R.N. Puri, Accountant Member - (1.) THE order dated 9-12-1983 of the Tribunal disposing of the appeal of the assessee pertaining to assessment year 1979-80 was subsequently recalled by the Bench by its order dated 19-2-1985. THE appeal filed by the assessee was heard afresh. After considering the rival submissions, the appeal is being disposed of as under.
(2.) Shri CM. Ali, assessee, is an individual. He derives income mainly by way of share of profit from partnership firms. He also has income from house property and agricultural income. The ground raised in this appeal is that the Appellate Assistant Commissioner had erred in not allowing a deduction for a sum of Rs. 64,000 which had been paid by the assessee to M/s. S.L.N. Charities by way of contribution for obtaining the tenancy of certain shops.
(3.) M/s. S.L.N. Charities constructed certain shops. They called for tenders for the tenancy of the shops. In the tender notification given in the newspaper, it was stated: Twelve Shops measuring 10'.9" x 20'.9" (Plinth area 223 Sq. Ft.) are under construction in the S.L.N. Charities premises facing Vanivilas Institute Road, Bangalore and they are expected to be ready for occupation by the end of June 1978. The management have proposed to lease these shops on rental basis. Tenders are invited from the interested parties in the prescribed form to be obtained from the Charities Office on any working day between 9 a.m. and 1 p.m. The Charities will be at liberty to reject any or every offer by way of tender without assigning any reason. The accepted tenders will be liable for execution of necessary rental deeds with the Charities as per existing rules of the management. The sealed tenders may be addressed to Secretary, S.L.N. Charities, Fort, Bangalore - 560 002 on or before May 20th 1978. In the tender form, the applicant was required to mention as to how much rent he was willing to offer and also as to how much amount he was willing to pay by way of contribution. The assessee submitted tender for the grant of lease of two shops. The assessee offered rent of Rs. 400 per month per shop and contribution of Rs. 32,000 per shop. The tender of the assessee was accepted and two shops were allotted to him. The assessee had to pay a sum of Rs. 64,000 at the rate of Rs. 32,000 per shop, by way of contribution. In the computation of taxable income, the assessee asked for a deduction in respect of this expenditure. The Income-tax Officer did not allow the deduction. According to him, the payment was in the nature of a "premium" for obtaining the lease of the shops and, hence, the expenditure was of capital nature. Another ground on which the ITO declined to allow deduction was that the shops in question had been utilised by the partnership firm and not by the assessee and, hence, the question of allowing a deduction in the computation of the taxable income of the assessee did not arise. The assessee was a partner in the firm which had carried on business from the said premises. The assessee had stated before the ITO that business carried on by a firm was business carried on by the partners and as such, the premises of the shops were to be considered to have been utilised by the assessee in the course of his business which he was carrying on in partnership. The ITO, however, did not agree with this contention of the assessee. Being aggrieved by the decision of the ITO, the assessee went up in appeal before the AAC. The AAC upheld the viewpoint of the ITO on both the counts, i.e., the expenditure in question was of capital nature and hence the question of allowing a deduction for it did not arise and in any event deduction could not be allowed in the computation of the taxable income of the assessee, since the shops were utilised by the firm for carrying on its business and not by the assessee. The assessee has come up in further appeal before us and has challenged the above stated findings of the AAC.;