|
Tax Publishers
Exemption under section 10(26) available to an
individual North East scheduled tribe whether available to a Partnership firm
consisting of blood /close relations as partners?
Facts:
Assessee's were two partnership firms one formed by two
uterine brothers and another firm by a husband and wife both being blood/close
relations. The plea of the assessee firms was that since Section 10(26) used
the word "any person" the exemption of Section 10(26) would also be
available to a partnership firm as well especially one where the relationship
is of blood/close in nature given the fact that in Khasi tribal community,
the family is the unit or the person. Since a partnership does not have a separate
existence apart from its partners as a creature of the law, the exemption of
Section 10(26) would not only be available to them individually but also be
available to the constituted firm of theirs as well. This was not acceptable to
the CIT(A) and to the ITAT as such a reading would tantamount to double
non-taxation both in the individual hands besides of the firm as well. Thus,
the case went in appeal to the Meghalaya HC who remanded the case to ITAT to
examine the fact whether the plea of the assessee's was correct as per the Khasi
tribal community and on merits. On remanded appeal to a larger bench of
ITAT -
Held against the assessee that for the purposes of income
tax a firm is separate and the partners are separate. The reading of the
community law or its customary law cannot be read into the income tax exemption
of Section 10(26). Factually once a firm is properly constituted and registered
the partners are entitled to sue the firm and the firm as well on the partners.
Such facts under the partnership law were not considered by the assessee. Under
LLP (Section 3) defines a LLP as a body corporate and no where in the
partnership act it is mentioned thus. Nonetheless the taxation of LLP also
dovetails that of a partnership firm under income tax law. So the exemption
available to an individual cannot be extended to a firm as well just because
the word "person" is used in Section 10(26).
Case: Hotel Centre
Point v. ITO 2024 TaxPub(DT) 1442 (Gau-Trib)
|