RAM B MANSUKHANI,MUMBAI vs. ASST CIT 17()2), MUMBAI

The only common issue in this appeal of assessee is against the order of CIT(A) in assessing the notional income on the basis of ALV of commercial property used by assessee’s firm where he is partner. For this assessee has raised following ground No.1 -

Briefly stated facts are that assessee is an individual, who is a partner in the firm M/s Eden Garden Exports. The assessee is the owner of 2 Galas at Wadala (East), which has been used by the firm of the assessee where he is partner. According to the AO, the assessee is not disclosing any rent from his firm and accordingly, in view of the section 22 of the Act a notional rent i.e. ALV of the property should be determined. Accordingly, the AO determine the notional income at prevailing market rate at Rs.11,83,140/-. Aggrieved, assessee preferred the appeal before CIT(A) and CIT(A) relying on the decision of the Hon’ble Kolkata High Court in the case of Prodip Kumar Bothra v. CIT (2012) 205 Taxman 19 (Calcutta) confirmed the action of the AO in assessing notional income being ALV of the property from firm in the hands of the partner. Aggrieved, now assessee is in second appeal before the Tribunal.

We have heard the rival contentions and gone through the facts and circumstances of the case. The only disputed point is whether the ALV of the commercial property, which is occupied by the firm where the owner is partner, ALV can be assessed or not in term of section 22 of the Act ? In similar circumstances Hon’ble Delhi High Court in the case of CIT(A) v. H. S. Singhal & Sons, (2002) 253 ITR 653 (Del) has held that where a portion of house property owned by the assessee was used by the firm for its business, wherein the assessee was a partner, the notional income being ALV in term of section 22 of the Act in respect of such portion used by the firm has been held not to be assessed in the hands of the assessee. Similarly, Hon’ble Madras High Court in the case of CIT v. K. M. Jagannathan (1989) 180 ITR 191 (Mad) following the decision of Hon’ble Gujarat High Court in the case of Rasiklal Balabhai’s case 119 ITR 303 (Guj) has taken a view that where a firm is in carrying on business in a building owned by one of the partners, the owner partner is entitled to exemption under section 22 of the Act in respect to computation of ALV. We find that the CIT(A) has simply relied on the Hon’ble Calcutta High Court in the case of Prodip Kumar Bothra v. CIT. (supra). As there are diversent views among the High Courts on this issue, hence, this is to be resolved by applying the ratio decided by Hon'ble Supreme Court in the case of CIT Vs. M/s Vegetables Products Ltd. (1973)88 ITR 192 (SC), wherein Hon’ble Supreme Court held as under: - Page 2 of 4

In view of the above proportion of law laid down by Hon'ble Delhi High Court and Hon’ble Madras Court (supra), we are of the view that no notional ALV can be assessed where a portion of commercial property owned by assessee was used by the firm for its business, wherein, the assessee was a partner. Accordingly, we allow this issue of assessee’s appeal and set aside the orders of the orders of the lower authorities. Appeal of the assessee is allowed.

In the result, the appeal of assessee is allowed.