Where retiring partners were paid sums on reconstitution of assessee-partnership firm in proportion of their share

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Whether standard deduction @ 30% of rental income can be allowed while computing income of a trust/institution claiming exemption u/s 11

Nandlal Tolani Charitable Trust Vs ITO

Whether standard deduction @ 30% of rental income can be allowed while computing income of a trust/institution claiming exemption u/s 11..

HELD NO BY ITAT

– Assessee’s appeal dismissed : MUMBAI ITAT

Whether standard deduction on rental income can be allowed while computing income of a trust/institution claiming exemption u/s 11 – NO : ITAT

++ as far as claim u/s 24(a) of the Act is concerned, in respect of rental income derived from property and consequent deduction on actual expenditure incurred towards repairs and maintenance of the property. The AR for the assessee, although admitted the fact that the issue has been decided against the assessee by the Tribunal for earlier years, argued that principles settled by Bombay High Court in the case of Vodafone India Services Ltd vs CIT 368 ITR 531 (Bom) which is binding on department as law of the land wherein it is held that income chargeable to tax has to be computed under the provisions of the Act, and therefore, income from property has to be computed allowing deduction u/s 24(a) of the Act, in the case of all assessee’s including charitable trust. The AR further submitted that the Bombay High Court in the case of DIT (Exemption) vs Jasabai Foundation – 2015-TIOL-941-HC-MUM-IT held that income which is not included in total income as per the provisions of the Act, cannot be included in taxable income of the trust entitled to exemption of certain income u/s 10 and section 11 of the Act and, therefore, 30% of income excluded from income from property u/s 24(a) of the Act, cannot be charged to tax in the case of charitable trust for computing taxable income;

++ deductibility of deduction u/s 24(a) against rental income in case of a trust/institution claiming benefit of exemption u/s 11 is a recurring issue in assessee’s case for earlier period. The co-ordinate bench of ITAT, Mumbai Bench “B” in assessee’s own case for AY 2005-06 in ITA No.200/Mum/2011had considered similar issue in the light of provisions of section 24(a) and also section 11 of the Income-tax Act, 1961, and held that income of a trust/institution shall be computed under normal commercial principles without resorting to computation mechanism as provided under respective head of income while determining income available for application u/s 11 of the Act. The relevant observations of the Tribunal are as under” Finally, the reliance by the assessee on the decision in the case of IAC, Mumbai vs. Saurashtra Trust – 2007-TIOL-61-ITAT-MUM-SB is, under the circumstances, misplaced. The said decision is, firstly, sansany reference to any precedents; nay, even without a discussion of the law in the matter. This aspect would in fact become clear in view of the questions referred to and answered by tribunal. As a reading of its order would show (refer para 1), are not directly connected with the issue before us. decision, thus, would be of no assistance to the assessee, w/jffi fve having even otherwise decided the matter following the precedentsin the matter, so that the decision in the case of of Baroda v. H.C Shrivastava [2002] 256 TTR 385 (Bom), advocating judicial discipline with reference to the decision by the apex court in CCE v. Dunlop India Ltd.- 2002-TIOL-156-SC-CX-LB, only supports the same. The decision in the case of Ameen Education Society v. DIT – 2012-TIOL-613-ITAT-BANG is again only in respect of the specific provision of sec. 11(1 A) of the Act, i.e., qua capital gain, and, thus, not applicable. It was clarified that our decision is based on and represents the general position of law, so that it would be subject to the specific provisions of the Act, giving example of ss. 11(4) and 11(4A). It may be relevant to state that the decision by the apex court in Harprasad & Co. (P.) Ltd. (supra), referred to earlier, is also in respect of capital gains.” In this view of the matter and consistent with the view taken by the co-ordinate bench, we are of the considered view that there is no error in the orders of authorities below and hence, we are inclined to uphold the findings of CIT(A) and reject ground taken by the assessee.

ITA No.106/Mum/2016

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