TaxTMI 
TaxTMI 
2006 (9) TMI 140
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....w: "(i) merely because, as on the date of the determination of the rental value of the assessee who is one of the co-sharers of the property the rental income returned by the other co-owners were interfered with by the Department could be a ground for extending the benefit of legality to the assessee? And (ii) in commercial business activity, when payments were made should it be apportioned to the previous loans outstanding or to the subsequent one?" While the first substantial question of law deals with the lease rent, the second substantial question of law deals with the interest attributable to loans. 2. The facts of the case, so far as they are relevant for the disposal of these appeals, are as under. 2.1. The....
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....n, a firm comprising of three partners, one of them being the assessee himself, discarded the lease agreement as per which lease rents had been fixed and estimated the assessee's share in the reasonable lease rent at Rs. 1,50,000, and made additions in all the three assessments. 2.2.2. On appeal by the assessee, the Commissioner of Income-tax (Appeals), though noted that the Assessing Officer has not justified his suspicions with the help of any material or evidence, agreed that the rent as has been admitted could not be regarded as reflective of market rent and he estimated the rent at Rs. 1,30,000 for the assessment years 1992-93 and 199495 and Rs. 1,50,000 for the assessment year 1996-97. 2.2.3. The Tribunal, on further appeal ....
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....ttribution is available to the taxpayer to arrange the matters in the way most favourable to him and allowed the assessee's appeal. 3. Aggrieved by the above common order the Tribunal dated December 9, 2005, the Revenue has filed these appeals on the substantial questions of law referred to above. 4.1. Issue: (1)-Merely because as on the date of the determination of the rental value of the assessee who is one of the co-sharers of the property the rental income returned by the other co-owners were (not?) interfered with by the Department could be a ground for extending the benefit of legality to the assessee? 4.2. As far as the issue of lease rent is concerned, according to the assessee the property concerned belongs to six co-o....
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....rd, held that the Revenue has not reverted to the fixation of lease rent in the case of other five co-owners with respect to the same property and that it would be a travesty of justice if the assessee, one of the co-owners, is solely picked out and an enhanced income is attributed in his hands for the same property, which, no doubt, in our considered opinion, is purely a question of fact. 4.5. Of course, a question of fact becomes a question of law, if the finding is either without any evidence or material, or the finding is contrary to evidence or is perverse or there is no direct nexus between the conclusion and the facts upon which that conclusion is based. A perverse finding is a finding where there is no evidence to support it or i....
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....lowed the assessee's appeals. 5.3. The doctrine of attribution has been emphatically dealt with by Lord Wright in Paton v. IRC [1936] 21 TC 626 (CA) as under: "...In the ordinary course, a person paying interest does not generally appropriate the payment to income or to any particular piece of income or any specific asset: he has the general body of available funds, say his banking account, if he has only one, and he pays by drawings on that account, which may include income, borrowed money, capital and so forth. This is what is meant by payment out of a mixed fund, or payments made out of the general till, or payments made neutrally. The Revenue authorities have no right in such cases to appropriate those payments to non-ta....