Monday 23 December 2013

Whether when assessee has declared income from partnership firm he is right in pleading for exclusion of income from property occupied by firm - NO: ITAT

THE issue before the Tribunal is - Whether when the assessee has declared the income from the partnership firm he is right in pleading for exclusion of the income from the property occupied by the firm. And the verdict goes in favour of the Revenue.
Facts of the case


The assessee files salary income stated to have been received from five partnership firms. The assessee also disclosed income as a financial advisor for investment in mutual fund. The assessee also received commission income. As per the AO, the assessee had not shown any “notional income” from the residential flat. According to the AO, the assessee was required to show rental income from the said flat in terms of Section 22. The AO held that the assessee was unable to prove that flat was indeed used for the business purpose of the assessee. The CIT(A) held that the assessee had not established that the property was used by the staff member, therefore, action of the AO was confirmed by rejecting the ground of the assessee.

Having heard the parties, the Tribunal held that,

++ divergent views have been expressed by the Courts. What is to be charged u/s.22 is the annual value of the property, irrespective of the fact whether or not any income is either actually received or accrued to the assessee. Since, the High Courts have expressed different views, therefore, we have to apply a thumb rule in respect of the applicability of the precedents cited. A thumb rule is that a latest decision of the High Court is required to be followed to maintain the judicial discipline. The Calcutta High Court has come to the conclusion that the assessee cannot pray for exclusion of the income of the property occupied by a partnership firm. The Court has expressed the view in favour of the Revenue and held that by operation of Section 22, income from house property is chargeable in the hands of the assessee. The view expressed by the Revenue Authorities is affirmed;

++ on the issue of commission expenditure of Rs.2,83,479/-, merely an estimate was applied by the AO. It appears that 70% of the expenditure was disallowed by the AO which appeared to be towards higher side in a situation when one estimate is to be pitted against another estimate; than it is reasonable to adopt a fair estimate. Considering the nature of the business of the tax payer, we therefore direct that 50% of the expenditure is to be allowed and, therefore, the balance 50% shall be disallowed.

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