Partnership firm wins appeal on rental income, but disallowance upheld for bearer cheque payment exceeding limit

The Tribunal partly allowed the appeal of the partnership firm engaged in Builders and Developers business. It set aside the addition of deemed rental income from unsold flats under Sec. 23(4) as Income from House Property for the assessment year 2012-13. However, the Tribunal upheld the disallowance under Sec. 40A(3) for a payment made through a bearer cheque exceeding the specified limit. The decision was based on the absence of contrary binding decisions presented by the Revenue and the interpretation of relevant legal provisions.

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Issues:
1. Addition of deemed rental income from unsold flats under Sec. 23(4) as Income from House Property.
2. Disallowance under Sec. 40A(3) for payment made through bearer cheque.

Issue 1: Addition of deemed rental income from unsold flats under Sec. 23(4) as Income from House Property:

The appeal involved a partnership firm engaged in Builders and Developers business, disputing the addition of deemed rental income from unsold flats under Sec. 23(4) as Income from House Property for the assessment year 2012-13. The AO determined the deemed rental income based on Fair Market Value, which was contested by the assessee. The Co-ordinate Bench of the Tribunal, in a similar case, held that unsold flats held as stock-in-trade are to be assessed under the head 'income from business' upon sale, and not as 'income from house property'. The Tribunal set aside the addition made by the AO, following the precedent, as no contrary binding decision was presented by the Revenue. Consequently, the Tribunal allowed the grounds raised by the assessee, directing the AO to delete the addition.

Issue 2: Disallowance under Sec. 40A(3) for payment made through bearer cheque:

The second issue concerned the disallowance under Sec. 40A(3) for a payment of &8377; 24,010 made through a bearer cheque, exceeding the limit specified. The AO disallowed the amount as it did not comply with the provisions of Sec. 40A(3). The assessee appealed for the disallowance to be restricted to &8377; 4,010 only, which was rejected by the Tribunal. The Tribunal upheld the order of the lower authorities, stating that once the provisions of Sec. 40A(3) are triggered, the disallowance cannot be limited to an arbitrary figure. Therefore, the grounds related to this issue were dismissed by the Tribunal.

In conclusion, the Tribunal partly allowed the appeal of the assessee, setting aside the addition of deemed rental income from unsold flats under Sec. 23(4) as Income from House Property while upholding the disallowance under Sec. 40A(3) for payment made through a bearer cheque. The decision was based on the specific facts and legal interpretations presented during the proceedings.

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