Once the income taxed in the hands of the firm that should not be taxed in the hands of the assessee and expenses incurred for betterment for title of the property is allowable

Last updated: 06 March 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Briefly stated the assessee is a Partner in the firm M/s Balachandra Laboratories. The firm had property at Thane on which development rights were transferred to M/s Friends Development Corporation (FDC) for an amount of Rs.17.00 crores. The said firm paid one third of consideration to legal heirs and Ms Balachandra laboratories claimed deduction in their assessment. The assessee happens to be one of the legal heirs of Late Shri C N Bhatavadekar. In the course of inquiry and assessment proceedings the issue relating to taxing of capital gains in the hands of the firm resulted in allowing the claim made to M/s Videocon Properties Ltd at Rs.95.00 lakhs paid to avoid civil litigation consequent to the compromise reached before the Bombay High Court. However, an amount of Rs.5.29 crores i.e. 1/3 rd of the total amount paid to legal heirs of Shri C N Bhatavadekar (who had 33% share in the property) was not allowed on the reason that it was an appropriation of the firm’s income. There were other issues with reference to the cost of acquisition etc., in the firm’s case which are not relevant for the issue in the present appeal.

Citation :
Balachandra Bhatavadekar B-6 Yak & Yeti Society Bundgarden Road PUNE - 411001 PAN – AACPB 4121 D Appellant Vs ACIT Range-16(3)206 2nd Floor Matru Mandir Mumbai