Assistant Commissioner of Income Tax, Circle-1(2) , Surat V. M/s Ruta Jewels, Surat

ITA 205/SRT/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1985 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSHAL RATHI
• Assessee Lawyers: R P RASTOGI
• Section: 10AA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.195/SRT/2017 / ASSESSMENT YEAR: 2013-14 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2), SURAT. VS. M/S. RUTA JEWELS, PLOT NO.205, SURAT SEZ, SACHIN GIDC, SACHIN, SURAT 395 008. [PAN: AANFR 8791 A] ( ' / APPELLANT) ( #$' /RESPONDENT) . / ITA NO.205/SRT/2018 / ASSESSMENT YEAR: 2014-15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2), SURAT. VS. M/S. RUTA JEWELS, PLOT NO.205, SURAT SEZ, SACHIN GIDC, SACHIN, SURAT 395 008. [PAN: AANFR 8791 A] ( ' / APPELLANT) ( #$' /RESPONDENT) / APPELLANT BY : SHRI KUSHAL RATHI CA /RESPONDENT BY : SHRI R.P.RASTOGI SR.DR /DATE OF HEARING : 04-10-2018 / DATE OF PRONOUNCEMENT : 26-10-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST THE SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPE ALS)-2, SURAT 2 ITA NO.195/SRT/2017 & 205/SRT/2018(A.Y: 2013-14 & 2 014-15) M/S. RUTA JEWELS (CIT(A) FOR SHORT) DATED 02.08.2017 & 04.01.2018 FOR THE ASSESSMENT YEARS (A.Y) 2013-14 AND 2014-15 RESPECTIVELY. 2. GROUNDS RAISED BY THE REVENUE FOR A.Y. 2013-14 R EADS AS FOLLOWS: 1. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLO WANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA) R.W.S. 10AA(9) IN GIVING DEDUCTIONS OF INTER EST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSE E FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BEN EFITS OF SECTION 10AA BY NOT CLAIMING INTEREST ON CAPITAL AN D REMUNERATION TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE? 2. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE FACT THAT BY NOT PROVIDING INTEREST AND REMUNERATION TO THE PART NERS, THE FIRM HAS CLAIMED HIGHER PROFITS LEADING TO HIGHER C LAIM OF DEDUCTION U/S 10AA OF THE ACT AND THUS, DEVOIDING T HE REVENUE FROM DUE AMOUNT OF TAX? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 3. GROUNDS RAISED BY THE REVENUE FOR A.Y. 2014-15 R EADS AS FOLLOWS: 1. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLO WANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA) R.W.S. 10AA(9) IN GIVING DEDUCTIONS OF INTER EST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSE E FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BEN EFITS OF SECTION 10AA BY NOT CLAIMING INTEREST ON CAPITAL AN D REMUNERATION TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE? 2. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE FACT THAT BY NOT PROVIDING INTEREST AND REMUNERATION TO THE PART NERS, THE FIRM HAS CLAIMED HIGHER PROFITS LEADING TO HIGHER C LAIM OF DEDUCTION U/S 10AA OF THE ACT AND THUS, DEVOIDING T HE REVENUE FROM DUE AMOUNT OF TAX? 3 ITA NO.195/SRT/2017 & 205/SRT/2018(A.Y: 2013-14 & 2 014-15) M/S. RUTA JEWELS 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 4. BOTH THE PARTIES HAVE AGREED TO THAT THE FACTS A ND CIRCUMSTANCES OF BOTH THE PRESENT APPEALS ARE IDENTICAL AND SIMILAR. FOR THE SAKE OF BREVITY AND CONVENIENCE, WE ARE TAKING UP ITA NO.192/SRT/20 17 AS LEAD CASE. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREF ULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBU NAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA) R.W.S. 10AA(9 ) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) IN GIVING DEDUCTION S OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSEE FIRM A FTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BENEFITS OF SECTION 10AA B Y NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS WH ICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE. HE FURTHER SUBM ITTED THAT THE LD.CIT(A) WAS ALSO NOT JUSTIFIED IN NOT APPRECIATIN G THE FACT THAT BY NOT PROVIDING INTEREST AND REMUNERATION TO THE PARTNERS , THE FIRM HAS CLAIMED HIGHER PROFITS LEADING TO HIGHER CLAIM OF DEDUCTION U/S 10AA OF THE ACT AND THUS, DEPRIVING THE REVENUE FROM DUE AMOUNT OF TAX. FINALLY, THE LD. DR SUBMITTED THAT THE AO MADE DISALLOWANCE OF BENEFIT OF S. 10AA OF THE ACT TO THE ASSESSEE ON REASONABLE AND JUSTIFIED GROUND WHICH HAS BEEN 4 ITA NO.195/SRT/2017 & 205/SRT/2018(A.Y: 2013-14 & 2 014-15) M/S. RUTA JEWELS DELETED BY THE LD. CIT(A) WITHOUT ANY SUSTAINABLE G ROUND. THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 5. THE LD. ASSESSEES REPRESENTATIVE (AR) STRONGLY SUPPORTED THE FIRST APPELLATE ORDER AND DREW OUR ATTENTION TOWARDS PARA S 6.1.1 TO 6.1.4 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT APPELLANT HAS NOT CHARGED ANY INTEREST AND REMUNERATIONS AS PER THE PARTNERSHIP D EED AND THEREFORE, THE APPELLANT CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION AND THUS, THE LD. CIT(A) WAS RIGHT IN ALLOWING APPEAL O F THE ASSESSEE BY FOLLOWING VARIOUS DECISIONS INCLUDING DECISION OF H ONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF ALIDHARA TAXSPIN ENGINEERS, TAX APPEAL NO.265 OF 2017 DATED 02.05.2017 AND ORDERS O F ITAT, AHMEDABAD IN THE CASE OF M/S. SAGAR FOODS AND SHREEJI DEHYDRA TE EXPORT, 2017 (3) TMI 1297 AND IN THE CASE OF M/S. AI REZA FOOD VS. I TO REPORTED IN (3) TMI 1237 (AHD. TRIB.). 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FROM THE RELEVANT OPERATIVE PART OF FIRST APPELLATE ORDER, E SPECIALLY PARAS 6.1.3 & 6.1.4, WE OBSERVE THAT THE AO HAS RELIED ON THE ORD ER OF ITAT, RAJKOT BENCH IN THE CASE OF MERIDIAN IMPEX 37 TAXMANN.COM 22 (2013) BUT THE FACTS OF THAT CASE ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS IN THAT CASE THERE WAS A SPECIFIC L OSS IN THE PARTNERSHIP DEED REGARDING PAYMENT OF INTEREST ON CAPITAL AND P ARTNERS REMUNERATION 5 ITA NO.195/SRT/2017 & 205/SRT/2018(A.Y: 2013-14 & 2 014-15) M/S. RUTA JEWELS IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED DURING S CRUTINY PROCEEDINGS. SUBSEQUENTLY, A SUPPLEMENTARY/ADDENDA TO SAID PARTN ERSHIP DEED WAS MADE AMENDING THE SAID CLAUSE PROVIDING THE CLAUSE OF NON-PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNER S, WHICH WAS NOT SUBMITTED BEFORE AO DURING ASSESSMENT PROCEEDINGS B UT IN THE PRESENT CASE UNDISPUTEDLY IN THE PARTNERSHIP DEED THERE IS NO CLAUSE PROVIDING PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNERS THEREFORE, THE LD. CIT(A) WAS RIGHT IN DENYING APPLICATION OF ORDER OF ITAT, RAJKOT IN FAVOUR OF THE REVENUE IN THE PRESENT CASE HAVING DI STINCT AND DISSIMILAR FACTS AND CIRCUMSTANCES. 7. FURTHER, FROM THE BINDING DECISION OF THE HON'BL E HIGH COURT OF GUJARAT IN THE CASE OF ALIDHARA TAXSPIN ENGINEERS ( SUPRA), WHEREIN THEIR LORDSHIP SPEAKING FOR THE JURISDICTIONAL HIGH COURT CLEARLY HELD THAT MERE INCORPORATION OF INTEREST ON PARTNERS CAPITAL ACCOU NT AND REMUNERATION DOES NOT SIGNIFY THAT THE SAME ARE MANDATORY IN NAT URE. AS WE HAVE NOTED ABOVE, IN THE PRESENT CASE THE APPELLANT HAS NOT CH ARGED ANY INTEREST AND REMUNERATION ASPER PARTNERSHIP DEED THEREFORE, THE APPELLANT FIRM CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION. T HEREFORE, WE ARE INCLINED TO HOLD THE LD. CIT(A) WAS RIGHT IN OBSERV ING THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTER EST AND REMUNERATION OF S. 10AA OF THE ACT DEDUCTION IS ERRONEOUS AND IN CORRECT AND LAW AND 6 ITA NO.195/SRT/2017 & 205/SRT/2018(A.Y: 2013-14 & 2 014-15) M/S. RUTA JEWELS FACTS AS IN THE PECULIAR FACTS OF THE PRESENT CASE THE PARTNERSHIP DEED CLEARLY LAYS DOWN THAT NO INTEREST AND REMUNERATION IS PAYABLE AND HENCE, THE FIRST APPELLATE AUTHORITY RIGHT IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTEREST AND REMU NERATION FROM AMOUNT OF DEDUCTION U/S. 10AA OF THE ACT. WE ARE UNABLE T O SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS OF REVENUE ARE DISMISSED. ITA NO.205/SRT/2018 FOR AY 2014-15 OF REVENUE: 8. SINCE, FACTS AND CIRCUMSTANCES OF ITA NO.195/SRT /2017 FOR AY 2013-14 ARE QUITE IDENTICAL AND SIMILAR TO THE FACT S OF ITA NO.205/SRT/2018 FOR AY 2014-15 THEREFORE, OUR CONCL USION DRAWN FOR AY 2013-14, IN THE EARLIER PART OF THIS ORDER, WOULD A PPLY MUTATIS MUTANDIS TO THE APPEAL FOR AY 2014-15 AND GROUNDS OF REVENUE IN THE SAME ARE ALSO DISALLOWED. 9. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH OCTOBER, 2018. / SURAT ; DATED : 26 TH OCTOBER, 2018 / S.GANGADHARA RAO,SR.PS # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . DSSASSSSSS SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER