No addition made in the hands of partnership firm on account of capital contributed by partner

M/s Jaylaxmi Land Developers Vs ITO (ITAT Ahmadabad)

There cannot be any addition made in the hands of the partnership firm on account of the capital contributed by the partner of the firm to the firm. In case any justification is required for the source of fund in the hands of the partner, then partner in his individual capacity is liable to explain. There is no liability fastened on the assessee (firm) for the explanation about the source of funds in the hands of the partner. Hence we disagree with the order of the Ld. CIT (A) and accordingly direct to the AO to delete the addition made by him.

Income from house property or business income – Difference in rent paid by unrelated and related parties

Assessee has charged the rent of Rs.l lakh only for the second floor to fifth floor of the said property for the entire year from one of its partners, who runs a hotel business therein under the name “Sudarshan Palace”. No valid reasons could be assigned on behalf of the assessee before us for charging such lower rent for second to fifth floor of the property as compared to rent of Rs.2.69 lakhs from “VCPL” per month for two floors.

In reply to a specific query from the Bench, no definite figure of the covered area let out to Sudarshan Palace could be filed before us. The CIT(A) has given a finding that it is not the appellant’s case that the property was subjected to Rent Control Act or standard rent was got determined. No conclusive evidence could be led on behalf of the assessee to show that the 2^nd floor of the asset was in broken condition and not usable for any commercial purpose.

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