Mayur Corporation, Tezpur V. Income Tax Officer, Ward-1, Tezpur

ITA 109/GTY/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7727 (ITAT-GUWAHATI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 12-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S P BHATI
• Section: 40(b)

Judgement Text

ITA NO. 109/GAU/2020 MAYUR CORPORATION, A.Y. 2014-15 1 | P A GE IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI BENCH: GUWAHATI VIRTUAL HEARING AT KOLKATA [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 109/GAU/2020 ASSESSMENT YEAR: 2014-15 MAYUR CORPORATION, TEZPUR (PAN: AACFM 6979 N ) VS. ITO, WARD-1, TEZPUR APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 15.01.2021 DATE OF PRONOUNCEMENT 20.01.2021 FOR THE APPELLANT SHRI S.P. BHATI, FCA FOR THE RESPONDENT SHRI ARUP CHATTERJEE, ADDL. CIT SR. DR ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- GUWAHATI-1, DATED 28.04.2020 FOR A.Y. 2014-15. 2. THE ONLY GRIEVANCE OF THE ASSESSEE FIRM IS AGAI NST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN DISALLOWING SALAR Y AND REMUNERATION PAID TO ONE OF THE PARTNERS OF SMT. SHARMILA DUGAR AMOUNTING TO RS . 2.50 LAKHS. 3. BRIEF FACTS OF THE CASE AS NOTED BY THE AO IS TH AT THE ASSESSEE FIRM HAD DECLARED TOTAL INCOME OF RS. 4,52,370/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE FIRM INTER-ALIA HAS CLAIMED SALARY AND REMUNERATION @ 2.50 LAKHS TO EACH OF THE TWO PARTNERS (TOTAL 5 LAKHS). THE AO CALLED FOR THE DEED OF PARTNERSHIP WHEREIN THE ASSESSEE BROUGHT TO THE NOT ICE OF THE AO THAT ASSESSEE FIRM WAS CONSTITUTED ON 01.07.1985 (ORIGINAL DEED OF PAR TNERSHIP DATED 01.07.1985 REFER PB 1-5) AND THEREAFTER MADE CERTAIN AMENDMENTS BY S UPPLEMENTARY DEED OF PARTNERSHIP DATED 10.05.1996 PLACED AT PAGE 6-7 OF THE PB. EVEN THOUGH THE AO ACKNOWLEDGES THAT THE ASSESSEE HAS AMENDED ITS PART NERSHIP DEED BY EXECUTING THE ITA NO. 109/GAU/2020 MAYUR CORPORATION, A.Y. 2014-15 2 | P A GE SUPPLEMENTARY DEED DATED 10.05.1996 WHEREIN IT ALTE RED AND AMENDED CLAUSE 4 AND 10 OF THE ORIGINAL DEED OF PARTNERSHIP AND AUTHORIZED PAYMENT OF INTEREST AND SALARY / REMUNERATION TO FULFILL IN ACCORDANCE TO THE PROVIS ION OF SECTION 40(B) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO ACT), THE AO TAKING NOTE OF THE CLAUSE 8 OF ORIGINAL PARTNERSHIP DEED (DATED 01.07.1985) WHICH IS REPRODUCED BELOW DENIED THE CLAIM OF THE ASSESSEE IN RESPECT OF PAYMENT OF RS. 2.50 LAKHS TO SMT. SHARMILA DUGAR: THAT THE LADY PARTNER SHALL NOT REMAIN ENGAGED IN THE DAY TO DAY MANAGEMENT AND CONDUCT OF THE BUSINESS OF THE FIRM AND SHE WILL NOT LIABLE FOR ANY INFRACTION O FLAW OF CRIMINAL NATURE COMMITTED BY THE MALE PARTNER OR ANY EMPLOYEE OF TH E FIRM EITHER KNOWINGLY OR UNKNOWINGLY AND THE PARTNERS HERETO MUTUALLY AGREE TO THE SAID PROPOSITION. 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A) WHO CONFIRMED THE ACTION OF AO. 4. AGGRIEVED THE ASSESSEE IS BEFORE ME. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORDS. I NOTE THAT THE ASSESSEE IS A FIRM CONSTITUTED VIDE PARTNERSHIP DEED DATED 01.0 7.1985 PLACED AT PAGES 1 TO 5 OF PB. THEREAFTER A SUPPLEMENTARY DEED OF PARTNERSHIP DATED 10.05.1996 WAS EXECUTED WHICH IS FOUND PLACED AT PAGE 6-7 OF THE PB. IN THI S SUPPLEMENTARY DEED , THE ASSESSEE ALTERED AND AMENDED CLAUSE 4 AND 10 OF THE ORIGINAL DEED OF PARTNERSHIP AND AUTHORIZED THE PAYMENT OF INTEREST AND SALARY/REMUN ERATION IN ACCORDANCE TO PROVISIONS OF SECTION 40(B) OF THE ACT. THE RELEVAN T CLAUSE 10 IS REPRODUCED BELOW: IN LIEU OF CLAUSE 10 THAT BOTH THE PARTNERS HAVE A GREED TO KEEP THEMSELVES ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS OF THE PA RTNERSHIP FIRM. THE SAID PARTNERS SHALL BE WORKING PARTNERS. IT IS HEREBY AGREED TO THAT IN CO NSIDERATION OF THE SAID PARTNERS KEEPING THEMSELVES ACTIVELY ENGAGED IN THE BUSINESS OF PART NERSHIP FIRM AND WORKING AS WORKING PARTNERS, SHALL BE ENTITLED TO REMUNERATION. THE REMUNERATION PAYABLE TO THE SAID WORKING PARTNE RS SHALL BE COMPUTED IN THE MANNER LAID DOWN OR DEDUCTION UNDER SECTION 40(B)(V), READ WITH EXPLANATION 3 OF THE INCOME TAX ACT, 1961 OR ANY OTHER APPLICABLE PROVISION AS MAY BE IN FOR THE RELEVANT ACCOUNTING YEAR. SUCH AMOUNT OF REMUNERATION SHALL BE DISTRIBUTED BETWEEN BOTH THE PARTNERS FOLLOWING PROPORTION: A. SMT. SHARMILA DUGAR : 50% OF SUCH AMOUNT B. SHRI SANJAY DUGAR : 50% OF SUCH AMOUNT. THE PARTNERS SHALL BE ENTITLED TO INCREASE OR REDUC E THE ABOVE REMUNERATION AND MAY AGREE TO PAY REMUNERATION TO OTHER PARTNERS. THE PARTNERS MA Y ALSO AGREE TO REVISE THE MODE OF CALCULATING THE ABOVE SAID REMUNERATION AS MAY BE T O BY AND BETWEEN THE PARTNERS FROM TIME TO TIME. ITA NO. 109/GAU/2020 MAYUR CORPORATION, A.Y. 2014-15 3 | P A GE 6. I NOTE THAT ON THE STRENGTH OF THE AFORESAID AME NDED CLAUSE 10 (SUPRA), THE FIRM CLAIMED SALARY AND REMUNERATION TO ITS PARTNERS AT RS 2.50 LAKHS EACH. THE AO/CIT(A) ACCEPTED THE CLAIM IN RESPECT OF ONE OF ITS PARTNER SHRI SANJAY DUGAR, BUT DID NOT ACCEPT THE CLAIM IN RESPECT OF OTHER PARTNER SMT. S HARMILA DUGAR AT RS. 2.50 LAKHS CITING CLAUSE 8 OF ORIGINAL PARTNERSHIP DEED (DATED 01.07.1985) AND WITHOUT GIVING CREDENCE TO THE SUPPLEMENTARY DEED DATED 10.05.1996 WHEREIN IT ALTERED AND AMENDED CLAUSE 4 AND 10 OF THE ORIGINAL DEED OF PARTNERSHIP AND AUTHORIZED PAYMENT OF INTEREST AND SALARY / REMUNERATION TO FULFILL IN ACCORDANCE TO THE PROVISION OF SECTION 40(B) OF THE ACT. ACCORDING TO ME THE AUTHORITIES BELOW ERR ED IN DISALLOWING THE CLAIM AND MISDIRECTED THEMSELVES BY LOOKING INTO THE CLAUSE 8 OF THE OLD PARTNERSHIP DEED WHICH IN NO WAY CONFLICT WITH THAT OF THE SUBJECT MATTER DISCUSSED IN CLAUSE 10 (SUPRA). MOREOVER, IT HAS BEEN BROUGHT TO MY NOTICE THAT AFT ER THE SUPPLEMENTARY DEED HAS BEEN EXECUTED ON 10.05.1996 I.E. FROM AY 1997-98 TILL AY 2014-15, THE ASSESSEE FIRMS EXPENDITURE ON ACCOUNT OF SALARY / REMUNERATION TO SMT. SHARMILA DUGAR HAS NOT BEEN DISALLOWED. THEREFORE, ON THE PRINCIPLE OF CONSISTE NCY ALSO THE CLAIM WHICH WAS RIGHTLY CLAIMED SHOULD NOT HAVE BEEN DISALLOWED. SO IN THE LIGHT OF THE DISCUSSION, I FIND FORCE IN THE SUBMISSION OF THE LD. AR SHRI S. P. BHATI THAT THE ASSESSEE FIRM HAS RIGHTLY CLAIMED THE SALARY AND REMUNERATION TO ITS PARTNER SMT. SHARMILA DUGAR AT RS. 2.50 LAKHS AS PROVIDED FOR IN AMENDED SUPPLEMENTARY DEED DATED 10.05.1996 AND SO, I DIRECT THE AO TO ALLOW RS. 2.50 LAKHS CLAIMED BY TH E ASSESSEE FIRM FOR SALARY/ REMUNERATION TO SMT. SHARMILA DUGAR. IN THE LIGHT O F THE ABOVE, I DIRECT THE AO TO ALLOW THE CLAIM OF EXPENDITURE IN RESPECT OF REMUNE RATION/SALARY OF RS. 2.50 LAKHS TO SMT. SHARMILA DUGAR. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2021. SD/- ( (A. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED: 20 TH JANUARY, 2021. SB, SR. PS ITA NO. 109/GAU/2020 MAYUR CORPORATION, A.Y. 2014-15 4 | P A GE COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- MAYUR CORPORATION, GROUND FLOOR, DUGAR M ANSION, BINJRAJ ROAD, TEZPUR, SONITPUR, ASSAM-784001. 2. RESPONDENT- ITO, WARD-1, TEZPUR 3. THE CIT(A)- GUWAHATI 4. CIT- , GUWAHATI 5. DR, GAUHATI BENCH, GUWAHATI TRUE COPY BY ORDER SR. PRIVATE SECRETARY ITAT, KOLKATA BENCHES, KOLKATA