Dinamalar, Tirunelveli V. DCIT, Tirunelveli

ITA 25/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4388 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: P RADHAKRISHNAN
• Keywords: Depreciation; Business expenditure; Corroborative evidences; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !.. $ , ) BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.25/MDS/2017 * * /ASSESSMENT YEAR: 2012-13 M/S.DINAMALAR, 5D, TRIVANDRUM ROAD, VANNARPETTAI, TIRUNELVELI-627 003. VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUNELVELI. [PAN: AAAFD 66 40 H ] ( - /APPELLANT) ( ./- /RESPONDENT) ./ ITA NO.200/MDS/2017 * * /ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, TIRUNELVELI. VS. M/S.DINAMALAR, 5D, TRIVANDRUM ROAD, VANNARPETTAI, TIRUNELVELI-627 003. [PAN: AAAFD 6640 H ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR.P.RADHAKRISHNAN, JCIT ./- 0 /RESPONDENT BY : MR.S. SRIDHAR, ADV. 0 /DATE OF HEARING : 19.04.2017 0 /DATE OF PRONOUNCEMENT : 07.06.2017 ITA NOS.25 & 200/MDS/2017 :- 2 -: / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THESE CROSS ARE FILED BY THE ASSESSEE AND THE RE VENUE AGAINST THE ORDER DATED 27/10.2016 OF COMMISSIONER OF INCOME TA X (APPEALS)-3, CHENNAI, IN ITA NO.003 /CIT(A)-2015-16 FOR THE AY 2012- 13 AND RAISED THE FOLLOWING GROUNDS: ITA NO.200/MDS/2017 AY 2012-13 - REVENUE 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT (A) OUGHT TO HAVE CONSIDERED THE FACT THAT T HE ARBITRATION. EXPENSES INCURRED ARE NOT INCIDENTAL TO THE BUSINESS CARRIED ON BY TH E FIRM AND HENCE NOT ALLOWABLE AS BUSINESS EXPENDITURE. 3. THE CIT (A) FAILED TO CONSIDER THE FACT THAT THE ARB ITRATION EXPENSES ARE INCURRED TO RESOLVE THE DISPUTE AMONG THE PARTNERS AND ARE INCU RRED ONLY FOR THE PERSONAL BENEFITS OF THE PARTNERS. 4. THE CIT(A) FAILED TO CONSIDER THE FACT THAT THE PRIN CIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME-TAX PROCEEDINGS AND HENCE DECISION TAKEN IN A PARTICULAR YEAR ARE NOT BINDING IN A SUBSEQUENT YEAR. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THE ORDER OF THE CIT (A) MAY BE REVERSED AND THAT OF THE A.O RESTORED. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE P AYMENT OF ARBITRATION EXPENSES INCURRED BY THE ASSESSEE AMOUN TING TO RS.52,35,000/- DISALLOWED BY THE AO HOLDING THAT TH E EXPENDITURE WAS PERSONAL IN NATURE AND NOT INCURRED FOR THE PURPOSE OF BUSINESS. 3.0 THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION OBSERVING THAT THE LEGAL EXPE NSES FOR DEFENDING THE SUIT FILED BY THE PARTNERS WOULD BE REVENUE EXPENDI TURE. THE RELEVANT PART ITA NOS.25 & 200/MDS/2017 :- 3 -: OF THE LD.CIT(A) IS EXTRACTED FOR THE SAKE OF CONVE NIENCE AND CLARITY AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRES ENTATIVE. ADMITTEDLY, THE APPELLANT IS RUNNING A TAMIL DAILY BY NAME DINAMALA R AND EVEN THOUGH THERE WAS DISPUTE AMONG THE PARTNERS, THE BUSINESS CONTINUED DURING THIS YEAR AND THE SUBSEQUENT YEARS. THE HISTORY OF THE DISPUTE AS EXP LAINED BY THE APPELLANT IS AS BELOW: DINAMALAR-NATIONAL TAMILDAILY STARTED BY SRI T.V. RAMASUBBIER AT TRIVANDRUM IN 1951. IT WAS SHIFTED TO TIRUNELVELI IN 1957. IT WAS HUF BUSINESS OF SRI TV. RAMASUBBIER. HUF WAS PARTITIONED BETWEEN FATHER SRI TV. RAMASUBBIER AND SONS DR. R. VENKITAPATHY, DR. R. KRISHNAMURTHY, DR. R. L AKSHMIPATHY, SRI R. RAGHAVAN AND DR. R. SATHIAMURTHI. FROM THE YEAR 1961, IT WAS RUN AS A FIRM WITH SIX PARTNERS. IN THE YEAR 1984, SRI T.V. RAMASUBBIER EX PIRED. AFTER SRI TV. RAMASUBBIER, HIS FIVE SONS CONTINUED THE BUSINESS A S A FIRM WHILE THE WIFE OF DR. R. VENKITAPATHY, SMT. V. SAROJA WAS A PARTNER IN TH E PLACE OF DR. R. VENKITAPALHY TILL HER DEATH ON 23.03.1997. DR. R. VENKITAPATHY B ECAME ONE OF THE PARTNERS IN THE PLACE HIS WIFE AND THE NEW PARTNERSHIP DEED EXISTS FROM 23.03.1997. THE BUSINESS OF THE PARTNERSHIP AS PER DEED IS AT W ILL. IT STARTED EDITIONS AT TIRUNELVELI, NAGERCOIL, MADURAI, TRICHY, CHENNAI, V ELLORE, PUDUCHERRY, COIMBATORE, ERODE AND SALEM. IN DUE COURSE, THE PARTNERS BECAME TWO GROUPS AS FO LLOWS:- PARTNERS EDITIONS 1. DR. R. VENKITAPATHY TIRUNELVELI AND NAGERCOIL SRI R. RAGHAVAN TRICHY AND VELLORE DR. R. SATHIAMURTHI ERODE AND SALEM 2. DR. R. KRISHNAMURTHY CHENNAI AND PUDUCHERRY DR. R. LAKSHMIPATHY COIMBATORE AND MADURAI THE FIRST GROUP THOUGH CONSISTS OF THREE PARTNERS A ND CONTROLLING SIX EDITIONS THEIR REVENUE IS NEARLY 35% OF DINAMALAR TOTAL REVENUE. M OREOVER ONE PARTNER HAS SHARE OF NEARLY 20% OF THE REVENUE AND SO THE OTHER TWO PARTNERS ARE CONTROLLING ONLY 15%. THE SECOND PARTNERS DR. R. KRISHNAMURTHY AND DR. R. LAKSHMIPATHY CONTROLLING FOUR BRANCHES HAVE REVENUE OF NEARLY 65% DINAMALAR REVEN UE. THE DISPUTES AMONG THE PARTNER AROSE FOR EQUAL CONT ROL OF THE REVENUE. THE SONS OF DR. R. KRISHNAMURTHY AND DR. R. LAKSHMI PATHY INTERESTED IN THE ADMINISTRATIONS OF THE EDITIONS MANAGED BY THEIR FA THER. THEY ALSO STARTED CONNECTED BUSINESS SUCH AS MANUFACTURE OF PRINTING INK, NEWSGATHERING ETC., FURTHER THEY STARTED THE COMPETITIVE NEWSPAPER IN T HE NAME OF KALAIKADIR IN SALEM. THESE ARE SOME REASONS FOR THE DISPUTES. EVEN THOUGH THEY WERE DISPUTES AMONG THE PARTNERS, THE ACCOUNTS OF ALL EDITIONS WERE SUBMITTED TO HEAD OFFICE AT TIRUNELVELI FOR CO NSOLIDATION. THE PROFIT AND LOSS ACCOUNTS AND BALANCE SHEET WERE PREPARED AT HEAD OFF ICE AND THE INCOME TAX RETURN WAS ALSO SUBMITTED AT TIRUNELVELI. DISPUTES AMONG THE PARTNERS AROSE RESULTING IN SOME OF THE PARTNERS FILING SUITS AGAINST OTHER SEEKING VARIOUS RELIEFS, FROM THE YEA R 1999 ONWARDS. IN ORDER TO RESOLVE THEIR DISPUTES ARISING IN RELATION TO THE P ARTNERSHIP DEED, THERE IS A CLAUSE 24 AND SO THE FIRST BENCH OF THE MADRAS HIGH COURT COMPRISING OF CHIEF JUSTICE BY ITS JUDGMENT DATED 23.01.2007 IN OSA 282/2006 AND OSA 285/2006 REFERRED THE DISPUTES TO ARBITRATION. ON THE CONSTITUTION OF THE ARBITRAL TRIBUNAL, CLAIMANTS 1 TO 5 ITA NOS.25 & 200/MDS/2017 :- 4 -: FILED THEIR PLEADINGS BEFORE THE ARBITRAL PUTTING F ORTH THEIR RESPECTIVE CASES AND PRAYING FOR THE RELIEFS DETAILED IN THEIR CLAIM STA TEMENTS. FURTHER, THE ARBITRATION EXPENSES CLAIMED IN THE EA RLIER YEARS AND SUBSEQUENT YEAR WAS NOT DISALLOWED BY THE ASSESSING OFFICER EVEN WHI LE COMPLETING THE SCRUTINY ASSESSMENTS U/S.143(3). IN FACT FOR ASSESSMENT YEAR 2 013-14, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) ON 09.03.2 006 IN WHICH THE ARBITRATION EXPENSES OF RS.88,53,002/- WAS ALLOWED BY THE ASSESSING OFFICER HERSELF. THE EXPENDITURE WAS INCURRED FOR THE PURPO SE OF PROTECTING BUSINESS AND IT WOULD NOT AMOUNT TO CAPITAL EXPENDITURE. MERELY BEC AUSE THE FIRM WAS DEEMED TO HAVE BEEN DISSOLVED ON 27.02.2012 BY THE REASON OF SHRI R. SATHIYAMURTHY GIVING NOTICE OF DISSOLUTION, IT WOULD NOT MEAN THAT THE E XPENDITURE CLAIMED IS CAPITAL IN NATURE. IN SIMILAR CIRCUMSTANCES, THE HONBLE PATNA HIGH COURT IN THE CASE OF CIT VS CARD BOARD PRODUCTS [224 ITR 51] HELD THAT THE LEGAL EXPENSES FOR DEFENDING THE SUIT FILED BY THE PARTNERS WOULD BE REVENUE EXPENDI TURE. FURTHER, AS PER CLAUSE 24 OF THE PARTNERSHIP DEED OF THE APPELLANT ANY DISPUT E ARISING AMONG THE PARTNERS SHALL BE REFERRED TO THE ARBITRATION UNDER THE ARBI TRATION ACT. IN THE CIRCUMSTANCES, I FIND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE ARBITRATION EXPENSES AND THE SAME IS DELETED. 4.0 DURING THE APPEAL HEARING, THE LD.AR CONTENDED THA T THE ARBITRATION EXPENSES CLAIMED IN THE EARLIER YEARS AND SUBSEQUEN T YEAR WERE ALLOWED BY THE AO AS BUSINESS EXPENDITURE AND NO DISALLOWAN CE WAS MADE. THE ARBITRATION EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS OF THE PARTNERSHIP FIRM AND REQUIRED TO BE ALLOWED AS BUSI NESS EXPENDITURE. FOR THE AY 2013-14, THE AO COMPLETED ASSESSMENT U/S.143 (3) AND ALLOWED THE ARBITRATION EXPENSES AMOUNTING TO RS.88,53,000/ - AND IN THE YEAR UNDER CONSIDERATION THE EXPENSES WERE ONLY RS.52,3 5,000/- BUT THE AO TOOK A DIFFERENT STAND AND DISALLOWED THE EXPENSES. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE PATNA HIGH CO URT IN THE CASE OF CIT V. CARD BOARD 224 ITR 51. 5.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. IN THIS CASE, THE DISPUTES AROSE AMONG THE PARTNER S FOR EQUAL CONTROL OF THE BUSINESS AND REVENUE. THE PARTNERS HAVE FIL ED SUITS AGAINST EACH ITA NOS.25 & 200/MDS/2017 :- 5 -: OTHER SEEKING VARIOUS RELIEFS FROM THE YEAR 1990 ON WARDS AND IN ORDER TO RESOLVE THE DISPUTE THE HONBLE MADRAS HIGH COURT R EFERRED THE DISPUTES TO THE ARBITRATION. SINCE THE DISPUTES AROSE REGARDIN G THE CONTROL OF THE REVENUE AMONG THE PARTNERS IT IS NO WAY CONNECTED T O THE RUNNING OF THE BUSINESS OF THE FIRM. ON VERIFICATION OF THE DETAI LS FURNISHED IN LD.CIT(A) ORDER, IT IS SEEN THAT IN AYS 2007-08, 2009-10 HUGE AMOUNTS WERE SPENT FOR ARBITRATION BUT THE PROCEEDINGS CONTINUED TO BE PENDING. ARBITRATION NORMALLY WOULD BE SETTLED IN SHORT SPAN OF TIME I.E . SIX MONTHS TO ONE YEAR WHERE AS IN THE INSTANT CASE ARBITRATION IS GOING O N FOR 7 TO 8 YEARS AND THE ASSESSEE IS INCURRING HUGE EXPENSES ON ACCOUNT OF ARBITRATION YEAR AFTER YEAR. NEITHER THE AO NOR THE LD.CIT(A) HAS E XAMINED THE ISSUE WHETHER THE ARBITRATION IS AROSE FOR PERSONAL PURPO SES OR FOR RUNNING THE BUSINESS AMONG THE PARTNERS? WHETHER THE SAME ARBI TRATOR IS CONTINUING OR DIFFERENT ARBITRATORS ARE APPOINTED ALSO REQUIRE FURTHER CONSIDERATION. THE AO AND THE LD.CIT(A) HAS NOT GONE INTO THE DETA ILS OF ACTUAL AMOUNT PAID TO THE ARBITRATOR FOR ALL THE YEARS AND THE AC TUAL EXPENDITURE INCURRED IN CONNECTION WITH ARBITRATION. FURTHER, ONE OF TH E PARTNERS HAS GIVEN NOTICE FOR DISSOLUTION OF THE FIRM ON 27.02.2012, S INCE THE PARTNERSHIP FIRM IS AT WILL, IT STANDS DISSOLVED BY ANY PARTNER GIVI NG NOTICE IN WRITING TO ALL THE OTHER PARTNERS OF HIS INTENTION TO DISSOLVE THE FIRM AND THE EXPENDITURE INCURRED FOR ARBITRATION NO LONGER BE THE EXPENDITU RE OF THE FIRM. FACTS REGARDING THE GENUINENESS OF EXPENDITURE, THE REASO NS FOR CONTINUATION OF ARBITRATION FOR LONG PERIOD AND EXPENDITURE INCURR ED FROM 2008-09 TO TILL DATE, THE ISSUE ON WHICH THE HONBLE JURISDICTIONAL HIGH COURT REFERRED THE ITA NOS.25 & 200/MDS/2017 :- 6 -: MATTER TO ARBITRATION AND ANY FRESH ISSUE HAS COME UP IN THE ARBITRATION PROCEEDINGS REQUIRE FURTHER VERIFICATION AT THE END OF THE AO. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE SHO ULD GO BACK TO THE FILE OF THE AO FOR VERIFICATION AND TO DECIDE THE ISSUE AFRESH ON MERITS. ACCORDINGLY, THE REVENUES APPEAL ON THIS ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 6.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSE. ITA NO.25/MDS/2017 AY 2012-13 7.0 GROUND NOS.1, 10 & 11 ARE GENERAL IN NATURE AND TH E LD.AR DID NOT MAKE ANY ARGUMENT. HENCE THESE GROUNDS ARE DISMISS ED AS NOT PRESSED. 7.1 GROUND NOS.2, 3 & 4 ARE RELATED TO THE DEPRECIATIO N CLAIMED BY THE ASSESSEE ON TEMPORARY SHED @100%. 7.2 DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT THE ASSESSEE HAS CLAIMED THE DEPRECIATION @100% ON TEMPORARY SHE DS OF RS.77,41,599/-. THE AO EXAMINED THE ISSUE IN DETAI L AND FOUND EXCEPT A BILL FOR RS.2,65,500/- ALL THE OTHER CAPITAL EXPEN SES ARE IN THE NATURE OF FURNITURE & FIXTURES AND EXTENSION OF EXISTING STRU CTURES. THE AO ISSUED SHOW CAUSE NOTICE AND THE ASSESSEE COULD NOT SUBSTA NTIATE ITS CLAIM ESTABLISHING THAT THE AMOUNT WAS INCURRED FOR ERECT ION OF TEMPORARY ITA NOS.25 & 200/MDS/2017 :- 7 -: STRUCTURES. THEREFORE, THE AO TREATED THE ENTIRE A MOUNT OF EXPENDITURE AS FURNITURE & FIXTURES AND ALLOWED THE DEPRECIATION @ 10% AND DISALLOWED THE EXCESS DEPRECIATION AMOUNTING TO RS.69,91,462/- . 7.3 ON APPEAL, THE LD.CIT(A) EXAMINED THE DETAILS AND CONFIRMED THE DISALLOWANCE OF RS.18,29,189/- PERTAINING TO TEMPOR ARY ROOM FOR WORKERS AND RS.7,92,380/- RELATED TO TEMPORARY SHED FOR PAR KING THE VEHICLES AND THE REMAINING ADDITION MADE BY THE AO WAS DELETED B Y THE LD.CIT(A). THE LD.CIT(A) EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS CONSTRUCTED A TEMPOR ARY ROOM FOR WORKERS AT A COST OF RS.18,29,189/- AND TEMPORARY SHED FOR PARKING THE VEHICLES AT A COST OF RS.7,92,320/- WHICH WAS NOT A TEMPORARY C ONSTRUCTION BUT IT IS A PERMANENT STRUCTURE. 7.4 DURING THE APPEAL, THE LD.AR ARGUED THAT THE CIT (A) HAS NOT APPRECIATED THE FACTS, AND IN FACT THE TEMPORARY RO OM FOR WORKERS AND PARKING SHED ALSO A TEMPORARY STRUCTURE ENTITLED FO R 100% DEPRECIATION. FURTHER THE AR SUBMITTED THAT THE ISSUE MAY BE RE MITTED BACK TO THE FILE OF THE AO FOR MAKING FURTHER VERIFICATION AND TO DE CIDE THE ISSUE ON THE MERITS. ON THE OTHER HAND, THE LD.DR ARGUED THAT T HE ASSESSEE HAS NOT SUBMITTED ANY SUPPORTING EVIDENCE EITHER BEFORE THE LD.CIT(A) OR BEFORE THE AO AND EVEN BEFORE THE TRIBUNAL AT THE TIME OF HEARING TO SUPPORT THE CONSTRUCTION WORK CARRIED ON IN THE PRESS PREMISES OF MADURAI IS A TEMPORARY CONSTRUCTION. BOTH THE SHED FOR PARKING V EHICLES AND THE ITA NOS.25 & 200/MDS/2017 :- 8 -: TEMPORARY ROOM FOR WORKERS WAS CONSTRUCTED IN THE P RESS PREMISES OF MADURAI. SINCE THE LD.CIT(A) HAS EXAMINED THE DETA ILS AND GIVEN A FINDING THAT THE CONSTRUCTIONS RELATING TO THE TEMP ORARY ROOM FOR WORKERS AND PARKING SHED WAS A PERMANENT STRUCTURE, THERE IS NO NEED TO REMIT BACK TO THE FILE OF THE AO AND PLEADED THE TRIBUNAL TO CONFIRM THE ADDITION. 7.5 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED ON RECORD. THE ASSESSEE HAS CLAIMED A SUM OF RS.77,41,599/- A S 100% DEPRECIATION RELATING TO TEMPORARY STRUCTURES IN TH E FACTORY PREMISES. THE ASSESSEE DID NOT FURNISH ANY DETAILS BEFORE THE AO. THEREFORE, THE AO DISALLOWED 100% DEPRECIATION CLAIMED BY THE ASSESSE E AND ALLOWED 10% OF DEPRECIATION TREATING THE CONSTRUCTION AS FURNIT URE & FIXTURES. THE LD.CIT(A) CALLED FOR THE DETAILS AND EXAMINED THE D ETAILS ELABORATELY AND ALLOWED A SUM OF RS.51.20 LAKHS AND CONFIRMED THE R EMAINING AMOUNT OF RS.27.21 LAKHS AFTER CLEARLY ANALYZING THE FACTS AS DISCUSSED IN PARA NO.5.3.2 AS UNDER: 5.3.2. REGARDING THE EXPENDITURE CLAIMED IN MADURAI , IT IS SEEN THAT THE APPELLANT HAS ENTERED INTO A LEASE AGREEMENT ON 01.04.2011 AND IN CURRED VARIOUS EXPENDITURES. THE NATURE OF EXPENDITURE HAS BEEN LISTED OUT IN THE PR ECEDING PARAGRAPH. AS SEEN FROM THE SAME, THE APPELLANT HAS CONSTRUCTED A TEMPORARY ROO M FOR WORKERS AT A COST OF RS.18,29,189/- AND THE SAME CANNOT BE TREATED AS PU RELY TEMPORARY ERECTION WHICH IS ENTITLED TO 100% DEPRECIATION. SIMILARLY, THE APPEL LANT HAS CONSTRUCTED TEMPORARY SHED FOR PARKING VEHICLES AT A COST OF RS.7,92,320/- WHICH C ANNOT BE TREATED AS PURELY TEMPORARY ERECTION ENTITLED TO 100% DEPRECIATION. I THEREFORE , CONFIRM THE ACTION OF THE ASSESSING OFFICER IN RESPECT OF THE ABOVE RS.18,29,189/- AND R S.7,92,320/-. ITA NOS.25 & 200/MDS/2017 :- 9 -: THOUGH, THE LD.AR ARGUED THAT THE ASSESSEE HAS MAD E TEMPORARY STRUCTURE IN THE PRESS PREMISES AND REQUESTED TO RE MIT THE MATTER BACK TO THE FILE OF THE AO, NO FRESH MATERIAL HAS NOT BEEN PLACED BEFORE US TO RE- EXAMINE THE ISSUE OR NO ERROR WAS POINTED OUT IN TH E FINDING GIVEN BY THE LD.CIT(A). THE LD.CIT(A) HAS GIVEN A CLEAR FINDING THAT ROOM FOR WORKERS AND SHED FOR PARKING FOR VEHICLES WAS NOT TEMPORAR Y STRUCTURE. THEREFORE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE ASSESSEES APPEAL ON THIS GROUND IS DISMISSED. 8.0 GROUND NO.6 IS RELATED TO THE SALARY PAYMENTS TO P ARTNERS AMOUNTING TO RS.1,65,515/- AND INTEREST PAYMENT TO PARTNERS AGGREGATING TO RS.19,36,411/- DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND TH AT ONE OF THE PARTNERS MR.R.SATYA MURTHY HAS GIVEN NOTICE TO THE PARTNERS FOR DISSOLUTION OF THE FIRM ON 27.02.2012. THIS FACT H AS NOT DISPUTED BY THE ASSESSEE AND THE FIRM STANDS DISALLOWED AS ON 27.02 .2012. ACCORDINGLY, THE AO HELD THE FIRM AS A AOP AND DISALLOWED THE PAYMENT OF SALARY AND INTEREST PAYMENT MADE TO PARTNERS FOR THE PERIOD FR OM 27.02.2012 TO 31.03.2012 WHICH WORKED OUT TO RS.1,65,515/- IN THE CASE OF SALARY AND RS.19,36,411/- IN THE CASE OF INTEREST. THE LD.AR ARGUED THAT THE AO ASSESSED THE STATUS OF THE ASSESSEE AS FIRM, THE PA RTNERS HAVE ALREADY FILED THEIR RETURNS OF INCOME IN WHICH THE SALARY A ND INTEREST RECEIVED WAS ITA NOS.25 & 200/MDS/2017 :- 10 -: ADMITTED TO TAX. THE AO DID NOT MAKE ASSESSMENT OF THE FIRM FOR THE PERIOD FROM 27.02.2012 TO31.03.2012 SEPARATELY IN T HE STATUS OF THE AOP, HENCE, THE LD.AR CONTENDED THAT THE SALARY AND INTE REST IS AN ADMISSIBLE DEDUCTION. 8.1 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. MR.R.SATYA MURTHY ONE OF THE PARTNERS OF THE FIRM HAS GIVEN A NOTICE OF DISSOLUTION ON 27.02.2012 UNDER PARTNERSHIP ACT, 1932. AS PER SEC.43 OF PARTNERSHIP ACT, IN THE CASE OF PARTNER AT WILL IF ANY OF THE PARTNERS GIVES A DISSOLUTION NOTICE TO ALL THE PARTNERS, TH E PARTNERSHIP FIRM GETS DISSOLVED FROM THE DATE MENTIONED IN THE NOTICE OR IF NO DATE IS MENTIONED, FROM THE DATE OF THE COMMUNICATION OF TH E NOTICE. FOR READY REFERENCE, WE REPRODUCE SEC.43 OF PARTNERSHIP ACT, 1932 WHICH READS AS UNDER: 43. DISSOLUTION BY NOTICE OF PARTNERSHIP AT WILL - (1) WHERE THE PARTNERSHIP IS AT WILL THE FIRM MAY BE DISSOLVED BY ANY PARTNER GIVING NOTICE IN WR ITING TO ALL THE OTHER PARTNERS OF HIS INTENTION TO DISSOLVE THE FIRM. (2) THE FIRM IS DISS OLVED AS FROM THE DATE MENTIONED IN THE `NOTICE AS THE DATE OF DISSOLUTION OR, IF NO DATE I S SO MENTIONED, AS FROM THE DATE OF THE COMMUNICATION OF THE NOTICE. FROM THE SEC.43 OF PARTNERSHIP ACT, IT IS CLEAR TH AT THE FIRM GETS DISSOLVED FROM THE DATE OF THE COMMUNICATION OF THE NOTICE. IN THE ASSESSEES CASE, ONE OF THE PARTNERS SHRI R. SATYA MURTHY GAVE A NOTICE OF DISSOLUTION ON 27.02.2012 WHICH IS AN UNDISPUTED FA CT. AS PER THE PARTNERSHIP ACT, THE FIRM SEIZED TO EXIST FROM 27.0 2.2012 AND THE ITA NOS.25 & 200/MDS/2017 :- 11 -: ASSESSEE IS NOT ENTITLED FOR PAYMENT OF INTEREST AN D SALARY TO THE PARTNERS. THE LD. AR ARGUED THAT THE AO HAS ASSESSED THE INCO ME IN THE STATUS OF PARTNERSHIP FIRM. IT IS THE DUTY OF THE ASSESSEE TO FILE THE RETURN IN CORRECT STATUS FOR THE PERIOD PRIOR 01.04.2011 TO 27.02.201 2 I.E. THE STATUS OF THE FIRM AND FOR THE REMAINING PERIOD IN THE STATUS OF AOP. THOUGH THE AO ASSESSED THE FIRM AS SUCH, IN THE ASSESSMENT ORDER CLEARLY MENTIONED THAT THE INCOME OF THE FIRM FROM 27.02.2012 TO 31.03.201 2 ASSESSED IN AOP STATUS. SINCE THERE IS NO FIRM EXISTS BY VIRTUE OF NOTICE GIVEN BY ONE OF THE PARTNERS, THERE IS NO CASE FOR PAYMENT OF SALARY AN D INTEREST TO THE PARTNERS SINCE THERE ARE NO PARTNERS IN EXISTENCE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AN D CONFIRM THE SAME ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSE D. 9.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! . . $ ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 7 TH JUNE, 2017. TLN 0 .$6 76 /COPY TO: 1. - /APPELLANT 4. 8 /CIT 2. ./- /RESPONDENT 5. 6 . /DR 3. 8 ( ) /CIT(A) 6. * /GF