RS PROPERTIES & DEVELOPERS, CHENNAI V. ACIT, NC 22, CHENNAI

ITA 25/CHNY/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2165 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 04-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALMALSAWMA PACHUAU
• Section: 6; 44AD; 143(3)

Judgement Text

, (SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.25/CHNY/2019 ! / ASSESSMENT YEAR : 2015-2016. M/S. RS PROPERTIES & DEVELOPERS, NO.20, DURAISAMI PILLAI STREET, WEST TAMBARAM, CHENNAI 600 045. [PAN AAMFR 6052R] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 22, TAMBARAM, CHENNAI. ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. K. BALASUBRAMANIAN, ADV &' '# $ % /RESPONDENT BY : SHRI. LAL MALSAWMA PACHUAU, IRS, JCIT. ( ) $ * /DATE OF HEARING : 19-06-2019 +,! $ * /DATE OF PRONOUNCEMENT : 25-06-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 0, CHENNAI ITA NO.25/CHNY/2019. :- 2 -: (CIT(A) FOR SHORT) DATED 31.10.2018 FOR THE ASSES SMENT YEAR (AY) 2015-16. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. RS PROPERTIES & DEVELOPER S IS A PARTNERSHIP FIRM CONSTITUTED UNDER THE PARTNERSHIP ACT. IT IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPERS. THE RETURN OF INCOME FOR THE AY 2015-16 WAS FILED ON 24.09.2016 DISCLOSING TOTAL INCOME OF D1,06,350/- UNDER THE PROVISIONS OF SECTION 44AD OF THE INCOME TAX ACT, 1961. AGAINST THE SAID RETURN OF INCOME, THE A SSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCOME T AX, NON CORPORATE CIRCLE, 22, CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 29.12.2017 PASSED U/S. 143(3) OF THE ACT AT TOTAL INCOME OF D4,90,878/-. WHILE DOING SO, THE AO DISALLOWED TH E CLAIM OF REMUNERATION PAID TO PARTNERS OF D3,84,528 ON THE GROUND THAT PARTNERSHIP DEED DID NOT SPECIFY THE METHOD OF COM PUTATION OF REMUNERATION TO PARTNERS, PLACING RELIANCE ON CBDT CIRCULAR NO.739, DATED 25.03.1996. 3. BEING AGGRIEVED BY THE ABOVE ADDITION, AN APPEAL WA S PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDE R CONFIRMED THE ITA NO.25/CHNY/2019. :- 3 -: FINDINGS OF THE ASSESSING OFFICER PLACING RELIANCE ON THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F SOOD BHANDARI & COMPANY VS. CBDT IN CWP NO.3765 OF 1997, ITA NO.3 8 OF 1999, 210 TO 212 OF 2002 ETC DATED 05.10.2011. 4. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS SUBMITTED BEFORE US THAT CLAU SE 6 OF THE PARTNERSHIP DEED PROVIDES WORKING PARTNERS OF THE F IRM ARE ENTITLED FOR REMUNERATION AS PER THE LIMITS FIXED BY THE INCOME TAX ACT, 1961 FROM TIME TO TIME AND THEREFORE THE REASONING OF TH E ASSESSING OFFICER AS WELL AS CIT(A) HAS NO LEGS TO STAND. HE FURTHER SUBMITTED THAT ISSUE IN THE PRESENT APPEAL IS SETTLED BY THE DECISIONS O F HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASES OF DURGA DASS DEVKI NANDAN VS. ITO, 342 ITR 17 AND CIT VS. ANIL HARDWARE STORE, (2010) 323 ITR 368 . 5. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF DURGA DASS DEVKI NANDAN (SUPRA ) HAD HELD THAT WHEN THE PARTNERSHIP DEED PROVIDES THAT THE REMUNERATION WILL BE AS PER THE PROVISIONS OF THE INCOME TAX ACT, IT CLEARLY MEANS THAT THE REM UNERATION PAYABLE ITA NO.25/CHNY/2019. :- 4 -: TO THE PARTNERS SHALL BE QUANTIFIED AS PER THE PRO VISIONS OF THE ACT AND SHALL NOT EXCEED THE MAXIMUM REMUNERATION PROVIDED. THE RELEVANT PARA NO. 7 OF THE SAID JUDGMENT IS REPRODUCED HEREU NDER:- 7 . IT IS SETTLED LAW THAT THE CENTRAL BOARD OF DIRECT TAXES CANNOT ISSUE A CIRCULAR WHICH GOES AGAINST TH E PROVISIONS OF THE ACT. THE CENTRAL BOARD OF DIRECT TAXES CAN ONLY CLARIFY ISSUES BUT CANNOT INSERT TERMS AND CONDITIONS WHICH ARE NOT PART OF THE MAIN STATUTE. A DELEGATE OR PERSON AUTHORIZED TO ISSUE DELEGATED LEGISLATION CANNOT VIRTUALLY SET AT NAUGHT THE PROV ISIONS OF THE MAIN STATUTE. A READING OF SECTION 40(B)(V) CLEARLY SHOWS THAT AMOUNT OF REMUNERATION WHICH DOES NOT EXCEED THE AMOUNT GIVEN IN THE INCOME- TAX ACT IS DEDUCTIBLE. THE CENTRAL BOARD OF DIRECT TAXES HAS PROVIDED THAT EITHER THE AMOUNT OF REMUNERATION PAYABLE TO EACH INDIVIDUAL WORKING PARTNER SHOULD B E FIXED IN THE AGREEMENT OR THE PARTNERSHIP AGREEMENT DEED SHOULD LAY DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. IN THE PRESENT CASE, WHEN THE PARTNER SHIP DEED PROVIDES THAT THE REMUNERATION WILL BE AS PER THE PROVISIONS OF THE INCOME-TAX ACT, IT CLEARLY MEANS THAT THE REMUNERATION PAYABLE TO THE PARTNERS SHALL BE QUANTIFIED AS PER THE PROVISIONS OF THE ACT AND SHA LL NOT EXCEED THE MAXIMUM REMUNERATION PROVIDED. IN THE PRESENT CASE, IT IS NOT DISPUTED THAT THE PARTNERS WERE PAID REMUNERATION WHICH WAS LESS THAN THE MAXIMUM PROVIDED BY THE INCOME- TAX ACT. NONE OF THE AUTHOR ITIES HAVE DOUBTED THE PAYMENT OF REMUNERATION AND IN FAC T ACCOUNT BOOKS OF THE ASSESSEE-FIRM HAVE BEEN ACCEPT ED TO BE CORRECT. THEREFORE, NOBODY HAS DOUBTED THE PAYMENT OF REMUNERATION TO THE PARTNERS. ITA NO.25/CHNY/2019. :- 5 -: RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALL OW THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 25TH DAY OF JUNE, 2019, AT CH ENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED: 25 TH JUNE, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF