1978 (2) TMI 33 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Appellate Assistant Commissioner to decide the question of status in an appeal on quantum.
2. Whether the amount paid to Laxmi Devi was her share of profit and rightly added back by the Income-tax Officer.

Analysis:

Issue 1:
The Appellate Assistant Commissioner (AAC) initially allowed the assessee's appeal, considering the deeds as a lease agreement and not a genuine partnership. The revenue contended that the AAC exceeded jurisdiction by deciding the question of status. The Tribunal set aside the AAC's order, stating that there was no evidence to support the claim that payments to Laxmi Devi were for rent. Referring to the Supreme Court decision in Pullangode Rubber Produce Co. Ltd. v. State of Kerala, the Tribunal concluded that the payments were Laxmi Devi's share of profits. The High Court noted that the assessee had requested to be treated as an individual before the assessment order and raised additional grounds before the AAC. However, as these letters were not part of the record, the Court could not consider them. The Court held that even if no valid partnership existed, the payments were rightly added back as Laxmi Devi's share of profit.

Issue 2:
The Tribunal found that the amounts paid to Laxmi Devi were not deductible and were correctly added back by the Income-tax Officer. The Court agreed, noting that the payments were not for rent and the assessee failed to provide any other grounds for deduction. Even though the nature of the deed did not establish a landlord-tenant relationship, the Court found that the payments were rightly added back to the assessee's income. Therefore, the Court answered the second part of the question in favor of the revenue, stating that the payments were Laxmi Devi's share of profit.

The Court did not find it necessary to answer the first part of question 2, as the second part was deemed academic. Similarly, as the assessee did not raise a consequential question regarding the Tribunal's order, the Court did not provide an answer. Ultimately, the Court disposed of the reference without any order as to costs, affirming the Tribunal's decision to add back the payments made to Laxmi Devi as her share of profit.