SUPER CONSTRUCTION CO., NAVI MUMBAI V. DCIT 22(3), MUMBAI

ITA 2699/MUM/2010

• Counselvise Citation: 269919914 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 01-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: A K GHOSH
• Keywords: Business income
• Section: 80G; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.2699/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2006-07 M/S.SUPER CONSTRUCTION CO. MANGALMURTI, OPP.HOTEL HIGHWAY VIEW, PLOT NO.17, SECTOR.30, NEAR SANPAD RLY. STN., VASHI, NAVI MUMBAI 400 702 ! ! ! ! / VS. THE DCIT 22(3), MUMBAI - 400 020. # ./ $% ./ PAN/GIR NO. : AADFS1973R ( #& / APPELLANT ) .. ( '(#& / RESPONDENT ) #& ) / APPELLANT BY: SHRI A.K.GHOSH '(#& * ) / RESPONDENT BY : SHRI PANKAJ KUMAR ! * + / DATE OF HEARING : 01/08/2013 ,-' * + / DATE OF PRONOUNCEMENT : 01/08/2013 . / O R D E R PER I.P.BANSAL, J.M: THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIREC TED AGAINST ORDER PASSED BY LD. CIT(A)-33, MUMBAI DATED 04/01/2010 FOR THE ASSE SSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: THE FOLLOWING GROUNDS OF APPEAL ARE WITHOUT PREJU DICE TO ONE ANOTHER. . / ITA NO.2699/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2006-07 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN CONFIRMING THE AOS ACTION IN DISALLOWING ALLEGED EXCESS CLAIM OF REMUNERATION TO THE PARTNERS AMOUNTING TO RS.7, 92,490/- U/S. 40(A0(V). 2. ON THE FATS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE LD. CIT(A) ERRED IN CONFIRMING THE A.OS ACTION ADOPTING THE B USINESS INCOME AT RS.42,75,652/- AND THEREBY, CONFIRMING THE A.OS AC TION OF ASSESSING PART OF THE HOUSE PROPERTY INCOME UNDER THE HEAD I NCOME FROM BUSINESS AND PROFESSION. 2. IT WAS SUBMITTED BY LD. AR THAT EFFECTIVE GROUN D TO ADDRESS THE GRIEVANCE OF THE ASSESSEE IS GROUND NO.1 AND IF GR OUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE THEN GROUND NO.2 WILL BECOME INFRUC TUOUS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE ISSUE OF ALLOWABILITY OF REMUNERATION PAID TO THE PARTNERS THE ASSESSEE HAD SUBMITTED REVISED COMPUTATION OF INCOME WHEREBY CLAIM UNDER SECTION 40(A)(V) OF THE INCOME TAX ACT,1961 (THE ACT) WAS COMPUTED AT RS.29,37,935.20 AGAINST ORIGINAL CLAIM OF RS.30,73,444/-. HOWEVER, AO HAS ADOPTED A FIGURE O F RS.22,80,954/- FOR COMPUTING THE ALLOWABLE REMUNERATION PAID TO THE PA RTNERS AND IN THIS MANNER HE REDUCED THE CLAIM TO A SUM OF RS.22,80,954/- AND DISALLOWED AN AMOUNT OF RS.7,92,490/-. THE AO THOUGH HAVE NOT DISCLOSED TH E BASIS IN THE ASSESSMENT ORDER THAT HOW HE HAS CALCULATED A SUM OF RS.22,80, 954/- AS ALLOWABLE BEING REMUNERATION PAYABLE TO PARTNERS BUT IN PARA 5 OF T HE ASSESSMENT ORDER HE HAS MENTIONED THAT THE DIVIDEND INCOME, RENTAL INCOME A ND PROFIT ON SALE OF ASSETS ARE NOT BUSINESS RECEIPTS AND CANNOT BE CONSIDERED AS PART OF NET PROFIT ARISING OUT OF BUSINESS. AS MENTIONED EARLIER THE ASSESSEE HAS FILED A REVISED COMPUTATION IN WHICH THE ASSESSEE HAD EXCLUDED DIVI DEND INCOME AND INCOME FROM SALE OF ASSETS FROM BUSINESS INCOME FOR THE PU RPOSE OF COMPUTING ALLOWABLE AMOUNT RELATING TO REMUNERATION OF THE PARTNERS. FOR THE SAKE OF CLARITY AND COMPLETENESS RELEVANT PART OF THE REVISED COMPUTATI ON IS REPRODUCED BELOW: REVISED COMPUTATION OF TOTAL INCOME: 1. INCOME FROM BUSINESS OR PROFESSION: NET PROFIT AS PER PROFIT & LOSS A/C. 4,478,916.00 . / ITA NO.2699/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2006-07 3 ADD: ITEMS DISALLOWED OR CONSIDERED SEPARATELY REMUNERATION PAID TO PARTNER 3,073,444 DONATION 65,103 3,138,547 7,617,463 LESS: PROFIT ON SALE OF TEMPO 7,430.00 PROFIT ON SALE OF SERVICE INDUSTRIAL PL OT 386,345.00 DIVIDEND 10,100.00 403,875 7,213,588 REMUNERATION ALLOWED 90% OF 75000 67,500.00 60% OF 75,000 45,000.00 40% OF 7213588 - 150000) 2,825,435.20 2,937,935.20 OR ACTUAL REMUNERATION PAID 3,073,444.00 2,937,935.20 4,275,652.80 WHICHEVER IS LESS. THE COMPUTATION OF INCOME MADE BY THE AO IN THE AS SESSMENT ORDER IS AS UNDER: INCOME FROM HOUSE PROPERTY ADD ON ACCOUNT OF PROPERTY INCOME 3,24,265 INCOME FROM BUSINESS (AS PER REVISED COMPUTATION) 42,75,652 ADD ON ACCOUNT OF REMUNERATION 7,92,490 50,68,142 INCOME FROM CAPITAL GAIN (AS PER COMPUTATION) 3,93,775 GROSS TOTAL INCOME 57, 86,182 LESS CHAPTER VIA DEDUCTION U/S. 80G 15,000 TOTAL INCOME 57,71,18 2 ROUNDED OFF 57,71,180 LD. CIT(A) HAS CONFIRMED THE ACTION OF AO, HENCE, ASSESSEE IS AGGRIEVED. 4. BEFORE US LD. AR SUBMITTED THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED REVISED COMP UTATION BUT IT IS NOT KNOWN THAT HOW AO HAS ARRIVED AT A FIGURE OF RS.22,80,954 /- AND COMPUTED THE DISALLOWANCE AT RS.7,92,490/-. REFERRING TO REVISE D COMPUTATION HE SUBMITTED THAT THE DISALLOWANCE, IF ANY, SHOULD HAVE BEEN RES TRICTED TO RS.1,35,509/-, WHICH . / ITA NO.2699/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2006-07 4 WAS AS PER REVISED COMPUTATION FILED BY THE ASSESSE E (RS.30,73,444 (-) RS.29,37,935/-) 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. AS PER PROVISIONS OF SE CTION 40(A)(V), AS IT WAS RELEVANT FOR THE YEAR UNDER CONSIDERATION, ANY PAYMENT OF R EMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNER, WHICH IS AUTHORIZED BY, A ND IS IN ACCORDANCE WITH THE TERMS OF PARTNERSHIP DEED IS ALLOWABLE AS PER FIGU RES GIVEN IN THAT CLAUSE ON THE BOOK PROFIT. BOOK PROFIT HAS BEEN DEFINED IN EXPLA NATION-3, WHICH MEANS THE NET PROFIT, AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR, COMPUTED IN THE MANNER LAID DOWN IN CHAPTER IV-D AS INCREASED BY THE AGGREGATE AMOUNT OF THE REMUNERATION PAID OR PAYABL E TO THE PARTNERS OF THE FIRM, IF SUCH AMOUNT HAS BEEN DEDUCTED WHILE COMPUTING NE T PROFIT. CHAPTER IV-D DESCRIBES PROFIT AND GAINS OF BUSINESS OR PROFESSI ON AND COMPRISE OF SECTIONS 28 TO 44DB. IT MEANS INCOME COMPUTED UNDER THE HEADS PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE COMPUTATION OF INCOME MADE BY THE AO HAS ALREADY BEEN DESCRIBED IN THE ABOVE PART OF THIS ORDER. TH E AO HAS TAKEN SUCH INCOME OF THE ASSESSEE AT A SUM OF RS.42,75,652/- WHICH INCL UDE THE AGGREGATE AMOUNT OF THE REMUNERATION PAID OR PAYABLE TO ALL THE PARTNER S. THEREFORE, IN OUR OPINION THE AO COULD NOT TAKE ANY OTHER FIGURE FOR THE PURP OSE OF COMPUTING ALLOWABLE AMOUNT UNDER SECTION 40(A)(V) OF THE ACT. THE AO H AS ADOPTED THE FIGURE OF ASSESSABLE INCOME UNDER THE HEAD BUSINESS INCOME AS PER REVISED COMPUTATION FILED BY THE ASSESSEE. THEREFORE, ALLOWABLE AMOUNT COULD NOT VARY FROM THE AMOUNT DESCRIBED IN THE REVISED COMPUTATION WHICH W AS A SUM OF RS.29,37,935/- IN PLACE OF AN AMOUNT OF RS.30,73,444/- CLAIMED BY THE ASSESSEE. THEREFORE, DISALLOWANCE IS RESTRICTED TO A SUM OF RS.1,35,509/ -. THE BALANCE DISALLOWANCE IS DELETED. GROUND NO.1 IS PARTLY ALLOWED. . / ITA NO.2699/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR 2006-07 5 7. IN VIEW OF THE SUBMISSION MADE BY LD. AR, GROUND NO.2 HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 01/08/2013 . * ,-' / 0!1 01/08/2013 - * 2 3 SD/- SD/- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0! DATED 01/08/2013 . . . . * ** * '+45 '+45 '+45 '+45 65'+ 65'+ 65'+ 65'+ / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '(#& / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. 582 '+! , , / DR, ITAT, MUMBAI 6. 2 9 / GUARD FILE. .! .! .! .! / BY ORDER, (5+ '+ //TRUE COPY// : :: : / ; ; ; ; $ $ $ $ (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ! . ./ VM , SR. PS