Pokuru Prahakar Rao & Co., SPSR Nellore, Hyderabad V. ITO, Ward-1, Gudur, Gudur

ITA 114/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6254 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: K UMA
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 114/HYD/2016 ASSESSMENT YEAR: 2010-11 M/S. POKURU PRABHAKAR RAO & CO., GUDUR SPSR NELLORE DISTRICT [PAN: AACFP7636H] VS INCOME TAX OFFICER, WARD-1, GUDUR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SMT K. UMA, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 08-09-2016 DATE OF PRONOUNCEMENT : 16-09-2016 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS), TIRUPATI, DATE D 14-12-2015. 2. M/S. POKURU PRABHAKAR RAO & CO., IS A FIRM ENGAG ED IN RUNNING A RETAIL OUTLET OF M/S. HPCL AND FILED ITS RETUR N OF INCOME ON 24-09-2010 DISCLOSING INCOME OF RS. 1,13,670/- ON A GROSS TURNOVER OF RS. 10.67 CRORES. IN THE COURSE OF ASSES SMENT PROCEEDINGS, ASSESSING OFFICER (AO) NOTICED THAT ASSES SEE CLAIMED RS. 10,000/- PER MONTH TOWARDS CAR RENT TO SIX CARS A MOUNTING TO RS.1,20,000/-. AO ASKED FOR DETAILS OF THE CARS HIRE D AND NOTICED THAT TWO CARS ENGAGED WERE REGISTERED SUBSEQUENTLY AND WERE NOT I.T.A. NO. 114/HYD/2016 :- 2 -: EVEN MANUFACTURED DURING THE COURSE OF YEAR AND WITH REFERENCE TO OTHER TWO CARS, NO DETAILS WERE FURNISHED. ACCORDING LY, CLAIM OF RENTALS FOR TWO CARS FOR FOUR MONTHS WAS ALLOWED AND THE BALANCE OF RS. 80,000/- INVOLVING THE FOUR CARS WAS DISALLOWED. 3. BEFORE THE LD.CIT(A), IT SEEMS ASSESSEE HAS FURNIS HED EVIDENCE WITH REFERENCE TO TWO CARS INFORMING THAT THE Y WERE MANUFACTURED AND ALSO REGISTERED PRIOR TO THE IMPUGN ED YEAR AND ACCORDINGLY, AOS STAND IS NOT CORRECT. LD.CIT(A) HOW EVER, DID NOT CONSIDER THE ADDITIONAL EVIDENCE FILED AND CONFIRMED THE ORDER OF AO. EVEN THOUGH ORDER OF CIT(A) RECORDS IN SUBMISSI ONS THAT ASSESSEE HAS FURNISHED C. BOOK COPIES, HE HAS NOT C ONSIDERED THE SAME AND DISMISSED THE GROUND. 4. THE OTHER DISALLOWANCE MADE BY AO IS WITH REFEREN CE TO DISALLOWANCE OF INTEREST PAYMENT U/S. 40(A)(IA). AO NOTICED THAT AN AMOUNT OF RS. 4,88,171/- WAS CLAIMED TOWARDS INTEREST OUT OF WHICH AN AMOUNT OF RS. 2,31,974/- WAS PAID TO THE PAR TNERS. AO WAS OF THE VIEW THAT THE SAID PERSONS WERE PARTNERS IN TH E CAPACITY OF HUF, THEREFORE, INTEREST PAID TO PERSONS IN INDIVID UAL STATUS IS NOT COVERED BY THE EXCEPTION PROVIDED U/S. 194A. SINC E NO TDS WAS DONE ON PAYMENTS MADE TO NON-PARTNERS, PROVISIONS OF SEC. 40(A)(IA) WERE ATTRACTED. ACCORDINGLY, HE DISALLOWED THE AMOUNT INVOKING THE PROVISIONS OF SECTION 40(A)(IA). 5. BEFORE THE LD.CIT(A), IT WAS SUBMITTED BY ASSESSEE THAT THE INTEREST IS COVERED BY THE PARTNERSHIP DEED AND PROVISI ONS OF SECTION 194A EXEMPT INTEREST PAID TO PARTNERS FROM THE PR OVISIONS OF TDS. ACCORDINGLY, THE AMOUNT CANNOT BE DISALLOWED I.T.A. NO. 114/HYD/2016 :- 3 -: U/S. 40(A)(IA). LD.CIT(A) HOWEVER, NOTICED THAT SHRI P.V. KRISHNAIAH AND SHRI P. PRABHAKAR RAO ARE THE TWO PARTNERS OF THE FIRM IN HUF CAPACITY AND INTEREST WAS PAID TO KRISHNAIAH AND PRAB HAKAR RAO IN INDIVIDUAL CAPACITY. SINCE STATUS IS DIFFERENT, HE C ONFIRMED THE DISALLOWANCE U/S. 40(A)(IA). 6. IT WAS THE CONTENTION OF ASSESSEES COUNSEL THAT LD.C IT(A) EVEN THOUGH NECESSARY EVIDENCE WAS FURNISHED BEFORE HIM AND HAS ACKNOWLEDGED IN THE EXTRACTION OF THE SUBMISSIONS IN PARA 3.2, DID NOT CONSIDER THE EVIDENCE AND CONFIRMED THE AMOUNT. IT WAS THE SUBMISSION THAT THOSE TWO CARS WERE CORRECTLY REGISTER ED PRIOR TO THE ENGAGEMENT DURING THE YEAR AND ACCORDINGLY AN AMOU NT OF RS. 40,000/- SHOULD HAVE BEEN ALLOWED BY THE AO. WITH RE FERENCE TO OTHER TWO CARS, IT WAS SUBMITTED THAT THE DETAILS ARE NOT A VAILABLE BUT THE AMOUNTS ARE PAID FOR THE PURPOSE OF BUSINESS. WITH REFERENCE TO DISALLOWANCE OF INTEREST U/S. 40(A)(IA), IT WAS THE CONTENTION OF LD. COUNSEL THAT THOSE TWO PERSONS ARE PAR TNERS IN THEIR INDIVIDUAL CAPACITY ONLY AND NOT IN THE CAPACIT Y OF HUF AND REFERRED TO THE PARTNERSHIP DEED. IT WAS THE CONTENTION THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED, AS TH E AMOUNTS ARE PAID TO PARTNERS ONLY AND ENTITLED TO RELIEF U/S. 194A. 7. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AUTHORI TIES. 8. AFTER CONSIDERING THE RIVAL CONTENTIONS AND DOCUME NTS PLACED ON RECORD, I AM OF THE OPINION THAT THESE ISSUES REQUIR E RE- EXAMINATION BY THE AO. IT IS NOT KNOWN ON WHAT BASIS, TH E AO GAVE A FINDING THAT THE TWO CARS WERE REGISTERED IN THE LATER YEAR. COPIES OF C-BOOKS PLACED ON RECORD DO INDICATE THAT THE Y ARE I.T.A. NO. 114/HYD/2016 :- 4 -: ALREADY REGISTERED BY THE TIME ASSESSEE ENGAGED THEM; TH EREFORE, THIS ASPECT REQUIRES RE-EXAMINATION BY THE AO. AFTER DU E EXAMINATION, THE AO IS DIRECTED TO ALLOW THE AMOUNTS A S CLAIMED BY ASSESSEE. 9. COMING TO THE ISSUE OF DISALLOWANCE U/S. 40(A)(I A), THE PARTNERSHIP DEED DOES NOT INDICATE WHETHER THE SAID PERS ONS ARE PARTNERS IN INDIVIDUAL CAPACITY OR HUF CAPACITY. IT IS REQUIRED TO BE SEEN THE RETURNS FILED BY THE PERSONS AND THE ENTRIE S IN THE BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS. IN CA SE, REMUNERATION AND INTEREST ARE PAID TO THE PARTNERS IN IND IVIDUAL CAPACITY, THEN, THE AMOUNT CANNOT BE DISALLOWED U/S. 40 (A)(IA) AS PROVISIONS OF SECTION 194A EXEMPTS THE PAYMENTS MADE TO PARTNERS TOWARDS REMUNERATION AND INTEREST. IN VIEW OF THAT, AO I S DIRECTED TO EXAMINE THE ISSUE AFRESH AND DECIDE AS PER THE FACTS AND LAW ON THE ISSUE. WITH THESE OBSERVATIONS AND DIRECTIONS, THE T WO ISSUES INVOLVED IN THIS APPEAL ARE RESTORED TO THE FILE OF AO FOR FRESH CONSIDERATION, AFTER GIVING DUE OPPORTUNITY TO ASSESSE E. 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2016 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 16 TH SEPTEMBER, 2016 TNMM I.T.A. NO. 114/HYD/2016 :- 5 -: COPY TO : 1. M/S. POKURU PRABHAKAR RAO & CO., GUDUR. C/O. S. DWARAKANATH, ADVOCATE, # 8-2-540/3, 1 ST FLOOR, ROAD NO. 4, BANJARA HILLS, HYDERABAD. 2. INCOME TAX OFFICER, WARD-1, GUDUR. 3. COMMISSIONER OF INCOME TAX(APPEALS), TIRUPATI. 4. PR. COMMISSIONER OF INCOME TAX, TIRUPATI. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.