Amount once included and Taxed from Partner can’t be added to Taxable Income of Firm: ITAT [Read Order]

In a significant ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that amount once included and taxed by a partner can’t be added to the taxable income of the firm.

The assessee, Prathamesh Developer is a Promoter, Builder, and Developer who filed a return declaring a total income of Rs.9.88 crore. The assessee submitted that the flat was sold to Mr. K.R. Bora, partner of the assessee firm a total consideration of Rs.61,98,750/- and sale by the partner in the year under consideration did not warrant recognition of sale proceeds as its revenue.  The AO included Rs.90.34 lakh in the total income of the assessee. 

The CIT(A) upheld the viewpoint of the AO, in principle, by, however, reducing the amount of the addition to Rs.28,35,750/- [Rs.90,34,500 (sale consideration in the year in question) minus Rs.61,98,750. The appellant appealed against the confirmation of the addition of Rs.28,35,750/- in the hands of the assessee even though the income to that extent was offered for taxation in the hands of the partner of the assessee firm.

It was observed that if an agreement for the sale of immovable property is not registered, it does not amount to transfer given the 2001 amendment carried out to section 55A of the Transfer of Property Act and also simultaneous amendments to section 17(1A) and 49 of the Registration Act, 1908.

The assessee contended that since the partner Mr. K.R. Bora included the said amount of Rs.28.35 lakh in his total income and paid taxes thereon, the inclusion of the similar amount in the hands of the assessee firm should not be made, double taxation of the same amount in two hands cannot be permitted.

Shri R S Syal, vice president, and Shri S S Viswanethra Ravi, a judicial member observed that Mr. K.R. Bora, an individual, had included Rs.28.35 lakh in his own hands and paid taxes can take remedial action for exclusion of said amount from his total income as per law. The appeal was dismissed.

Shri Sharad Atmaram Vaze appeared on behalf of the assessee and Shri M.G. Jasnani appeared on behalf of the revenue.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.