1976 (9) TMI 75 - AT - Income Tax

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Computation of income from house property.
3. Eligibility for deduction under Section 22 of the Income-tax Act, 1961.
4. Interpretation of partnership business and individual business for tax purposes.

Detailed Analysis:

1. Delay in Filing the Appeal:
There was a delay of one day in filing the appeal. After hearing the assessee's learned counsel, the tribunal was satisfied that there was sufficient cause for the delay. Consequently, the delay was condoned, and the appeal was admitted.

2. Computation of Income from House Property:
The assessee, an individual and a partner in the firm M/s. Continental Packers, owned properties in Madras and Bangalore. For the assessment year 1972-73, the assessee admitted an income of Rs. 1,377 from these properties. The computation included deductions for municipal taxes, urban land tax, and repairs. However, the Income-tax Officer (ITO) did not accept the computation for the property at 192, Triplicane High Road, Madras-5, arguing that the business of the firm could not be considered as the assessee's business. The ITO recomputed the income, resulting in a higher taxable income of Rs. 5,945.

3. Eligibility for Deduction under Section 22 of the Income-tax Act, 1961:
The assessee claimed that portions of the properties were used for business purposes and should be excluded from the computation of annual value under Section 22. The ITO accepted this claim for the Bangalore properties but not for the Madras property. The Appellate Assistant Commissioner upheld the ITO's decision, leading the assessee to appeal to the tribunal.

4. Interpretation of Partnership Business and Individual Business for Tax Purposes:
The tribunal examined whether the business carried on by the firm could be considered as carried on by the assessee for the purposes of Section 22. The tribunal referred to Section 4 of the Partnership Act, which defines partnership as a relation between persons who agree to share profits of a business carried on by all or any of them. The tribunal concluded that the business carried on by the firm was indeed the business of the partners, including the assessee.

Judgment:
The tribunal found that the assessee met all conditions under Section 22 for excluding portions of the property used for business purposes from the computation of annual value. The tribunal cited several rulings, including the Supreme Court's decision in Commissioner of Income-tax, Bihar vs. Ramniklal Kothari, which supported the view that a partner's share in a firm's profits is income from business carried on by the partner. The tribunal also referred to the Kerala High Court's decision in Commissioner of Income-tax, Kerala vs. Indo-Marine Agencies, Cochin, which held that a firm is not recognized as a separate entity for all purposes.

Conclusion:
The tribunal held that the assessee was entitled to the claim of exclusion under Section 22 for the portions of the property used for business purposes. The appeal was allowed, and the assessee's computation of income from the Madras property was accepted.