High Court Of Gujarat
CIT vs. Gaekwad & Co.
Sections 22, 28(i)
Asst. Years 1977-78, 1978-79
D.A. Mehta & Ms. H.N. Devani, JJ.
IT Ref. No. 44 of 1994
31st August, 2005
Counsel Appeared
Mrs. M.M. Bhatt, for the Applicant : None, for the Respondent
JUDGMENT
MS. H.N. Devani, J. :
The Tribunal, Ahmedabad Bench ‘A’ has referred the following questions under s. 256(2) of the IT Act, 1961 at the instance of the CIT, Baroda :
“(1) Whether the Tribunal is right in law in directing the ITO to treat the income from property known as ‘Kunj Bungalow’ under the head ‘Business’?
(2) Whether the Tribunal is right in law in deleting the income from property known as ‘Jadav Bungalow’ ?”
The assessment years are 1977-78 and 1978-79. The relevant accounting periods are 31st March, 1977 and 31st March, 1978, respectively. The assessee is a firm. As per cl. 5 of its partnership deed, the assessee-firm was constituted for running a hotel at Baroda or at any other place or places and to run any other business or businesses as may be mutually agreed upon by the partners thereto. The firm consisted of five partners. One of the partners had brought in property known as ‘Kunj Bungalow’ as capital contribution at the market value of Rs. 1,50,000 at the time when the firm was originally formed. For the years under consideration, the AO vide orders dt. 30th Nov., 1979 and 13th March, 1981 respectively, assessed the income from the said property under the head “Income from house property”. The assessee carried the matter in appeal before the AAC claiming that the income from “Kunj Bungalow” should be assessed under the head “Business” instead of “Income from house property”. The AAC, for the reasons stated in his order dt. 15th Dec., 1981 upheld the order of the AO.
The assessee carried the matter in second appeal before the Tribunal. The Tribunal vide its order dt. 7th March, 1988 held that the income from the property “Kunj Bungalow” was liable to be computed under the head “Business” and accordingly directed the AO to treat the income from the said property under the head “Business”. The Tribunal found that the property in question was brought into the partnership business by one of the partners for its exploitation as a business asset. That, right from the inception of the firm, the income from the said property had been assessed under the head “Business” and that the firm had been granted registration/renewal under s. 185 of the Act, despite the fact that in the earlier years the only source of income of the assessee was from exploitation of the said property. The Tribunal further found that merely because in the previous year relevant to asst. yr. 1977-78, the property had been hired out to the S.S.C. Board for few months, was no ground for taking a different view. Heard Mrs. M.M. Bhatt, learned standing counsel for the appellant-Revenue. Mrs. Bhatt has relied upon the findings of the AO and the AAC in support of her submissions. Though served, there is no appearance on behalf of the respondent-assessee. As can be seen, the Tribunal has arrived at the aforesaid findings of facts after appreciation of the evidence on record and has accordingly held that the income from the said property is required to be computed under the head “Business”. Mrs. M.M. Bhatt has not been able to point out anything to dislodge the aforesaid findings arrived at by the Tribunal. In the circumstances, there is no infirmity in the conclusion arrived at by the Tribunal. Accordingly, it is held that the Tribunal was right in law in directing the ITO to treat the income from property known as “Kunj Bungalow” under the head “Business”. Question No. 1 is accordingly answered in the affirmative, i.e., in favour of the assessee and against the Revenue. Insofar as question No. 2 is concerned, Mrs. M.M. Bhatt has fairly pointed out that the controversy raised by the said question stands concluded by a decision dt. 17th Feb., 2005 of this Court in IT Ref. No. 42 of 1993 and IT Ref. No. 335 of 1993 in the assessee’s own case [reported as CIT vs. Gaekwad & Co. (2005) 198 CTR (Guj) 258Ed.]. For the reasons stated in the said order it is held that the Tribunal is right in law in deleting the income from property known as “Jadav Bungalow”. Question No. 2 is accordingly answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly. There shall be no order as to costs.
[Citation : 284 ITR 382]
