Assistant Commissioner of Income Tax, Circle-1(2), Surat V. M/s Arav Diamond, Surat

ITA 286/SRT/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1716 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 10AA; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND DR. ARJUN LAL SAINI (ACCOUNTANT MEMBER) (VIRTUAL COURT HEARING) ITA NO. 286/SRT/2017 ASSESSMENT YEAR: 2013-14 THE ASSSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(2), ROOM NO. 213, 2 ND FLOOR, AAYAKAR BHAVAN, MAJURATGATE, SURAT-395 001 VS. M/S ARAV DIAMOND, PLOT NO. 139, SURAT SPECIAL ECONOMIC ZONE, SACHIN, SURAT-394 230 PAN NO. AAOFA 5434 C APPELLANT RESPONDENT REVENUE BY : MR. RITESH MISHRA, DR ASSESSEE BY : MR. DEVEN KAPADIA, AR : DATE OF HEARING : 01/07/2021 DATE OF PRONOUNCEMENT : 01/07/2021 ORDER PER PAWAN SINGH, JUDICIAL MEMBER. 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT, DATED 11.09.2017, WHICH IN TURN ARISE FROM THE ASSESSMENT COMPLETED UNDER SECTION 143(3) DATED 31.03.2016 FOR ASSESSMENT YEAR (AY) 2013-14. 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA)(10) R.W.S 10AA(9) IN GIVING DEDUCTIONS OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSEE FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BENEFITS OF SECTION 10AA BY NOT CLAIMING INTEREST TON M/S ARAV DIAMOND ITA NO. 286/SRT/2017 2 CAPITAL AND REMUNERATION TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSEE? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN NOT APPRECIATING THE FACT THAT BY NOT PROVIDING INTEREST AND REMUNERATION TO THE PARTNERS, THE FIRM HAS CLAIMED HIGHER PROFITS LEADING TO HIGHER CLAIM OF DEDUCTION U/S 10AA OF THE ACT AND THUS, DEVOIDING THE REVENUE FROM DUE AMOUNT OF TAX? 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICE MAY BE RESTORED TO THE ABOVE EXTENT.. 3. AT THE OUTSET OF HEARING THE LEARNED (AR) FOR THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ASSESSEES OWN CASE, BY THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR FOR ASSESSMENT YEAR 2012-13 IN ITA NO. 240/SRT/2018 DATED 15.05.2019. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT SIMILAR DISALLOWANCES WAS MADE BY ASSESSING OFFICER IN EARLIER YEAR, ON APPEAL BEFORE LD. CIT(A) THE DISALLOWANCES. THE REVENUE FILED APPEAL AGAINST THE DECISION OF LD. CIT(A) BEFORE TRIBUNAL, WHEREIN THE APPEAL OF THE REVENUE WAS DISMISSED VIDE ORDER DATED 15.04.2019. THE LD. AR FOR THE ASSESSEE FURNISHED THE COPY OF THE DECISION OF TRIBUNAL FOR A.Y. 2012-13(SUPRA). IT WAS SUBMITTED THAT THERE IS NO VARIATION IN THE FACTS FOR THE YEAR UNDER CONSIDERATION QUA THE FACTS WITH EARLIER YEAR ASSESSMENT YEARS. 4. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT SIMILAR DISALLOWANCES UNDER SECTION 80(IA) RWS 10AA(9) ON ACCOUNT OF NOT CLAIMING M/S ARAV DIAMOND ITA NO. 286/SRT/2017 3 INTEREST AND REMUNERATION ON PARTNERS CAPITAL, WAS MADE BY ASSESSING OFFICER IN THE ASSESSMENT FOR A.Y. 2012-13, HOWEVER, ON APPEAL THE DISALLOWANCES WERE DELETED BY LD. CIT(A) BY FOLLOWING THE ORDER OF JURISDICTIONAL HIGH COURT IN ALIDHARA TAXPRO ENGINEERING (P) LTD VS DCIT [2010] 189 TAXMAN 164 AND DECISION OF TRIBUNAL IN ACIT VS MUKTA ENTERPRISES [2018] 100 TAXMANN.COM 33 (SURAT-TRIBUNAL). THE RELEVANT PART OF THE DECISION OF TRIBUNAL IN A.Y. 2012- 13 IS EXTRACTED BELOW; 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AO HAS RELIED ON THE ORDER OF RAJKOT BENCH IN THE CASE OF MERIDIAN IMPEX 37 TAXMANN.COM 22 (2013) BUT THE FACTS OF THAT CASE ARE DIFFERENT FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS IN THAT CASE THERE WAS A SPECIFIC LOSS IN THE PARTNERSHIP DEED REGARDING PAYMENT OF INTEREST ON CAPITAL AND PARTNERS REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED DURING SCRUTINY PROCEEDINGS. SUBSEQUENTLY, A SUPPLEMENTARY/ADDENDA TO SAID PARTNERSHIP DEED WAS MADE AMENDING THE SAID CLAUSE PROVIDING THE CLAUSE OF NON-PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNERS, WHICH WAS NOT SUBMITTED BEFORE AO DURING ASSESSMENT PROCEEDINGS BUT IN THE PRESENT CASE UNDISPUTEDLY IN THE PARTNERSHIP DEED THERE IS NO CLAUSE PROVIDING PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNERS THEREFORE, THE LD. CIT(A) WAS RIGHT IN DENYING APPLICATION OF ORDER OF ITAT, RAJKOT IN FAVOUR OF THE REVENUE IN THE PRESENT CASE HAVING DISTINCT AND DISSIMILAR FACTS AND CIRCUMSTANCES. 6. FURTHER, FROM THE BINDING DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF ALIDHARA TAXSPIN ENGINEERS (SUPRA), WHEREIN THEIR LORDSHIP SPEAKING FOR THE JURISDICTIONAL HIGH COURT CLEARLY HELD THAT MERE INCORPORATION OF INTEREST ON PARTNERS CAPITAL ACCOUNT AND REMUNERATION DOES NOT SIGNIFY THAT THE SAME ARE MANDATORY IN NATURE. AS WE HAVE NOTED ABOVE, IN THE PRESENT CASE THE APPELLANT HAS NOT CHARGED ANY INTEREST AND REMUNERATION ASPER PARTNERSHIP DEED THEREFORE, THE APPELLANT FIRM CANNOT BE COMPELLED TO CHARGE INTEREST OR REMUNERATION. THEREFORE, WE ARE INCLINED TO HOLD THE LD. CIT(A) WAS RIGHT IN OBSERVING THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTEREST AND REMUNERATION OF S. 10AA OF THE ACT DEDUCTION IS ERRONEOUS AND INCORRECT AND LAW AND FACTS AS IN THE PECULIAR FACTS OF THE PRESENT CASE THE PARTNERSHIP DEED CLEARLY LAYS DOWN THAT NO INTEREST AND REMUNERATION IS PAYABLE AND HENCE, THE FIRST APPELLATE AUTHORITY RIGHT IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTEREST AND M/S ARAV DIAMOND ITA NO. 286/SRT/2017 4 REMUNERATION FROM AMOUNT OF DEDUCTION U/S. 10AA OF THE ACT. WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS OF REVENUE ARE DISMISSED. 6. CONSIDERING THE FACTS THAT THE IS NO VARIATION IN THE FACTS FOR THE YEAR UNDER CONSIDERATION, THUS, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2012-13, WE AFFIRM THE ORDER OF LD. CIT(A). IN THE RESULT THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE ALLOWED. ORDER ANNOUNCED AT THE TIME OF HEARING OF APPEAL ON 01/07/2021 IN THE VIRTUAL COURT HEARING. SD/- SD/- (DR. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 01.07.2021 RAHUL SHARMA, SR. P.S. (ON TOUR) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, SURAT