No Tax to partnership on surrender of Tenancy Right held by partners

tax1By Legal Cell, Accommodation Times Bureau

In the instant case, no where the assessee-firm is considered as the tenant. In thepartnership deed dated 4-4-1990 also, it is stated that all rights over trade name, goodwilllicense and permits shall belong to the partners. It is the legal heirs of ‘A’ and ‘V’, who have continued to hold the tenancy rights and have used the name of the business only for the sake of convenience, which had been continuance from the pre-partition days.Moreover, none of the partners at no point of time have ever introduced his/her share in the tenancy as capital in the accounts of the firm. The ‘tenancy of the premises’ was always held by the individual and later on individuals only, and never by the firm, as held by the Assessing Officer. Even the relevant provisions of Bombay Rent,Hotels and Lodging House Rates Control Act, 1947, comes to the rescue of the individuals, wherein, the statute itself defines ‘tenant means any person by whom or on whose account rent is payable for any premises includes sub-tenants and other persons or have derived title under a tenant before 1-2-1973?. Section 14(aa) says ‘any person to whom interest in premises has been assigned a transferred as permitted or deemed to be permitted under section 15?. This only means that the firm was never the tenant. The individuals were, thus, correct, who had not only taken the compensation for surrender of tenancy rights but also deposited the same in NABARD Bonds.

IN THE ITAT MUMBAI BENCH ‘B’

Income-tax Officer, 17(3)(1), Mumbai

v.

Bombay Electrical Laundry





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