Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 8046 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-01-2017
Appeal Filed By
Assessee
Bench Allotted
B
Assessment Year
2013-2014
Appeal Filed On
14-09-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2661/MDS./2016 / ASSESSMENT YEAR : 2013-14 M/S.BRAHMAYYA & CO., 48,MASILAMANI ROAD, BALAJI NAGAR, ROYAPETTAH, CHENNAI 600 014. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-11, CHENNAI -6. [PAN AAAFB 2481 J ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : NONE /RESPONDENT BY : SHRI SUPRIYO PAL, JCIT DR / DATE OF HEARING : 14 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-13, CHENNA I DATED 14.06.2016 PERTAINING TO ASSESSMENT YEAR 2013-14. ITA NO.2661/16 :- 2 -: 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPE AL IS WITH REGARD TO CONFIRMING THE DISALLOWANCE OF PAYMENT MA DE TO LIC IN RESPECT OF THE RETIREMENT PENSION SCHEME TO THE PAR TNERS -39,50,000/- BY LD.CIT(A). 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HA VE HEARD THE LD.D.R AND PERUSED THE MATERIAL ON RECORD. WE H AVE PROCEEDED TO DECIDE THE CASE ON MERITS. THIS ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NO.2174 TO 2176/MDS./2007 FOR ASSESSMENT YEARS 2000-01 TO 2002 -03 VIDE ORDER DATED 14.05.2008 WHEREIN THE TRIBUNAL HELD AS FOLLO WS:- THE ASSESSEE IS A FIRM OF CHARTERED ACCOUNTANTS. DU RING THE RELEVANT ASSESSMENT YEARS THE ASSESSEE DEBITED UNDE R THE CAPTION PENSION TO PARTNERS CONTRIBUTION TO LIC. THE AO HELD THAT THE ASSESSEE CONTRIBUTED THE AMOUNT ACCOR DING TO THEIR WISH SO AS TO REDUCE THEIR TAX LIABILITY. SE CONDLY, NO EMPLOYER EMPLOYEE RELATIONSHIP DID EXIST BETWEEN TH E FIRM AND THE RETIRING PARTNERS. LASTLY, ANY PAYMENT MADE TO PARTNERS OTHER THAN REMUNERATION ARID INTEREST WHICH IS SPECIFICALLY ALLOWED UNDER THE ACT IS ONLY APPLICATION OF INCOME . FOR THE AFORESAID REASONS THE ASSESSING OFFICER ADDED THE A MOUNT TOWARDS THE INCOME OF THE ASSESSEE. ON APPEAL THE COMMISSIONER (APPEALS) DELETED THE ADDITION. AS SUC H THE DEPARTMENT IS IN APPEAL BEFORE US. ITA NO.2661/16 :- 3 -: WE HAVE EXAMINED THE DEED OF PARTNERSHIP. CLAUSE 10 OF THE DEED OF PARTNERSHIP READS AS UNDER: LN THE EVENT OF RETIREMENT OF ANY OF THE PARTNERS WHO HAVE ATTAINED SUPERANNUATION AGE OF /0 YEARS OR A PARTNER WHO HAS COMPLETED 60 YEARS OF AGE OR HAS COMPLETED 25 YEARS OF SERVICE AS PARTNER WHICHEVER IS EARLIER AND WISHING TO RETIRE, THE CONTINUING PARTN ERS SHALL IN CONSIDERATION OF THE USE AND ADVANTAGES IN RESPECT OF GOODWILL OUTSTANDING BALANCES AND OTHER ASSETS OF THE PARTNERSHIP PAY TO THE RETIRING PARTN ERS OUT OF GROSS RECEIPTS OF THE PRACTICE OF THE PROFESSION AS CHARTERED ACCOUNTANTS THAT MAY BE CONTINUED BY THEM OR ALONG WITH ANY OTHER PERSON IN THE SAME OR SIMIL AR NAME A SUM OF RS. 15,000/- PER MONTH. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE RATIO LAID DOWN IN THE CASE OF DEVIDAS VITHALDAS A CO. V. CIT. 84 ITR 277 (S.C.). IN THIS CASE IT WAS HELD THAT ACQUISITION O F THE GOODWILL OF A BUSINESS IS, WITHOUT DOUBT, ACQUISITION OF A C APITAL ASSET AND, THEREFORE, ITS PURCHASE PRICE WOULD BE CAPITAL EXPENDITURE. IT WOULD NOT MAKE ANY DIFFERENCE WHETHER IT IS PAID IN A LUMP SUM AT ONE TIME OR IN INSTALLMENTS DISTRIBUTED OVER A DEFINITE PERIOD. WHERE, HOWEVER, THE TRANSACTION IS NOT ONE FOR ACQUISITION OF THE GOODWILL, BUT FOR THE RIGHT TO U SE IT, THE EXPENDITURE WOULD BE REVENUE EXPENDITURE. IN THE CASE OF MOHANLAL HARGOVINDDAS V CIT, 188 ITR 556 (M.P.) IT WAS HELD THAT PAYMENT MADE TO ALLOW CONTI NUED USE OF THE GOODWILL CANNOT BE SAID TO BE PROMPTED BY EX TRA COMMERCIAL CONSIDERATIONS. IT IS REVENUE EXPENDITUR E. ADVERTING TO THE FACTS OF THE PRESENT CASE WE FIND THAT THE A SSESSEE DID NOT MAKE PAYMENT TO THE LIC. AT THE INSTANCE OF THE LIC A TRUST ITA NO.2661/16 :- 4 -: DEED WAS EXECUTED. IT IS STIPULATED IN IT THAT THE TRUSTEES FOR THE TIME BEING AT THE BRAHMAYYA & CO EMPLOYEES GROUP SUPERANNUATION SCHEME. ADMITTEDLY THE SUPERANNUATIO N SCHEME WAS NOT APPROVED EITHER DURING THE YEARS UND ER APPEAL OR AT ANY TIME UPTO THE DATE OF MAKING THE CONTRIBU TION. IN THE CASE OF SONY INDIA LTD V CIT. 285 ITR 213 (DEL) THE ASESSEE ENTERED INTO AN AGREEMENT WITH LIC AND MADE CONTRIB UTIONS TOWARDS GRATUITY AND SUPERANNUATION FUND FOR THE BE NEFITS OF ITS EMPLOYEES. THE FUNDS TO WHICH THE ASSESSEE HAD CONTRIBUTED WERE NOT APPROVED EITHER DURING THE YEA R UNDER APPEAL OR AT ANY TIME UPTO THE DATE OF MAKING THE CONTRIBUTIONS. THE HON BLE HIGH COURT HAS HELD THAT CONTRIBUTIONS DO NOT QUALIFY FOR DEDUCTION EITHER U NDER SECTION 36 OR UNDER SECTION 37(1) OF THE ACT. WE FIND THAT IN THE YEARS UNDER CONSIDERATION THE A SSESSEE DID NOT MAKE ANY PAYMENT TO AN OUTSIDER. PAYMENTS WERE MADE ONLY TO THE LIC TO TAKE POLICY IN THE NAME OF TRUST WHICH WAS FULLY CONTROLLED BY THE ASSESSEE FIRM. THE TRUST WA S NOT APPROVED. THE AUTHOR OF THE TRUST, THE BENEFICIARIE S OF THE TRUST AND THE TRUSTEES WERE ALL PARTNERS OF THE FIRM. THE PROCEEDS OF THE POLICY TAKEN BY THE TRUST WERE WITHIN THE COMPL ETE CONTROL OF THE FIRM. IT IS PERTINENT TO NOTE THAT DURING TH E RELEVANT YEARS OF ASSESSMENT NO PARTNER DID RETIRE. NO PAYMENT WAS MADE TO USE THE RIGHT OF GOODWILL DURING THESE YEARS. ON ID ENTICAL FACTS FOR THE ASSESSMENT YEAR 2003-04 THE TRIBUNAL DECIDE D THIS ISSUE AGAINST THE ASSESSEE IN ASSESSEE'S OWN CASE V IDE ORDER DATED 9.4.2008 IN ITA NO.1308(MDS.)/2007. THE EXPEN DITURE IN QUESTION WAS HELD TO BE NOT REVENUE EXPENDITURE. HA VING REGARD TO THE FACTS AND AFTER CONSIDERING THE PRECE DENTS, WE DECIDE THIS ISSUE IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE. ITA NO.2661/16 :- 5 -: IN VIEW OF THE ORDER OF THE TRIBUNAL, WE ARE INCLIN ED TO CONFIRM THE FINDINGS OF THE LD.CIT(A) O THIS ISSUE. HENCE, THE APPEAL OF ASSESSEE IS DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 4. - 1 / CIT 2. / RESPONDENT 5. /23- 4 / DR 3. - 1-!' / CIT(A) 6. 3&-5 / GF
