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

ITA 294/SRT/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1988 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Section: 10AA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.294/SRT/2017 / ASSESSMENT YEAR: 2014-15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(2), SURAT. VS. MUKTA ENTERPRISE, 1104, C WING TIRUPATI COMPLEX, OPP.MAHALAXMI TEMPLE, BHULABHI DESAI ROAD, MUMBAI. [PAN: AATFM 4435 C] ( ' / APPELLANT) ( #$' /RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI R.P.RASTOGI SR.DR /DATE OF HEARING : 04-10-2018 / DATE OF PRONOUNCEMENT : 26-10-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT (CIT (A) FOR SHORT) DATED 08.09.2017 FOR THE ASSESSMENT YEAR (A.Y) 2014-15. 2. WHEN THE CASE WAS CALLED FOR HEARING NEITHER THE ASSESSEE NOR HIS AUTHORIZED REPRESENTATIVE APPEARED NOR ANY APPLICAT ION FOR ADJOURNMENT HAS BEEN FILED. HOWEVER, ON PERUSAL OF RECORD, WE F IND THAT THE APPEAL 2 ITA NO.294/AHD/2017/SRT (A.Y: 2014-15) MUKTA ENTERPRISES MAY BE DECIDED IN ABSENCE OF THE ASSESSEE RESPONDEN T AFTER HEARING THE ARGUMENTS OF LD. DR ON BEHALF OF REVENUE. 3. GROUNDS RAISED BY THE REVENUE READS AS FOLLOWS: 1. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLO WANCE MADE BY THE ASSESSING OFFICER OF EXEMPTION CLAIMED U/S 10AA BY THE ASSESSEE IN RESPECT OF TURNOVER FOR TRADING AND TRE ATED ENTIRE SUM AS TAXABLE INCOME BY NOT GIVING ANY SPECIFIC FI NDINGS IN HIS DECISION? 2. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLO WANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SEC TION 80(IA) 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 SECTION10A A BY NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATION TO PA RTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSE E? 3. WHETHER ON THE FACT AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.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 D EDUCTION U/S 10AA OF THE ACT AND THUS, DEVOIDING THE REVENUE FRO M DUE AMOUNT OF TAX? 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 4. WE HAVE HEARD THE ARGUMENTS OF LD. DR AND CAREFU LLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBU NAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 80(IA) R.W.S. 10AA(9 ) IN GIVING DEDUCTIONS 3 ITA NO.294/AHD/2017/SRT (A.Y: 2014-15) MUKTA ENTERPRISES OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS OF THE ASSESSEE FIRM AFTER FINDING THAT THE ASSESSEE HAD TAKEN UNDUE BEN EFITS OF SECTION 10AA BY NOT CLAIMING INTEREST ON CAPITAL AND REMUNERATIO N TO PARTNERS WHICH RESULTED INCREASE IN EXEMPTED PROFIT OF THE ASSESSE E. HE FURTHER SUBMITTED THAT THE LD.CIT(A) WAS ALSO NOT JUSTIFIED IN NOT A PPRECIATING THE FACT THAT BY NOT PROVIDING INTEREST AND REMUNERATION TO THE P ARTNERS, THE FIRM HAS CLAIMED HIGHER PROFITS LEADING TO HIGHER CLAIM OF D EDUCTION U/S 10AA OF THE ACT AND THUS, DEPRIVING THE REVENUE FROM DUE AMOUNT OF TAX. FINALLY, THE LD. DR SUBMITTED THAT THE AO MADE DISALLOWANCE OF B ENEFIT OF S. 10AA OF THE ACT TO THE ASSESSEE ON REASONABLE AND JUSTIFIED GROUND WHICH HAS BEEN DELETED BY THE LD. CIT(A) WITHOUT ANY SUSTAINA BLE GROUND. THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE B Y RESTORING THAT OF THE AO. 5. WE ALSO CONSIDERED THE CONTENTION OF THE ASSESSE E-RESPONDENT BEFORE THE AUTHORITIES BELOW AS NOTED IN THE ASSESS MENT AND FIRST APPELLATE ORDER AND RATIO OF THE DECISIONS RELIED B Y AO AS WELL AS BY THE LD. CIT(A). 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS OF LD. DR AND CONTENTIONS OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW, FROM THE RELEVANT OPERATIVE PART OF FIRST APPELLATE ORDER, E SPECIALLY PARAS 6.1.3 & 6.1.4, WE OBSERVE THAT THE AO HAS RELIED ON THE ORD ER OF ITAT, RAJKOT 4 ITA NO.294/AHD/2017/SRT (A.Y: 2014-15) MUKTA ENTERPRISES 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 L OSS IN THE PARTNERSHIP DEED REGARDING PAYMENT OF INTEREST ON CAPITAL AND P ARTNERS REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED SUBMITTED DURING S CRUTINY PROCEEDINGS. SUBSEQUENTLY, A SUPPLEMENTARY/ADDENDA TO SAID PARTN ERSHIP DEED WAS MADE AMENDING THE SAID CLAUSE PROVIDING THE CLAUSE OF NON-PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNER S, WHICH WAS NOT SUBMITTED BEFORE AO DURING ASSESSMENT PROCEEDINGS B UT 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 DI STINCT AND DISSIMILAR FACTS AND CIRCUMSTANCES. 7. FURTHER, FROM THE BINDING DECISION OF THE HON'BL E 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 ACCOU NT AND REMUNERATION DOES NOT SIGNIFY THAT THE SAME ARE MANDATORY IN NAT URE. AS WE HAVE NOTED ABOVE, IN THE PRESENT CASE THE APPELLANT HAS NOT CH ARGED ANY INTEREST AND REMUNERATION ASPER PARTNERSHIP DEED THEREFORE, THE APPELLANT FIRM CANNOT 5 ITA NO.294/AHD/2017/SRT (A.Y: 2014-15) MUKTA ENTERPRISES BE COMPELLED TO CHARGE INTEREST OR RUMUNERATION. T HEREFORE, WE ARE INCLINED TO HOLD THE LD. CIT(A) WAS RIGHT IN OBSERV ING THAT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON PROVISION OF INTER EST AND REMUNERATION OF S. 10AA OF THE ACT DEDUCTION IS ERRONEOUS AND IN CORRECT 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 REMU NERATION FROM AMOUNT OF DEDUCTION U/S. 10AA OF THE ACT. WE ARE UNABLE T O SEE ANY VALID REASON TO INTERFERE WITH THE SAME AND THUS, WE CONFIRM THE SAME. ACCORDINGLY, GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH OCTOBER, 2018. / SURAT ; DATED : 26 TH OCTOBER, 2018 / S.GANGADHARA RAO,SR.PS # & / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. # ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / / TRUE COPY / / // TRUE COPY // SD/- - SD/- -- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER