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

ITA 239/SRT/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5247 (ITAT-SURAT)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH SINGH
• Assessee Lawyers: KUSHAL GHEEWALA
• Keywords: Business income
• Section: 10AA

Judgement Text

ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 1 OF 11 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI RAM LAL NEGI, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A. NOS.196/SRT/2017 & 239/SRT/2018 [ [ / ASSESSMENT YEARS : 2013-14 & 2014-15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2), SURAT. VS. GUNJAN EXPORTS, 7/2458 B, SAIYADPURA, UBHI SHERI, SURAT 395 003. [PAN: AAGFG 7030 E] APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI NITIN GHEEWALA & KUSHAL GHEEWALA CA /REVENUE BY SHRI OM PRAKASH SINGH CIT - DR / DATE OF HEARING: 2 9 . 0 3 .201 9 /PRONOUNCEMENT ON: 06 .0 6 .2019 /O R D E R PER O.P.MEENA, AM: 1. THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT (IN SHORT THE CIT (A)) DATED 02.08.2017, 30.01.2018 PERTAINING TO ASSESSMENT YEAR 2013-14 AND 2014-15 RESPECTIVELY. 2. THE GROUNDS RAISED BY THE REVENUE IN ITA NO.196/SRT/2017 READ AS UNDER : ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 2 OF 11 1. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA)(10) R.W.S 10AA(9) IN GIVING DEDUCTIONS OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSEE FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BENEFITS OF SECTION10AA BY NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN NOT APPRECIATING 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, DEVOIDING THE 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 OFFICER. 3. THE ABOVE TWO APPEALS RELATED TO THE SAME ISSUE OF INVOKING PROVISIONS OF SECTION 80(IA)(10) R.W.S 10AA(9) IN GIVING DEDUCTIONS OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNER OF THE ASSESSEE FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BENEFITS OF SECTION 10AA BY NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS WHICH RESULTED IN INCREASE IN EXEMPTED PROFIT. ALL PARTIES HAVE AGREED TO THAT THE FACTS AND CIRCUMSTANCES OF APPEALS ARE IDENTICAL AND SIMILAR. FOR THE SAKE OF BREVITY AND CONVENIENCE, WE ARE TAKING UP OF ITA NO.196/SRT/2017 AS LEAD CASE. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AO ERRED IN RESORTING TO PROVISIONS OF SECTION 80(IA)(10) R.W.S. 10AA(9) AND THRUSTING INTEREST AND REMUNERATION PAYMENT TO PARTNERS AND CONSEQUENTLY REDUCING THE DEDUCTION CLAIMED U/S 10AA TO THE TUNE OF RS.1,33,08,751/- AS AGAINST RS.5,59,96,248/- CLAIMED BY THE ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 3 OF 11 ASSESSEE. THE APPELLANT DERIVED INCOME FROM MANUFACTURING ACTIVITY AND CLAIMED DEDUCTION U/S 10AA OF RS.5,59,96,248/-. THE AO FOUND THAT APPELLANT HAS NOT CLAIMED INTEREST AND REMUNERATION TO THE PARTNERS FROM THE BUSINESS INCOME AND THE SUPPLEMENTARY PARTNERSHIP DEED EXECUTED ON 19.03.2007 DOES NOT PROVIDE ANY PROVISION FOR PAYMENT OF INTEREST AND REMUNERATION TO PARTNERS. THE AO RELYING ON THE JUDGMENT IN THE CASE OF ACIT VS. MERIDIAN IMPEX [2013] 37 TAXMANN.COM 22 OF ITAT RAJKOT BRANCH, HELD THAT INTEREST AND REMUNERATION TO PARTNERS ARE ALLOWABLE EVEN THOUGH IT HAS NOT BEEN CLAIMED IN THE PARTNERSHIP DEED. THE AO HELD THAT NON-CHARGING OF THE INTEREST ON THE INVESTED CAPITAL AND NO REMUNERATIONS FOR THE WORKING PARTNERS HAS BEEN DONE TO ENHANCE THE PROFIT OF THE APPELLANT CONCERN WHICH IS EXEMPT FROM TAXATION AND REDUCE THE TAXABLE INCOME OF THE INDIVIDUAL PARTNERS TO SAME EXTENT. THE AO HELD THAT THE PARTNERSHIP DEED ITSELF IS A VEHICLE OF COLLUSIVE TAX AVOIDING ACTION AND RELYING ON THE MERIDIAN IMPEX (SUPRA) CALCULATED THE PAYMENT OF INTEREST AND REMUNERATION OF PARTNERS AND THE AMOUNT OF RS.9,57,36,986/- WAS EXCLUDED FROM THE DEDUCTION U/S 10AA OF THE ACT. THE AO HAD RESTRICTED THE CLAIM OF DEDUCTION U/S 80IA(10) TO THE TUNE OF RS.1,33,08,751/- AS AGAINST THE TOTAL CLAIM OF DEDUCTION OF RS.5,59,96,248/- ON ACCOUNT OF INTEREST TO PARTNERS REMUNERATION. ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 4 OF 11 5. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). BEFORE WHOM, THE ASSESSEE HAS SUBMITTED THAT THE AOS FINDING IS INCORRECT AS IT WAS CLEARLY MENTIONED IN THE SUPPLEMENTARY PARTNERSHIP DEED THAT NO PARTNER IS ELIGIBLE FOR INTEREST ON CAPITAL AS WELL AS REMUNERATION. HOWEVER, CIT (A) OBSERVED THAT THE APPELLANT HAS RELIED ON THE CIRCULAR NO.739 DATED 25.03.1996 WHEREIN THE CBDT HAS CLARIFIED THAT NO DEDUCTION 40(B)(V) OF THE ACT WILL BE ADMISSIBLE UNLESS THE PARTNERSHIP DEED EITHER SPECIFIES THE AMOUNT OF REMUNERATION PAYABLE TO EACH INDIVIDUAL WORKING PARTNER OR LAYS DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. THE CLAUSE OF THE PARTNERSHIP DEED SPECIFICALLY RESTRICTS PAYMENT OF INTEREST TO PARTNERS ON THEIR CAPITAL AS WELL AS REMUNERATION TO PARTNERS. THIS IS THE MAIN REASON WHY THE APPELLANT HAS NOT CLAIMED BOTH THE EXPENSES AGAINST THE BUSINESS INCOME SHOWN IN INCOME TAX RETURN. THE LD. CIT (A) FURTHER PLACING RELIANCE ON THE DECISIONS OF ITAT BENCH, AHMEDABAD IN M/S. SAGAR FOODS AND SHREEJI DEHYDRATE EXPORT, 2017 (3) TMI 1297, M/S. AL REZA FOOD VS. ITO, WARD-2(4), BHAVNAGAR 2017(3) TMI 1237 ITAT AHMEDABAD AND IN THE DECISION OF HON'BLE GUJARAT HIGH COURT IN ALIDHARA TAXSPIN ENGINEERS, TAX APPEAL NO.265/2017 DATED 02.05.2017 HELD THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON-PROVISION OF INTEREST AND REMUNERATION U/S.10AA DEDUCTION IS ERRONEOUS AND INCORRECT IN LAW AND FACTS. THE PARTNERSHIP DEED CLEARLY LAYS DOWN THAT NO INTEREST ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 5 OF 11 AND REMUNERATION IS PAYABLE AND THEREFORE THE ADDITION MADE BY THE AO IS DELETED. 6. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD.DEPARTMENTAL REPRESENTATIVE (THE LD. CIT (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)(10) R.W.S. 10AA(9) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) IN GIVING DEDUCTIONS OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSEE FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BENEFITS OF SECTION 10AA BY NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN NOT APPRECIATING 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. THE LD. CIT (DR) VEHEMENTLY SUPPORTED THE ORDER OF THE AO. HOWEVER, LEARNED CIT(D.R.) DID NOT CONTROVERT THE FACTS THAT THE ISSUE IS COVERED THE DECISION OF TRIBUNAL IN THE CASE OF ACIT, CIRCLE-1(2), SURAT VS. RUTA JEWELS FOR A.Y. 2013-14 IN ITA NOS.195/SRT/2017 & 205/SRT/2018 DATED 26.10.2018. ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 6 OF 11 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION OF THE FIRST APPELLATE ORDER OF PARAS 6.1.1 TO 6.1.5 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT APPELLANT HAS NOT CHARGED ANY INTEREST AND REMUNERATIONS AS PER THE PARTNERSHIP DEED AND THEREFORE, THE APPELLANT CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION AND THUS, THE LD.CIT(A) WAS RIGHT IN ALLOWING APPEAL OF THE ASSESSEE BY FOLLOWING VARIOUS DECISIONS INCLUDING DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF ALIDHARA TAXSPIN ENGINEERS, TAX APPEAL NO.265 OF 2017 DATED 02.05.2017 AND ORDERS OF ITAT, AHMEDABAD IN THE CASE OF M/S. SAGAR FOODS AND SHREEJI DEHYDRATE EXPORT, 2017 (3) TMI 1297 AND IN THE CASE OF M/S.AI REZA FOOD VS. ITO REPORTED IN (3) TMI 1237 (AHD. TRIB.). THE LD. COUNSEL FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF ITAT SURAT IN THE CASE OF ACIT, CIRCLE- 1(2), SURAT VS. RUTA JEWELS FOR A.Y. 2013-14 IN ITA NOS.195/SRT/2017 & 205/SRT/2018 DATED 26.10.2018 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT (A) HAS GIVEN HIS FINDING AS UNDER: 6.1.1. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL- GROUND NO.1 TO 3 PERTAINS TO LEARNED AO ERRED IN RESORTING TO PROVISIONS OF SECTION 80(IA)(10) R.W.S. ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 7 OF 11 10AA(9) AND THRUSTING INTEREST AND REMUNERATION PAYMENT TO PARTNERS AND CONSEQUENTLY REDUCING THE DEDUCTION CLAIMED U/S 10AA TO THE TUNE OF RS.94,63,66,731/-. THE APPELLANT DERIVED INCOME FROM MANUFACTURING ACTIVITY AND CLAIMED DEDUCTION U/S 10AA OF RS.1,47,67,42,521/-. THE AO FOUND THAT THE APPELLANT HAS NOT CLAIMED INTEREST AND REMUNERATION TO THE PARTNERS FROM THE BUSINESS INCOME AND THE SUPPLEMENTARY PARTNERSHIP DEED EXECUTED ON 01.02.2010 DOES NOT PROVIDE ANY PROVISION FOR PAYMENT OF INTEREST AND REMUNERATION TO PARTNERS. THE AO RELYING ON THE JUDGMENT IN THE CASE OF MERIDIAN IMPEX 37 TAXMANN.COM 22(2013) BY ITAT RAJKOT BRANCH, HELD THAT INTEREST AND REMUNERATION TO PARTNERS ARE ALLOWABLE THOUGH IT HAS NOT BEEN CLAIMED IN THE PARTNERSHIP DEED. THE AO HELD THAT NON-CHARGING OF THE INTEREST ON THE INVESTED CAPITAL AND NO REMUNERATIONS FOR THE WORKING PARTNERS HAS BEEN DONE TO ENHANCE THE PROFIT OF THE APPELLANT CONCERN WHICH IS EXEMPT FROM TAXATION AND REDUCE THE TAXABLE INCOME OF THE INDIVIDUAL PARTNERS TO SAME EXTENT. THE AO HELD THAT THE PARTNERSHIP DEED ITSELF IS A VEHICLE OF COLLUSIVE TAX AVOIDING ACTION AND RELYING ON THE MERIDIPAN IMPEX (SUPRA) CALCULATED THE PAYMENT OF INTEREST AND REMUNERATION TO PARTNERS AND THE AMOUNT OF RS.95,05,14,050/- WAS EXCLUDED FROM THE DEDUCTION U/S 10AA OF THE ACT. THE AO HAD RESTRICTED THE CLAIM OF DEDUCTION U/S 80IA(10) TO THE TUNE OF RS.53,03,75,790/- AS AGAINST THE TOTAL CLAIM OF DEDUCTION OF RS.1,47,67,42,521/- ON ACCOUNT OF INTEREST TO PARTNERS REMUNERATION. THE APPELLANT SUBMITTED THAT THE AOS FINDING IS INCORRECT AS IT WAS CLEARLY MENTIONED IN THE SUPPLEMENTARY PARTNERSHIP DEED THAT NO PARTNER IS ELIGIBLE FOR INTEREST ON CAPITAL AS WELL AS REMUNERATION. 6.1.2 ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT AS PER THE PARTNERSHIP DEED THE APPELLANT HAS NOT DEBITED INTEREST AND REMUNERATION TO THE PARTNERS AS THE SUPPLEMENTARY PARTNERSHIP DEED DOES NOT PROVIDE ANY PROVISION FOR PAYMENT OF INTEREST AND REMUNERATION TO THE PARTNERS. THE MAIN CONTENTION OF THE APPELLANT IS THAT THE INTEREST AND REMUNERATION OF THE PARTNERS ARE NOT CLAIMED BY THE APPELLANT AS THE SAME WAS NOT AUTHORIZED BY OR IS NOT IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED. THE APPELLANT HAS RELIED ON THE CIRCULAR NO.739 DATED 25.03.1996 WHEREIN THE CBDT HAS CLARIFIED THAT NO DEDUCTION 40(B)(V) OF THE ACT WILL BE ADMISSIBLE UNLESS THE PARTNERSHIP DEED EITHER SPECIFIES THE AMOUNT OF REMUNERATION PAYABLE TO EACH INDIVIDUAL WORKING PARTNER OR LAYS DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. THE CLAUSE OF THE PARTNERSHIP DEED SPECIFICALLY RESTRICTS PAYMENT OF INTEREST TO PARTNERS ON THEIR CAPITAL AS WELL AS REMUNERATION TO PARTNERS. THIS IS THE MAIN REASON WHY THE APPELLANT HAS NOT CLAIMED BOTH THE EXPENSES AGAINST THE BUSINESS INCOME SHOWN IN INCOME TAX RETURN. 6.1.3. THE AO HAS MAINLY RELIED IN THE CASE OF MERIDIAN IMPEX (SUPRA) TO DISALLOW THE INTEREST ON CAPITAL PARTNER REMUNERATION BUT THE FACTS IN THIS CASE OF MERIDIAN IMPEX (SUPRA) WAS DIFFERENT AS THERE WAS THE SPECIFIC CLAUSE REGARDING THE PAYMENT OF INTEREST ON CAPITAL AND PARTNERS REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED AT THE TIME OF SCRUTINY ASSESSMENT AND THE SUPPLEMENTARY DEED WAS MADE AMENDING ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 8 OF 11 THE CLAUSE REGARDING NON-PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS. THIS SUPPLEMENTARY DEED WAS NOT SUBMITTED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. IN THE INSTANT CASE, THE PARTNERSHIP DEED ITSELF DOES NOT HAVE ANY CLAUSE PERTAINING TO PAYMENT OF INTEREST AND REMUNERATION TO THE PARTNERS. 6.1.4 THIS ISSUE CAME UP FOR CONSIDERATION BEFORE THE JURISDICTIONAL ITAT BENCH AHMEDABAD, IN THE CASE OF M/S SAGAR FOODS AND SHREEJI DEHYDRATE EXPORT, 2017 (3) TMI 1297. THE HON'BLE BENCH, IN ITS ORDER DATED 22.02.2017, HELD THAT THE AO COULD NOT HAVE COMPELLED THE APPELLANT TO CHARGE INTEREST OR REMUNERATION BY INVOKING SECTION 40(B)(V) OF THE ACT. SIMILARLY IN THE CASE OF M/S AL REZA FOOD VS. ITO, WARD-2(4), BHAVNAGAR 2017 (3) TMI 1237 ITAT AHMEDABAD SIMILAR VIEW WAS TAKEN RELYING ON THE JUDGMENT IN THE CASE OF M/S SAGAR FOOD AND SHREEJI DEHYDRATE EXPORTS VS. ITO, WARD-2(4), BHAVNAGAR. IN A RECENT DECISION OF HON'BLE GUJARAT IN THE CASE OF ALIDHARA TAXSPIN ENGINEERS, TAX APPEAL NO.265 OF 2017 DATED 02.05.2017 HELD THAT MERE INCORPORATION OF INTEREST PARTNERS CAPITAL ACCOUNT AND REMUNERATION DOES NOT SIGNIFY THAT THE SAME ARE MANDATORY IN NATURE. THESE DECISIONS OF THE JURISDICTIONAL HIGH COURT AND ITAT BENCH AHMEDABAD ARE SQUARELY APPLICABLE IN THIS CASE OF THE APPELLANT. THE APPELLANT HAS NOT CHARGED ANY INTEREST AND REMUNERATIONS AS PER THE PARTNERSHIP DEED AND THEREFORE, THE APPELLANT CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION. 6.1.5 IN VIEW OF THE ABOVE FACTS, THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTEREST AND REMUNERATION OF 10AA DEDUCTION IS ERRONEOUS AND INCORRECT IN LAW AND FACTS. THE PARTNERSHIP DEED CLEARLY LAYS DOWN THAT NO INTEREST AND REMUNERATION IS PAYABLE AND THEREFORE THE ADDITION MADE BY THE AO IS DELETED AND THE GROUNDS OF APPEAL IS ALLOWED. 9. WE FURTHER FIND THAT THE ISSUE IS COVERED BY THE ORDER OF IN ACIT, CIRCLE-1(2), SURAT VS. RUTA JEWELS FOR A.Y. 2013-14 & 2014- 15 [ITA NOS.195/SRT/2017 & 205/SRT/2018 DATED 26.10.2018] HELD AS UNDER :- 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, FROM THE RELEVANT OPERATIVE PART OF FIRST APPELLATE ORDER, ESPECIALLY PARAS 6.1.3 & 6.1.4, WE OBSERVE THAT THE AO HAS RELIED ON THE ORDER OF ITAT, RAJKOT 6.1.4, WE OBSERVE THAT THE AO HAS RELIED ON THE ORDER OF ITAT, RAJKOT BENCH IN THE CASE OF MERIDIAN IMPEX 37 TAXMANN.COM 22 (2013) BUT THE FACTS OF THE CASE ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS IN THAT CASE THERE WAS A SPECIFIC LOSS IN THE PARTNERSHIP DEED REGARDING PAYMENT OF INTEREST ON CAPITAL AND PARTNERS REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED DURING SCRUTINY PROCEEDINGS. ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 9 OF 11 SUBSEQUENTLY, A SUPPLEMENTARY/ADDENDA TO SAID PARTNERSHIP DEED WAS MADE AMENDING THE SAID CLAUSE PROVIDING THE CLAUSE OF NON-PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNERS, WHICH WAS NOT SUBMITTED BEFORE AO DURING ASSESSMENT PROCEEDINGS BUT 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 DISTINCT AND DISSIMILAR FACTS AND CIRCUMSTANCES. 7. FURTHER, FROM THE DECISION OF THE HON'BLE 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 ACCOUNT AND REMUNERATION DOES NOT SIGNIFY THAT THE SAME ARE MANDATORY IN NATURE. AS WE HAVE NOTED ABOVE, IN THE PRESENT CASE THE APPELLANT HAS NOT CHARGED ANY INTEREST AND REMUNERATION ASPER PARTNERSHIP DEED THEREFORE, THE APPELLANT FIRM CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION. THEREFORE, WE ARE INCLINED TO HOLD THE LD. CIT(A) WAS RIGHT IN OBSERVING THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON-PROVISION OF INTEREST AND REMUNERATION OF S. 10AA OF THE ACT DEDUCTION IS ERRONEOUS AND INCORRECT AND LAW AND 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 REMUNERATION FROM AMOUNT OF DEDUCTION U/S. 10AA OF THE ACT. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS OF REVENUE ARE DISMISSED. 10. CONSIDERING THE TOTALITY OF FACTS AND IN THE LIGHT OF THE ABOVE DECISION OF TRIBUNAL IN THE CASE OF RUTA JEWELS (SUPRA). WE FIND THAT IN THE PRESENT CASE, THE ASSESSEE FIRM HAS NOT CHARGED ANY INTEREST AND REMUNERATION AS PER PARTNERSHIP DEED DOES NOT PRESCRIBED SO, THEREFORE, THE ASSESSEE FIRM CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION. THEREFORE, WE ARE INCLINED TO HOLD THE LD. CIT(A) WAS RIGHT IN OBSERVING THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON-PROVISION OF INTEREST AND REMUNERATION OF CANNOT BE DISALLOWED UNDER SECTION 10AA(9) OF THE ACT. HENCE, DISALLOWANCES SO MADE BY THE AO ARE FOUND TO BE ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 10 OF 11 ERRONEOUS AND INCORRECT IN LAW AND 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 CIT (A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON-PROVISION OF INTEREST AND REMUNERATION FROM AMOUNT OF DEDUCTION UNDER SECTION 80IA(10) READ WITH SECTION 10AA(9) OF THE ACT. WE FURTHER OBSERVED THAT THE ISSUE IS COVERED BY THE DECISION CO-ORDINATE BENCH OF ITAT, SURAT IN FAVOUR OF THE ASSESSEE IN THE CASE OF RUTA JEWELS (SUPRA) AND NO REASON TO DEVIATE WITH THE FINDING OF LD. CIT(A), ACCORDINGLY SAME IS UPHELD. THUS, THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE ORDER OF LEARNED CIT (A) IT AND THUS, WE CONFIRM THE SAME. ACCORDINGLY, ALL GROUNDS OF APPEAL IN ITA NO.196/SRT/2017 OF THE REVENUE ARE DISMISSED. 11. SINCE THE FACTS AND CIRCUMSTANCES IN ABOVE ITA NO.196/SRT/2017 FOR A.Y. 2013-14 ARE IDENTICAL AS OF FACTS AS IN 239/SRT/2018 FOR A.Y.2014-15, THEREFORE, THE REASONING AND FINDINGS GIVEN A.Y. 2013-14 WOULD MUTATIS-MUTANDIS APPLY TO THIS APPEAL FOR THE ASSESSMENT YEAR 2014-15 ALSO. THEREFORE, FOLLOWING THE SAME, WE DISMISS THE APPEAL OF THE REVENUE IN RESPECT OF ALL GROUNDS OF APPEAL FOR A.Y. 2014-15 ALSO. ACIT, CIRCLE -1(2), SURAT VS. GUNJAN EXPORTS/ITA NOS.196/SRT/2017 & 239/SRT/2018: A.Y.2013-14 & 14-15 PAGE 11 OF 11 12. IN THE RESULT, THE ABOVE TWO CAPTIONED APPEALS OF THE REVENUE FOR THE ASSESSMENT YEAR 2013-14 AND 2014-15 ARE DISMISSED. 13. THE ORDER PRONOUNCED IN THE OPEN COURT 06.06.2019. SD/- SD/- (RAM LAL NEGI) (O.P.MEENA) ( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER) / SURAT, DATED : 6 TH JUNE , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT