9911796707
TMI Blog1986 (6) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. For the purpose of hiring, the assessee had to construct the godown. With this intention, the assessee entered into an agreement on 26th Nov., 1977 with Mr. A.K. Bakiwala and Smt. Padma Bakiwala by which agreement, the parties agreed to bring in Rs. 12,000 each as initial contribution whereby the contribution so made by the persons on the basis of which the bank loan would be advanced as specified. After the initial contribution by these three parties. Mr. Bhanwarlal Baj approached the Bank of Baroda for advancing of the loan for construction purpose which was so done. As per the agreement between the parties, the parties namely, Shri A.K. Bakiwala and Smt. Bakiwala were given two options either to charge interest @ 18 per cent on their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advisor as to the validity of the constitution, which is at page 12. At page 11 is a letter from F.C.I. agreeing to the change in the constitution and the letter is addressed to the Regional Manager of Bank of Baroda. At page 10A is a letter written by The Bank of the FCI informing them of the change, subject to the accepting the change in the constitution. The letter of the assessee informing the change is at page 10. The letter from the Regional Manager favouring the FCI is at page 9 in which they accepted the change in the constitution and have requested FCI to pay the rent to them directly. This arrangement of payment of rent directly to the Bank of Baroda is on the understanding that Bank of Baroda will collect the rentals and adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owners only. Alternatively, Mr. Ranka submitted that the AAC is allowed interest @ 18 per cent on the basis that the option as exercised by the parties is not acceptable. According to Mr. Ranka, if this has to be so taken, then to the extent of the shares as accepted by them in the partnership deed it should be deemed to be a prior charge and to the extent of 75 per cent should be treated as outgo in the hands of Mr. Bhanwarlal Baj. 3. Mr. B.K. Iyer vehemently supported the order of the AAC and the ITO. He relied on the Supreme Court judgment in the case of Mc Dowell Co. Ltd vs ITO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). 4. We have heard the parties and have considered the submissions in details. The accepted facts in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own the asset and be responsible for the liabilities attached thereon and also to share the income from the property equally. The bank has accepted that from the date of formation of the firm all the four persons are jointly and severally liable to the loan taken by Shri Bhanwarlal Baj earlier, now treated as loan given to the four persons. The ld. AAC has refused to accept the deed as a valid document on the reasoning that there could be no valid partnership. To our mind, the reasoning given by the ld. AAC is not at all satisfactory. As already observed by us above that Mr. Bhanwarlal Baj having given the option to Bakiwalas vide agreement dt. 26th Nov., 1977, could not have gone back especially when the Bakiwalas wanted to be co-owners in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, but he having contributed initially Rs. 12,000 on the some understanding which has been specified in deed of agreement dt. 28th March, 1981 the same view would have to be taken as in the case of agreement with Bakiwalas. In view of our above discussion, which goes to clearly establish that with the advent of the agreement dt. 28th March, 1981, the property alongwith its liability and the income thereon, is owned and shared by the four persons in equal proportion. In the case of ITO vs. Narol Highway Commercial Centre (1985) 21 TTJ (Ahd) 62, the Tribunal was considering situation where there existed a firm which carried on only activity of letting out of property, namely, godown. In that case, the ld. Members had held the partners havi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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