Case Law Details
Hotel Centre Point Vs ITO (ITAT Gauhati)
ITAT Guwahati held that the exemption of 10(26) of the Income Tax Act is available to the individual members of the Scheduled Tribe and that this benefit cannot be extended to a firm which has been recognized as a separate assessable person under the Income Tax Act.
Facts- The assessee is partnership firm running hotel business under the name and style of M/s Hotel Centre Point at Shillong. It consisted of two partners namely Shri Prabhat Dey Sawyan and Mr. Walamphang Roy, both the partners are related to each other and are belonged to Khasis tribe which is enlisted as Scheduled Tribe in the State of Meghalaya and is covered under Clause (25) of Article 366 of the Constitution of India. They are entitled for exemption u/s 10(26) of the Income Tax Act in their individual capacity.
However AO held that under the Income Tax Act, the partnership firm is a separate legal entity chargeable to Income Tax. That the exemption u/s 10(26) of the Act was available to individual members of the recognized Scheduled Tribes and not to a partnership firm which is a separate entity under the Income Tax Act.
Conclusion- The exemption u/s 10(26) of the Act has been specifically conferred on members of the Scheduled Tribe residing in the specified area. This exemption, in our view, cannot be extended to another separate and distinct “person”, that is the partnership firm, though such partnership firm consist of the individual partners who in their individual capacity are entitled to such exemption. A partnership firm is a separate and district entity under the Income Tax Act and as observed above, its income is separately assessable subject to admissible exemptions and deductions. It has been held time and again that the benefit of deduction of loss/depreciation etc. in case of a partnership firm cannot even be transferred and taken into consideration for the purpose of assessment of income of another partnership firm consisting of same members, what to say of adjustment of the same in the income of the individual.
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