oil from oil seeds. The assessee in the manufacturing and P L a/c claimed expenses on various counts and the AO made disallowance therefrom under each head and the CIT(A) in certain cases upheld the disallowances made or reduced the same on due consideration of the facts involved. 3.2 We have heard the learned representatives of the assessee as well as the Revenue and also considered the facts relating to each disallowance. On the consideration of the facts and material available we s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, made a disallowance of Rs. 40,000. The CIT(A) reduced such disallowance to Rs. 10,000. 4.2 We have heard the learned representative of the Revenue as well as the assessee and also considered the facts involved. We find that the AO has not brought on record any material to justify the disallowance of Rs. 40,000. Disallowance made was rather on estimate basis. The CIT(A) appreciating the facts, nature of the expenses incurred, reduced the disallowance to Rs. 10,000. We also note that no additional evidence was adduced before us influencing his decision. Considering all the facts and circumstances involved the disallowance sustained by the CIT(A) at Rs. 10,000 is considered to be justified and calls for no interference. 5. The second ground raised by the Revenue is that the CIT(A) erred in allowing interest of Rs. 67,800 which was debited to the P L a/c and credited to Gulab Beneficiary Trust. The AO noted that the assessee-firm received loan from Gulab Beneficiary Trust out of the rental income received. Having referred to the finding given with respect to the rental income, the AO held the view that the said loan amount in fact belonged to the assessee-firm and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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