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

ITA 240/SRT/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0110 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 10AA

Judgement Text

ACIT 1(2) SURAT V. ARAV DIAMOND /I.T.A. NO.240/SRT/2018/A.Y.12-13 PAGE 1 OF 4 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.240/SRT/2018: / ASSESSMENT YEAR: 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 1(2) SURAT V. M/S. ARAV DIAMOND, PLOT NO. 139, SURAT SPECIAL ECONOMIC ZONE, SACHIN, SURAT 395001 APPELLANT / RESPONDENT ASSESSEE BY MS. MITALI SHAH CA, SHRI DEVEN KAPADIA CA REVENUE BY SHRI PRASOON KABRA, SR. D.R. DATE OF HEARING 15 .05.2019 DATE OF PRONOUNCEMENT 15 .05.2019 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT (IN SHORT THE CIT (A)) DATED 19.01.2018 PERTAINING TO ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 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) 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 FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.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 ACIT 1(2) SURAT V. ARAV DIAMOND /I.T.A. NO.240/SRT/2018/A.Y.12-13 PAGE 2 OF 4 10AA OF THE ACT AND THUS, DEVOIDING THE REVENUE FROM DUE AMOUNT OF TAX? 3. WE HAVE HEARD THE ARGUMENTS OF LD. DR AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. 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) 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 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 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 DELETED BY THE LD. CIT(A) WITHOUT ANY SUSTAINABLE GROUND. THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 4. PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ALIDHARA TAXPRO ENGINEERING (P) LTD. V. DCIT [2010] 189 TAXMAN 164 AND DECISION OF SURAT BENCH OF TRIBUNAL IN THE CASE OF ACIT V. MUKTA ENTERPRISE [2018] 100 TAXMANN.COM 33 (SURAT- TRIB). ACIT 1(2) SURAT V. ARAV DIAMOND /I.T.A. NO.240/SRT/2018/A.Y.12-13 PAGE 3 OF 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AO HAS RELIED ON THE ORDER OF 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 LOSS IN THE PARTNERSHIP DEED REGARDING PAYMENT OF INTEREST ON CAPITAL AND PARTNERS REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED DURING SCRUTINY PROCEEDINGS. 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. 6. FURTHER, FROM THE BINDING 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 ACIT 1(2) SURAT V. ARAV DIAMOND /I.T.A. NO.240/SRT/2018/A.Y.12-13 PAGE 4 OF 4 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. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 1. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.05.2019 SD/- SD/- (BHAVNESH SAINI) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 15 TH MAY, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT