M/s. Surjit Cold Storage and ICE Factory, Hoshiarpur V. The Income-tax Officer, Dasuya

ITA 246/ASR/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0608 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: PARAMJIT SINGH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.246(ASR)/2011 ASSESSMENT YEAR:2005-06 PAN :AAVFS8786L M/S. SURJIT COLD STORAGE AND VS. INCOME TAX OFFIC ER, ICE FACTORY, VILL. JAJJA, TEHSIL DASUYA. DASUYA, DISTT. HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. PARAMJIT SINGH RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING: 02/01/2013 DATE OF PRONOUNCEMENT:04/01/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED18.02.12011 FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS RAISED SOLITARY GROUND OF APPEAL, WHICH READS A S UNDER: 1. THAT THE LD. CIT(A), JALANDHAR, IS NOT JUSTIFIE D IN LAW IN CONFIRMING ASSESSMENT OF INTEREST INCOME OF RS.63,8 33/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.246(ASR)/2011 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD CREDITED INTEREST ON FDRS AT RS.63,833/- IN THE PROFIT & LOSS ACCOUNT. T HE AO TREATED THE SAME AS INCOME FROM OTHER SOURCES AS AGAINST THE BUSINES S INCOME AS PER ASSESSEES RETURN OF INCOME. CONSEQUENTLY, SALARY T O PARTNERS CLAIMED AT RS.84000/- IN THE RETURN OF INCOME WAS REDUCED TO R S.50,000/- UNDER SECTION 40(B) OF THE ACT. 3. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, REL IED UPON THE SUBMISSIONS AND ARGUMENTS MADE BEFORE THE LD. CIT(A). 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE INTEREST I NCOME ON SURPLUS FUNDS HAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURC ES, IN VIEW OF THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS VS. CIT REPORTED IN 262 ITR 278, CIT VS. DR. V.P. GOPIN ATHAN REPORTED IN 248 ITR 449 AND TUTICORIN ALKALI CHEMICALS & FERTILIZE RS LTD. VS. CIT 227 ITR 127 (SC). THEREFORE, THE AO HAS RIGHTLY TREATED THE SAID INTEREST INCOME ON SURPLUS FUNDS AS INCOME FROM OTHER SOURCES. ITA NO.246(ASR)/2011 3 5. HOWEVER, THE LD. CIT(A) IS NOT JUSTIFIED IN CONF IRMING THE ACTION OF THE A.O. WITH REGARD TO THE ALLOWANCE OF SALARY TO PARTNERS AT RS.50,000/- U/S 40(B) AS AGAINST RS.84,000/- CLAIMED BY THE ASSESSE E. IN VIEW OF THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF ACIT VS. SHETH BROTHERS (2006) 99 TTJ 189 (RAJ-TRIB), WHERE IT HAS BEEN HELD THAT SECTIO N 40(B) ADOPTS THE NET PROFIT AS SHOWN IN THE PROFIT & LOSS A/C OF THE FI RM AS THE BASIS FOR ALLOWING DEDUCTION ON ACCOUNT OF REMUNERATION TO PARTNERS. I N VIEW OF EXPLANATION 3 TO SECTION 40(B)(V), THE LEGISLATURE HAS NOT AUTHOR IZED EXCLUSION OF NON- BUSINESS RECEIPTS RECORDED IN THE PROFIT & LOSS A/C AND WHOLE INCOME OF THE FIRM UNDER DIFFERENT HEADS IS LIABLE TO BE ASSESSED IN THE HANDS OF THE FIRM AND REMUNERATION TO PARTNERS DEBITED TO PROFIT & LO SS A/C CANNOT BE BROKEN DOWN INTO DIFFERENT COMPONENTS, TO BE ALLOCATED TO THE INCOME COMPUTED UNDER DIFFERENT HEADS, THE INCOME EMBEDDED IN THE N ET PROFIT AS APPEARING IN THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FIRM IS T O BE TAKEN INTO CONSIDERATION FOR ALLOWING DEDUCTION OF REMUNERATIO N PAID TO PARTNERS UNDER SECTION 40(B) WITHOUT EXCLUDING THE INTEREST INCOME WHICH FORMED PART OF THE BOOK PROFIT. SIMILAR FINDINGS HAVE BEEN GIVEN BY TH E ITAT, JAIPUR BENCH IN THE CASE OF S.P. EQUIPMENT & SERVICES VS. ACIT (20 10 ) 36 SOT 325, DATED 30 TH SEPTEMBER, 2009. IN VIEW OF THE DECISION OF THE CO -ORDINATE BENCH AS OF THE TRIBUNAL REFERRED TO HEREINABOVE AND EXPLANA TION (3) TO SECTION 40(B), ITA NO.246(ASR)/2011 4 THE AO IS REQUIRED TO ALLOW DEDUCTION ON SALARY TO PARTNERS AS CLAIMED BY THE ASSESSEE INCLUDING THE INTEREST INCOME. THOUGH THIS GROUND WAS NOT TAKEN SPECIFICALLY BY THE ASSESSEE BEFORE US, BUT WITHIN OUR POWERS, WE ORDER ACCORDINGLY AND DIRECT THE A.O. EVEN IF THE INTERE ST INCOME OF 63,833/- IS TREATED AS INCOME FROM OTHER SOURCES, THE ASSESSEE HAS TO BE ALLOWED SALARY TO PARTNERS AT RS.84,000/- AS CLAIMED IN THE RETURN OF INCOME. THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.246(ASR)/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH JANUARY, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 4THS JANUARY, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SURJIT COLD STORAGE & ICE FACTOR Y, HOSHIARPUR. 2. THE ITO DASUYA. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL,