BANOO BATLIBOI,MUMBAI vs. ACIT 16(1), MUMBAI

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ITA 3151/MUM/2014Status: DisposedITAT Mumbai27 May 2016AY 2007-084 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to claim statutory deductions in relation to the rental income included in her share of partnership profit. The AO was directed to recompute the deduction and allow the claim.

What were the facts?

The assessee, a partner in a firm, claimed her share of partnership profit as exempt under Section 10(2A). The AO added back Rs. 48,000, representing a difference in rental income due to statutory deductions allowed to the firm. The CIT(A) upheld this addition.

What were the issues?

Whether statutory deductions for house property income should be allowed in the hands of a partner on her share of partnership profit, and if such deductions are covered under Section 10(2A).

Which sections of the Income-tax Act were involved?

Section 10(2A),Section 24

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI

Before: Shri Mahavir Singh & Shri Rajesh Kumar

For Respondent: Shri G N Maknana
Hearing: 24.05.2016Pronounced: 27.05.2016

O R D E R Per Mahavir Singh, Judicial Member

This appeal by assessee is arising out of the order of the CIT(A) – I, Mumbai, in appeal No.CIT(A)-I/IT-16(234)/2011-12 dated 11.02.2014. The assessment was framed by the ACIT 16(1), Mumbai, for A.Y. 2007-08 vide his order dated 11.02.2014 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2.

The only issue in this appeal of the assessee is against the order of the CIT(A) in confirming the addition made by the AO being partnership profit claimed as exempt u/s. 10(2A) of the Act amounting to Rs.48,000/- being difference arising on account of rental income.

3.

We have heard the learned senior DR and have gone through the facts and circumstances of the case. Briefly stated the facts of the case are that the assessee is a proprietor of M/s. RJB Hands On and M/s. J R Co., which are engaged in the business of interior designing and trading in materials required for interior designing. The assessee is also partner in a partnership firm Jamshedji Ratanji & Co., where the assessee’s share of profit in the firm is 40%. The said firm, inter alia, has income from house property. During the year under consideration, the assessee filed return of income declaring total income of Rs.72,62,329/- and in addition, she had earned exempt income of Rs.3,13,970/- being her share in profit in the partnership firm. During the course of assessment proceedings, the AO noted that there is difference in the rental income as appearing in the profit & loss account of the partnership concern as compared to the rental income declared from house property assessed in the hands of the firm. The assessee explained before the AO that the difference is on account of deduction allowed u/s. 24 of the Act. The AO ignored the submissions and made addition being differential amount of Rs.48,000/.

Aggrieved, the assessee preferred appeal before the CIT(A), who also confirmed the action of the AO observing as under:

“3.2 I have considered the facts and circumstances of the case, submissions and arguments of the appellant and findings of the A.O. in the assessment order. There is no dispute on the verified amount of share of the appellant in the total income of the firm as recorded by the A.O. in the assessment order. The explanation given by appellant as noted above referring to computation of total income of the firm is contradictory to the records namely Return of income of the firm and the verification done by the A.O. It is also not relevant in respect of the share of the appellant in the income of the firm as discussed by the A.O. In fact the submission of the appellant is totally delinked to the Ground of appeal stating that such amount is neither received nor receivable in the form of salary or interest. The learned AR has argued for 30% statutory deduction allowable under the computation provisions of income from house property, separately in the hands of appellant against the rental income included in the Return of the partnership firm at Rs.4 lakhs. Once the rental income is computed and included in the Return of partnership firm, same cannot be recomputed in the hands of appellant resulting in double statutory deduction of 30% as claimed by the appellant. In any case, if there was any apparent mistake in calculation of the house property in the hands of the firm, same could have been explained in the assessment of the firm, followed by any corrections in the income of the appellant. The remedy is yet available to the appellant in that manner.” Aggrieved, now the assessee is in second round of appeal before the Tribunal.

4.

We have heard the learned senior DR and gone through the facts and circumstances of the case. We find that the only dispute is regarding computation of statutory deduction allowable under the computation provisions of income from house property and whether it forms part of claim of deduction u/s. 10(2A) of the Act i.e. share of profit from partnership firm. We are of the view that ‘yes’, the assessee is entitled for claim of deduction and accordingly, we direct the AO to recomputed the deduction and allow the claim of the assessee.

5.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on this day of 27th May 2016.

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