DcCIT, Circle-1(1)(1(, Surat, Surat V. Argine Jewels, Surat, Surat

ITA 239/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2409 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-03-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 22-12-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Set aside
• Section: 28; 143(3); 40(b); 10AA; 43D; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 239/SRT/2020 (AY 2013-14) (Hearing in Virtual Court) Deputy Commissioner of Income-Tax, Circle-1(1)(1), Room No.118, 1 st Floor, Ayakar Bhavan, Majura Gate, Surat-395001 Vs Argine Jewels, 10, Kastrubha Nagar Society, Nr. Baroda Prestige, Varachha Road, Surat-395 006 PAN : AAPFA 6045 E Appellant / Revenue Respondent / assessee Assessee by Shri Mehul Shah, C.A Revenue by Shri H.P.Meena, CIT-DR Date of hearing 11.03.2022 Date of pronouncement 11.03.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-2 Surat [for short to as ‘CIT(A)’] dated 28.08.2017 for assessment year (AY) 2013-14, which in turn arises out assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’) vide order dated 31.03.2016. The Revenue has raised the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of assessee on deduction u/s 10AA of Rs.7,80,89,398/- in spite of the fact that the assessee claimed excess deduction without allowing the interest and remuneration to partners which was otherwise taxable in the hands of partners. 2. The assessee has tried to cover its intentions behind the provisions of section 40(b) of taking undue benefits of section 10AA by making reverse interpretation of the ITA No.239/SRT/2020 (A.Y 13-14) Argine Jewels. 2 same which says that a firm is entitled for claim of remuneration and interest paid to partners only if the same is authorized in the Partnership Deed. 3.The income in the hands of the a firm was computed in terms of Sec 28 to 43D and Sec 40(b) in respect of allowance of interest and salary falls between these two provisions and therefore full effect has to be given to this provisions also. Hence, the action of the AO was in accordance of the existing law and provisions. 4.It is, therefore, prayed that the order of the Ld. CIT(A) maybe set aside and that of Assessing Officer maybe restored to the above extent.” 2. At the outset of hearing, the Ld. Authorized Representative (AR) for the assessee submits that grounds of appeal raised by Revenue are covered by the judgment of Hon'ble jurisdictional High Court in the case of Pr. Commissioner of income Tax vs. Alidhra Taxspin Engineers Tax Appeal No.265 of 2017 dated 02.05.2017, wherein it was held merely incorporation of interest on partners’ capital account and remuneration does not signify that same are in mandatory in nature. The Ld. AR for the assessee submits that the Ld. CIT(A) while granted relief to the assessee has relied on the decision of Hon'ble jurisdictional High Court in the case of Alidhra Taxspin Engineers (supra). The Ld. AR of the assessee further submits that there is no such clause in the partnership deed, which may entitle the partners to claim interest and/ or remuneration to the partners. 3. On the other hand, Ld.Commissioner of Income Tax-Departmental Representative (CIT-DR) for the Revenue supported the order of Assessing Officer. The Ld. CIT-DR submits that co-ordinate Bench of Rajkot Bench in the case of ACIT vs. Meridian Impex (37) Taxmnann.com 22 (2013), held that ITA No.239/SRT/2020 (A.Y 13-14) Argine Jewels. 3 interest and remuneration to partners are allowable, though it was not mentioned in the partnership deed. Therefore the Assessing Officer rightly disallowed the claim to that extent while allowing deduction under section 10AA of the Act. The ld DR for the revenue also relied on the decisions of Rajkot Tribunal in ITO Vs Devine Impex (ITA No. 279/Rjt/2012) and Chandigarh Tribunal in ITO Vs Shivam Industries (ITA No. 510/Chd/2012). 4. We have considered the submission of both the parties and have gone through the order of lower authorities carefully. During the assessment, the Assessing Officer noted that assessee has claimed deduction under section 10AA of Rs.7.80 crores. The Assessing Officer further noted that assessee has not claimed interest & remuneration to the partners from business income. The Assessing Officer relying upon the decision of Meridian Impex (supra) ITO Vs Devine Impex (supra) and in ITO Vs Shivam Industries (supra) held that non- charging of interest on the capital investment and no remuneration for working partners, the assessee has enhanced the profit which is exempted from taxation. We find that the assessee claimed deduction under section 10AA of Rs. 12.08 Crore. The Assessing Officer worked out the payment of interest and remuneration of partners of Rs.7.80 crores and restricted the deduction under section 10AA to the extent of Rs. 4.27 Crore. On appeal before Ld. CIT(A), the assessee relied on several case laws including the decision of Alidhra Taxspin ITA No.239/SRT/2020 (A.Y 13-14) Argine Jewels. 4 Engineers (supra).The Ld. CIT(A) after considering the decision of Meridian Impex (supra) and the judgment of Hon'ble jurisdictional High Court in the case of Alidhra Taxspin Engineers (supra) held that partnership deed clearly laid down that no interest and remuneration is payable, therefore addition made by Assessing Officer is deleted. We find that the Ld. CIT(A) while passing the impugned order followed the judgment of Hon'ble jurisdictional High Court in the case of Alidhra Taxspin Engineers (supra), which is a binding precedent. In view of the aforesaid discussion, we do not find any infirmity in the order passed by Ld. CIT(A), no contrary fact or law is brought to our notice to take other view, which we affirm. In the result the grounds of appeal raised by the revenue are dismissed. 5. In the result, the appeal of the Revenue is dismissed. Order pronounced in open court on 11/03/2022 by placing result on notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 11/03/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Assistant Registrar, ITAT, Surat