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2010 (8) TMI 1060 - KARNATAKA HIGH COURT

2010 (8) TMI 1060 - KARNATAKA HIGH COURT - TMI - ITA Nos. 308/2007 c/w 304/2007, 305/2007, 306/2007, 307/2007, & ITA No. 308/2007 - Dated:- 16-8-2010 - N. Kumar J. For the Appellants : Sri M. V. Seshachala Adv. For the Respondent : Sri. M. V. Javali Adv. JUDGMENT As these five appeals arise out of the very same assessment order as well as the orders passed by the first appellate authority and second appellate authority they are taken up for consideration together and disposed of by this Common o .....

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Rajagopal Rao carried on hotel business at the lease premises along with his two daughters Smt. Anitha and Smt. Latha. Constituting a partnership under the name and style of M/s Hotel Shyam Prakash. The said partnership came into existence on 1/2/1978 but unfortunately the partnership deed is not produced in this case. Subsequently, the said partnership was reconstituted on 20/08/1982 admitting other two daughters as partners. However, it was reconstituted by admitting Sri Mohan Virvani, as a p .....

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ri K. Rajagopal Rao and his tow dasughters. The said valuation was specifically made for the purpose of admitting Sri. Mohan Virvani into the partnership deed. It is also on record that under the terms of the lease deed, the lessee Sri K. Rajagopal Rao was required to put up additional building by investing not less than ₹ 6 Lakhs as is clear from the terms of the lease deed. After taking property on lease, in the existing structure. Sri Rajagopal Rao was carrying on hotel business. The ma .....

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t with one M/s Sri. Durga Enterprises, the latter was given license to run the business of boarding and restaurant under the name and style M/s Swathi Restaurant in the same property. The partnership firm put up an additional construction and a sum ₹ 10000/- was paid as lease deposit at the Wakf, Which is reflected in the books of the partnership firm. The interest free refundable rent deposit is shown as an asset of the firm and the lease rental is shown as expensed of the firm in the yea .....

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e treated as an asset of the firm for the years 1978-79 and the balance sheet as on 31/03/1979 the building project account in schedule shown the account balance for additional construction garden improvement etc… Further balance for the year ended 31/3/1981. 31/3/1983 etc. show that the firm had built in this leased promises and that it had claimed deprecation and the same has been accepted and allowed by the revenue authorities over the years. All this shows that it was the firm which e .....

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heque drawn in favour M/s Hotel Shyam Prakash the partnership firm and Sri. K Rajagopal. The balance sheet of the firm M/s Hotel Shyamprakash as on 31/3/1981 reflects the interest free deposit received from Swathi Restaurant as its liability under unsecured loan. Similarly, the trading and prifit and loss account reflects the rent received from Swathi Restaurant as income of the assessee firm. These entries found in the books of account of M/s Hotel Shyam Prakash. A registered partnership firm c .....

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refore, in the absence of any written lease deed licensing the property by Sri K. Rajagopal Rao to M/s Hotel Shyam Prakash, as viewed, no sub-lease has come into existence. Secondly, it is only in the year 1984 in the partnership deed dated 29/3/1984 for the first time, the leasehold rights in shown as contribution of Sri K Rajagopal Rao, in the capacity of managing partner of M/s Hotel Shyam Prakash and as the same is not reflected earlier in the said period, he was not prepared to believe that .....

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d rights to all his legal heirs and the With on which reliance is placed was held to be sham transactions and therefore, it was held that it is not a case of consideration paid to a partner at the time of retirement of the partnership firm, over with no tax is payable. 5. From the aforesaid facts, it is amply clear that Sri K. Rajagopal Rao took the land and building under a registered sale deed for a lease period of 35 years. After taking the building on lease, he started hotel business, Origin .....

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es for running a restaurant under the name and style M/s Swathi Restaurant it was styled as lease and license. The advance paid by them is reflected in the books of accounts of the partnership firm. The rent is acknowledged in the books of the partnership firm. It is under these circumstances the appellate Tribunal held that is not for the first time the lease hold rights were treated as a partnership asset in the year 1994-95, as sought to be made out by the authorities. It was shown for the fi .....

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