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  • Mar 12, 2020
  • Rent from children not a tax evasion tool, rules ITAT

    Receiving rent from your children will not be treated as tool for tax evasion, provided it is for genuine tax-saving arrangement, Income Tax Appellate Tribunal (ITAT) has ruled.

    ITAT is a quasi judicial institution set up in January, 1941 and specialises in dealing with appeals under the Direct Taxes Acts, such as Income Tax Act 1961. The orders passed by the ITAT are final, an appeal can be made to the High Court only if a substantial question of law arises for determination. An order by ITAT is binding on the concerned parties and can be used as persuasive in similar matter.

    The said matter here involves an income-tax assessment order where the official did not accept the claim of the assesee, who is the petitioner. He had claimed a loss of Rs. 15,32,120 on account of interest (on borrowed capital) at Rs. 21,62,120, adjusting it against the rental income of Rs. 9 lakh. The said rent was, on the basis of a field enquiry by the Assessing Officer (AO), found to be from the assessee’s major son and daughter, Neha Pathan, residing along with the other family members.