M/s P Samantray & Co, V. ITO, Khurda

ITA 292/CTK/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52376 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 28-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: BHIMSEN SAHOO

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 292/CTK/2011 (ASSESSMENT YEAR 2007 - 08) M/S.P.SAMANTRAY & CO., AT:KHAJURIA, P. O.GAMBHARIMUNDA, DIST. KHURDA PAN: AAHFP 4196 K VERSUS INCOME - TAX OFFICER, KHURDA WARD, KHURDA. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI BHIMSEN SAHOO, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.18.3.2011 RAISING ONLY ONE ISSUE AGAINST CONFIRMATION OF THE DISALLOWANCE THE CLAIM OF INTEREST OF 1,56,000 ON CAPITAL OF TH E PARTNERS IN THE FIRM OUT OF THE GROSS PROFIT FOR THE ASSESSMENT YEAR 2007 - 08 IN THE CASE OF THE ASSESSEE. 2. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUE AND ITS LEGAL IMPLICATIONS. 3. ON CAREFUL CONSIDERATION OF THE MATERIALS AVAILABLE TO THE TRIBUNA L AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE , A PARTNERSHIP FIRM, IS A SUB - CONTRACTOR SUPPLYING LABOURERS. THE ASSESSE FILED ITS RETURN FOR THE ASSESSMENT YE AR UNDER CONSIDERATION BY ESTIMATING NET PROFIT U/S.44AD @8% OF THE GROSS RECEIPTS RECEIVED BY IT AND CLAIMED DEDUCTION OUT OF THAT AMOUNT A SUM OF 1,56,000 TOWARDS INTEREST PAID TO PARTNERS ON THEIR RESPECTIVE CAPITAL AND 1,12,320 TOWARDS SALARY/REMUNER ATION PAID TO ALL WORKING PARTNERS, WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT WHILE PROCESSING THE RETURN U/S.143(1) OF THE ACT. BUT, T HE ASSESSING OFFICER, IN THE ITA NO.292/CTK/2011 2 IMPUGNED ORDER DT.27.11.2009 PASSED U/S.147/143(3) OF THE ACT , ALLOWED THE CLAIM OF SALARY/R EMUNERATION PAID TO THE WORKING PARTNERS BUT DISALLOWED THE CLAIM OF INTEREST OF 1,56,000 PAID TO THE PARTNERS IN THEIR RESPECTIVE CAPITAL ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED THE RELEVANT DOCUMENTS SUPPORTING THE CLAIM MADE IN THE RETURN . THE ASSESSING OFFICER HAS OBSERVED THAT AS PER CLAUSE 6 OF THE PARTNERSHIP DEED THE CAPITAL OF THE FIRM SHALL CONSTITUTE OF SUCH OF SUM SHALL BE CONTRIBUTED BY THE PARTNERS TOWARDS THEIR CAPITALS AND SHALL BE REFLECTED THROUGH THEIR PERSONAL ACCOUNT MAINTAINED IN THE BOOKS OF ACCOUNTS OF THE FIRM. PARTNERS CAPITAL CONTRIBUTION HAS NOT BE EN MENTIONED IN THE PARTNERSHIP DEED AND IN ABSENCE OF CASH - FLOW/BALANCE SHEET OF INDIVIDUAL PARTNERS IT CAN BE CONCLUDED THAT NO CAPITAL WAS AVAILABLE AS ON 1.4.2006 TO EARN INTEREST . AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) BUT BEING UNSUCC ESSFUL IS IN THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE VEHEMENTLY ARGUED CONTENDING INTERALIA THAT THE ASSESSEE IS A REGISTERED FIRM AND WAS ASSESSED AS FIRM IN THE PREVIOUS YEARS BY THE DEPARTM ENT BY THE SAME ASSESSING OFFICER. THE OBSERVATION OF THE ASSESSING OFFICER AS UPHELD BY THE LEARNED CIT(A) IS CONTRARY TO THE FACTUAL EVIDENCE AVAILABLE ON RECORD AS THE ASSESSEE HAS FILED THE P & L ACCOUNT AND BALANCE SHEET, WHICH CLEARLY DISCLOSED THE CAPITAL ACCOUNTS OF THE PARTNERS FOR THE PREVIOUS YEAR AND CURRENT YEAR ALSO. AS PER THE PARTNERSHIP DEED, THE PARTNERS OF THE FIRM ARE ENTITLED TO INTEREST ON THEIR RESPECTIVE CAPITAL. THE ABOVE FACTS AS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE COULD N OT BE NEGATED BY THE LEARNED DR BEFORE US. IN VIEW OF THIS, THAT THE AUTHORITIES BELOW ARE NOT AT ALL JUSTIFIED IN DISALLOWING THE CLAIM OF INTEREST ON CAPITAL OF PARTNERS ON THE PLEA THAT THE ASSESSEE HAS NOT APPEARED BEFORE HIM WITH THE RELEVANT EVIDENCE PRODUCING THE BOOKS OF ACCOUNT SHOWING THE CAPITAL INVESTED BY THE PARTNERS, IN OUR ITA NO.292/CTK/2011 3 CONSIDERED VIEW, IS NOT JUSTIFIED. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW INTEREST ON CA PITAL OF THE PARTNERS AS CLAIMED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 5 TH AUGUST, 2011 S D/ - S D/ - (K.K.GUPTA) ACCOUNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 5 TH AUGUST, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.P.SAMANTRAY & CO., AT:KHAJURIA, P.O.GAMBHARIMUNDA, DIST. KHURDA 2. THE RESPONDENT: INCO ME - TAX OFFICER, KHURDA WARD, KHURDA. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.