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TMI Blog1993 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961, the Tribunal was justified in holding that a part of the rent which was paid by the assessee-firm in respect of the flat occupied by its partner, posted in Bombay branch during the relevant previous year, was rightly disallowed by the Inspecting Assistant Commissioner, Special Range-V ?" The facts, inter alia, as appears from the statement of case are that the assessee is a registered firm and derives income from profession as chartered accountants. The dispute is about the disallowance of a portion of the rent paid for the flats in Bombay and Delhi. The assessee-firm had its branches at Delhi and Bombay, etc. In October, 1971, the assessee took a flat and a garage in a building known as ANITA from Mrs. Harkirat Anand in Bombay. On the basis of the said agreement, the flat and garage were taken firstly for three years. The rent for the flat was fixed at Rs. 1,650 per month. One of the partners of the firm, Shri D. C. Rajan, who was in charge of the Bombay branch, was residing in the said flat. The Bombay branch has its own office. Sri Rajan was paying a rent of Rs. 660 per month. However, it was claimed that Shri Rajan was discharging his official duties even from hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay or in Delhi has to reside in the said city for the discharge of the duties as a partner of the firm which is a professional accountants' firm and the rent is paid by the firm itself to the landlord for taking out the tenancy of the flat. He has further contended that when a company or a firm incurs expenditure for taking out a tenancy of a flat for the residence of its employee, the expenditure incurred is undoubtedly allowable as a business expenditure, because the expenditure is for the purposes of the business carried on by the assessee. On the same reasoning, when a firm has to take out the tenancy of a flat for providing residence to its partner, the expenditure is undoubtedly for the purposes of the business and the rent which is paid by the firm will squarely come under section 30 of the Income-tax Act and such rent is to be allowed as a permissible deduction because the rent is paid by the firm itself and not by the partner for the purposes of the business of the firm. However, according to him, such rent paid by the firm will be subject to the limitation provided under section 40(b) of the Act. Section 40(b) of the Act provides that notwithstanding anything to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had to pay the rent to get the services of any accountant partner who is placed either in Delhi or in Bombay. If the assessee does not incur the expenditure of paying rent, no partner would agree to stay in Delhi or in Bombay since he is not provided with residential accommodation. It has also been submitted that in order, therefore, to facilitate the carrying on of the business of the firm and to secure the services of efficient partners, the firm has to incur such expenditure for providing residential accommodation to its partners who are placed in cities like Delhi or Bombay. The expenditure, therefore, according to the learned advocate for the assessee, is incurred wholly and/or exclusively for the purpose of the business of the firm. It was, therefore, submitted that the expenditure incurred for payment of rent by the firm to the landlord on the facts and circumstances of the case is allowable either under section 30(a)(i) or under section 37 of the Act. The said finding of the Tribunal that the said flats are mainly used for the residence of the partners and not for the purpose of profession of the assessee is a finding of fact which has not been challenged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allowance of rent proportionately. The fact is that the flats in question were used by the partners for their residence and, therefore, while computing the income of the assessee-firm from profession the rent paid for the flats cannot be allowed as a deduction. The action of the Assessing Officer is, therefore, justified." The contention of the learned advocate for the assessee that the partners might not have agreed to stay in Delhi or Bombay, is a question of fact which can only be determined on the basis of evidence and, as such, we are unable to accept the contention of learned counsel for the assessee on that point since no such point has, in fact, been decided by the Tribunal. The decision of the Supreme Court relied upon by Dr. Pal is not the answer to the fact situation before us. There, the Supreme Court decided an issue arising from altogether different circumstances. There is no identity between a Hindu undivided family and a firm consisting of the members of the self-same Hindu undivided family after its disruption. They are distinct and separate entities. Therefore, the Supreme Court decided that the written down value of the property in the hands of the disrup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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