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2016 (10) TMI 9 - ITAT MUMBAI

2016 (10) TMI 9 - ITAT MUMBAI - TM - Notional rent added as income from house property u/s 22 - Held that:- The assessee is a Private Limited Company and is a partner in a Partnership Firm which carries on business from the same premises which is owned by the assessee. In such circumstances, whether rent from house property is to be assessed u/s 22 of the Act as notional rent or not, the issue has been answered by the Hon‟ble Bombay High Court in the case of Shantikumar Narottam Morarji v. .....

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L MEMBER For The Appellant : Shri Yogesh Thar, Shri Faril Bhatt, ARs For The Respondent : Shri Durga Dutt, Sr. DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of order of CIT (A)-9, Mumbai in Appeal No. CIT (A)-9/5(1) (3)/603/2013-14 dated 10-10-2014. Assessment was framed by ITO-5(1) (3), Mumbai for the assessment year 2011-12 u/s 143(3) of the Income Tax Act, 1961 (hereinafter the Act‟) vide his order dated 11th February, 2014. 2. First two issues in this appea .....

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onal rent added as income from house property u/s 22 of the Act amounting to ₹ 38,48,380/-. 4. Brief facts leading to the above issue are that the assessee Company own six units viz. Unit No.1208, 1203, 1207, 1207A, 1601 and 1601A in the building Opera House . The assessee claimed before the AO that it is a partner in one Partnership Firm. This Partnership Firm is carrying on business, but no rent is charged by the Assessee Company in respect to these units. According to the AO, the assess .....

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the assessee is in second appeal before the Tribunal. 5. I have heard the rival contentions and gone through the facts and circumstances of the case. Before me, the learned Counsel for the assessee first of all drew my attention to the assessee‟s paper book page 95 wherein a copy of a letter was filed before the Tribunal withdrawing the appeal on the ground that the past unabsorbed losses are sufficient to set off income even after estimation of notional income and as such practically, th .....

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essee Company, there is no need to estimate notional rent. For this argument he took me through the case law of the Hon‟ble Gujarat High Court in the case of CIT Vs Rasiklal Balabhai (1979) 119 ITR 303 (Guj.), wherein the decision of the Hon‟ble Bombay High Court in the case of Shantikumar Narottam Morarji Vs CIT (1955) 27 ITR 69 (Bom) was considered and the same was answered as under:- 7. Broadly, two points would arise for answering the question referred to us, namely, (i) is the a .....

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istered firm is entitled to claim deduction against the share of the profits included in his total income when the share has been ascertained on the assessment of the firm with regard to its profits. The Division Bench consisting of Chagla C.J. and Tendolkar J., while answering the question in favour of the assessee, addressed itself to the question as to what exactly the rights of a partner in a registered firm are with regard to deductions under s. 10(2) of the Indian I. T. Act, 1922. The reve .....

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ndividual. Although a firm is an assessable entity under the Indian Income-tax Act a firm is not a legal entity. In the eye of the law, a firm is a compendious expression used to indicate that several persons constituting that firm are carrying on a business. But that compendious expression cannot give to the firm a legal entity or a legal existence. In law it is only the partners who exist and who carry on the business. It is equally true that looking to the definition of 'partnership' .....

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are derived by the assessee from the business carried on by him, those profits and gains must be brought to tax only under the head, viz., the head falling under section 10(1) which is the head of business." 8. Before a Division Bench of this court, consisting of K. T. Desai C.J. and P. N. Bhagwati J. (as they then were), a question arose in Sitaram Motiram Jain v. CIT [1961] 43 ITR 405 (Guj), whether an assessee is entitled to set off his loss in the individual business against the share .....

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by all or any of them acting for all. When a firm carries on business, it is a business carried on by the partners of that firm. One partner is the agent of the other in carrying on that business. When a partnership carries on a business each partner thereof carried on that business. The language used in section 24(2) requires that the business should be continued to be carried on by the individual concerned. The requirements of that section are satisfied when a partner carries on the same busi .....

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carrying on his business when he carries on that business through partnership. The answer is obviously in the affirmative as has been held by the two decisions above. The learned Government Pleader for the revenue wanted to distinguish these two decisions on the ground that they are pertaining to those assessment years before 1956-57 when a registered firm was not a different entity in the sense that it was not liable to pay firm tax since it was in 1956 that the Indian I. T. Act, 1922, was amen .....

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ian I. T. Act, 1922, in its application to a registered firm and arose out of the assessment of a registered firm for the assessment year 1961-62. The question was whether exemption under s. 15C was available both to the registered firm and to the partners. In that perspective the Division Bench of this court, consisting of J. M. Shelat C.J. and P. N. Bhagwati J. (as they then were), was faced with a problem whether the benefit under s. 15C(1) is also available to a partner in a firm which engag .....

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irm manufactures or produces articles in the industrial undertaking, every partner of the registered firm does so and he would, therefore, be an assessee within the meaning of section 15C, sub-section (1), and would be entitled to claim that no tax is payable by him in respect of his share of the exempted profits in his individual assessment." 10. We, therefore, feel no hesitation in agreeing with the learned advocate for the assessee that the assessee must be held to be carrying on busines .....

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sessee Company in which the assessee is a partner, income cannot be assessed u/s 22 of the Act on notional basis. The learned Counsel for the assessee drew my attention to Para 5.1 of the Tribunal Order which reads as under:- The Hon ble High Court of Allahabad in case of Mustafa Khan (supra) and Hon ble High Court of Gujarat in the case of Rasiklal Balabhai (supra) have taken the view that the property used by the partnership firm in which the assessee is a partner has to be treated as the user .....

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