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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT (A)-32, Mumbai in appeal No. CIT (A)-32/IT-179/AC 17(2)/2012-13 dated 20-04-2015. The Assessment was framed by ACIT Circle-17(2), Mumbai for the A.Y. 2010-11 vide order dated 20-12-2012 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
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 -
“ The learned AC has wrongly added Rs. 11,83,140/- as notional income of 2 galas, without considering the fact in the both the galas (commercial property) A’ is having a share along with other co-owners are being used for the purposes of A’s personal business and for business by the firm where the A is a partner”
Mr. Ram B. Mansukhani (2010-11)
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
Mr. Ram B. Mansukhani (2010-11)
“At any rate, the provision in question is capable of more than one reasonable interpretation. Two high courts namely Calcutta and Mysore have taken the view ‘that the expression the tax” in s. 271(1) (a) (i) refers to “the tax, if any, payable” (by the assessee) mentioned in the earlier part-of the section. It is true that Lahore and Delhi High Courts have taken a different view. But the view taken by the Calcutta and Mysore High Court cannot be said to be untenable view. Hence, particularly in view of the fact that we are interpreting, not merely a taxing provision but a penalty provision as well, the interpretation placed by the Calcutta and Mysore High Courts cannot be rejected.. Further as seen earlier, the consequences of accepting the interpretation placed by the Revenue may lead to harsh results. For the reasons mentioned above, this appeal is dismissed with, costs.”
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.
Order pronounced in the open court on 15-02-2017.