Tribunal rules in favor of company on notional rent dispute, citing section 14A and depreciation set off

Dhadda Diamonds Pvt. Ltd. Versus The Income Tax Officer, Ward-5 (1) (3), Mumbai

Dhadda Diamonds Pvt. Ltd. Versus The Income Tax Officer, Ward-5 (1) (3), Mumbai - TM Issues:
1. Disallowance under section 14A and set off of unabsorbed depreciation.
2. Addition of notional rent as income from house property under section 22 of the Income Tax Act.

Analysis:
1. The first two issues in the appeal involved the disallowance made by the Assessing Officer (AO) under section 14A and the set off of carry forward unabsorbed depreciation from earlier years. The Counsel for the assessee chose not to press these issues, resulting in their dismissal as withdrawn.

2. The primary issue remaining was the addition of notional rent as income from house property under section 22 of the Act. The assessee, a company owning several units in a building, claimed to be a partner in a firm conducting business from the same premises without charging rent. The AO assessed notional rent, leading to an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)], who upheld the decision. The Tribunal considered legal precedents, including a High Court ruling and a Tribunal decision, emphasizing that when a partnership firm carries on business, each partner is deemed to carry on that business. Citing relevant case laws, the Tribunal concluded that notional rent cannot be charged when a partnership firm, in which the assessee is a partner, conducts business from the owned premises. Consequently, the addition of notional rent was deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's judgment addressed the issues of disallowance under section 14A, set off of unabsorbed depreciation, and the addition of notional rent as income from house property. The decision highlighted legal principles regarding business ownership, partnership firms, and the treatment of notional rent under section 22 of the Income Tax Act, ultimately ruling in favor of the assessee based on established legal interpretations and precedents.