Hasmukhbhai Makanbhai Padariya Vs ITO (ITAT Rajkot)
ITAT Rajkot held that each partner is owner of the assets to the extent of his share in the partnership, hence, exemption u/s 54G of the Act, should not be denied to the assessee under consideration. Thus, investment made by firm is allowable as deduction u/s. 54G to the partner as per his share in partnership.
Facts- The assessee has filed his return of income declaring total income at Rs.4,78,670/-and claimed deduction u/s 54G of the Act, for Rs. 1,15,94,133/- on the ground that he has invested more than Rs.1,15,94,133/- in the firm of M/s Om Metal Cast and M/s Om Metal Cast has invested the said amount in Factory Building and Plant & Machinery.
AO rejected the contention of the assessee and held that assessee is individual and he shifted the undertaking from urban area to rural area, to a partnership firm, which is different entity under the Income Tax Act, therefore, the assessing officer made the addition and disallowed the claim of the assessee u/s 54G of the Act, to the tune of Rs.88,24,035/-.
CIT(A) confirmed the action of AO. Being aggrieved, the present appeal is filed.
Conclusion- Apex Court, in Juggilal Kamlapat Bankers vs. WTO, has held that the interest of a partner in a partnership firm belonged to him and would be includible in his ‘assets’ and will have to be taken into account while computing his net wealth. In this view of the matter, the assessee in the present case could be said to be having specific interest in the factory land and the building belonging to the firm and, as such, is entitled to the exemption under section 54G of the Act.
