M/s AKD Construction, Hooghly V. ITO, Wd-1(2), Hooghly, Hooghly

ITA 295/KOL/2014

• Counselvise Citation: 29523514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 18-02-2014
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS JCIT LD
• Assessee Lawyers: A K CHANDRA
• Section: 143(3)

Judgement Text

ITA NO . 2 9 5/KOL/2014 - SMC - MVS M/S. A.K.D CONSTRUCTION 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH: KOLKATA BEFORE HON BLE SRI MAHAVIR SINGH, JM I.T.A NO . 2 9 5 /KOL/2014 A.Y 200 8 - 09 M/S. A.K.D CONSTRUCTION V S. I.T.O WARD - 1(2) , HOOGHLY PAN: A ALFA 5375K ( APPELLANT ) ( RESPONDENT ) FOR THE APPELLANT/ASSESSEE: SHRI A.K CHANDRA, ADVOCATE FOR THE RESPONDENT/DEPARTMENT : S MT. RANU BISWAS, JCIT / LD. SR. DR DATE OF HEARING: 2 3 - 07 - 2015 DATE OF PRONOUNCEMENT : - 0 8 - 201 5 10/09/2015 ORDER TH IS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF LD. C IT(A), KOLKATA IN APPEAL NO. 216 / CIT(A) - XXX VI /KOL /WD. - 1(2), HG./ 10 - 11 DATED 19/11/2013 . ASSESSMENT WAS FRAMED BY I.T.O WARD - 1(2), HOOGHLY FOR THE ASSESSMENT YEAR 200 8 - 09 U /S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 04/11/2010 . 2. T HE ONLY ISSUE INVOLVED IN T HIS APPEAL OF ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE THE CLAIM FOR DEDUCTION TOWARDS PARTNERS REMUNERATION AMOUNTING TO 3,48,445/ - U/S.40(B)(V) OF THE I.T ACT 1961. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND: - 1) THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - XXXVI, KOLKATA ERRED IN DISMISSING THE APPEAL BEFORE HIM AGAINST THE ASSESSMENT ORDER OF THE ASSESSING OFFICER WHEREIN CLAIM FOR DEDUCTION ON ACCOUNTS OF REMUNERATION TO WORKING PARTNERS ADMISSIB LE U/S. 40(B)(V) OF THE INCOME TAX ACT, 1961 WAS DISALLOWED, IN SPITE OF THE FACT THAT THE PARTNERSHIP DEED CLEARLY MADE PROVISIONS FOR PAYMENTS OF REMUNERATIONS IN CONFORMITY TO PROVISIONS OF THE ACT AND AFFIRMS AS PER VARIOUS JUDICIAL DECISIONS. 3. BR IEFLY STATED THE FACTS ARE THAT THE AO FOUND THAT THE ASSESSEE FIRM HAS DEBITED AND CLAIMED AS DEDUCTION AMOUNTING TO RS.3,84,707/ - IN THE P & L ACCOUNT BEING REMUNERATION PAYABLE TO EACH PARTNER . THE AO REQUIRED THE ASSESSEE TO PRODUCE THE PARTNERSHIP DE ED. THE ITA NO . 2 9 5/KOL/2014 - SMC - MVS M/S. A.K.D CONSTRUCTION 2 ASSESSEE PRODUCED THE PARTNERSHIP DEED DATED 01 ST APRIL, 2006 . IN THE PARTNERSHIP DEED, IT HAS BEEN MENTION ED AS UNDER: - THAT THE PARTIES HERE OF THE FIRST AND SECOND PART AGREED TO WORK IN THE PARTNERSHIP FIRM AS WORKING PARTNERS. IT IS ALS O AGREED BETWEEN THE PARTIES HERETO THAT THE SAID WORKING PARTNERS OF THE FIRM SHALL BE ENTITLED TO GET REMUNERATION AS PER THEIR PROFIT SHARING RATIO I.E 50% EACH. THE CEILING LIMIT OF REMUNERATION PAYABLE TO THE WORKING PARTNERS SHALL BE CALCULATED AT TO TAL REMUNERATION OF PARTNERS IS NOT TO BE EXCEED: - ( A ) IN RESPECT OF INCOME UPTO RS. 75,000 OR LESS : RS. 50,000/ - OR 90% OF THE BOOK PROFIT, WHICHEVER IS HIGHER. ( B ) IN RESPECT OF NEXT INCOME OF RS. 75,000/ - , AT THE RATE OF 60% ( C ) IN RESPECT OF BALANCE OF INCOME : AT THE RATE OF 40% 4. THE AO REQUIRED THE ASSESSEE THAT THAT THE PARTNERS REMUNERATION ARE PAYABLE ONLY AS PER PROVISIONS OF SECTION 40(B)(V) OF THE ACT MENTIONED IN THE SAID PARTNERSHIP DEED, BUT THE ASSESSEE HAS FAILED TO QUANTIFY THE AMO UNT OF REMUNERATION PAYABLE TO PARTNER . ACCORDINGLY, THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5 . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO ALSO CONFIRMED THE ACTION OF THE AO BY RELYING ON THE BOARD CIRCULAR NO.73 9 DATED 25 - 03 - 96 AND THE DECISIONS OF VARIOUS COURTS OF LAW AVAILABLE IN HIS ORDER. AGGRIEVED, NOW THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 6. I HAVE HEARD THE RIVAL PARTIES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE ARGUMENTS OF BOTH THE PARTIES AND CASE RECORD THAT THE ASSESSEE HAS CLAIMED RS. 3,48,445/ - TOWARDS PAYMENT OF SALARY/PARTNERS REMUNERATION AS PER ITS PARTNERSHIP DEED DATED 1 ST DAY OF APRIL 2006 , WHEREIN THE SALARY/REMUNERATION ARE TO BE ALLOWE D IN TERM OF PROVISIONS OF SECTION 40(B)(V) OF THE ACT AND TO BE QUANTIFIED ACCORDINGLY. IT IS A FACT THAT QUANTIFICATION OF AMOUNT IS NOT MENTIONED IN THE SAID DEED, BUT THE FORMULA AS PRESCRIBED IN THE PROVISIONS OF SECTION 40(B)(V) OF THE ACT IS APPLI ED. THE HON BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF DURGA DASS DEVKI NANDAN VS. ITO REPORTED IN (2012) 342 ITR 17(HP) HAS HELD AS UNDER : - A READING OF SECTION 40(B) ( V) CLEARLY SHOWS THAT AMOUNT OF REMUNERATION WHICH DOES NOT EXCEED THE AMOUNT SP ECIFIED IN THE ACT IS DEDUCTIBLE. THE BOARD HAS PROVIDED THAT EITHER THE AMOUNT OF REMUNERATION ITA NO . 2 9 5/KOL/2014 - SMC - MVS M/S. A.K.D CONSTRUCTION 3 PAYABLE TO EACH INDIVIDUAL SHOULD BE FIXED IN THE AGREEMENT OR THE PARTNERSHIP AGREEMENT DEED SHOULD LAY DOWN THE MANNER OF QUALIFYING SUCH REMUNERATION. IT WA S NOT DISPUTED THAT THE PARTNERS WERE PAID REMUNERATION WHICH WAS LESS THAN THE MAXIMUM PROVIDED BY THE ACT. NONE OF THE AUTHORITIES HAD DOUBTED THE PAYMENT OF REMUNERATION AND IN FACT ACCOUNT BOOKS OF ASSESSEE HAD BEEN ACCEPTED TO BE CORRECT. THE REMUNERATION HELD DEDUCTIBLE. 7. SIMILARLY, HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ASIAN MARKETING REPORTED IN (2012) 254 CTR 453(RAJ) HAS HELD AS UNDER: - THE REMUNERATION PAID BY THE ASSESSEE - FIRM TO ITS WORKING PARTNERS HELD ADMISSIBLE WHICH WAS BASED ON PARTNERSHIP DEED ACCORDING TO THE NORMS AND STANDARDS FIXED BY THE RELEVANT PROVISIONS OF 1961 ACT. 8. IN VIEW OF ABOVE JUDICIAL PRECEDENT, I AM OF THE VIEW THAT PAYMENT OF REMUNERATIONS ARE WITHIN THE LIMIT PRESCRIBED IN THE PRO VISIONS OF SECTION 40(B)(V) OF THE ACT AND AS AUTHORIZED BY THE SAID PARTNERSHIP DEED. THERE IS NO NEED TO QUANTIFY THE REMUNERATION/SALARY ON MONTHLY BASIS, BUT IT SHOULD BE PAID UNDER THE PROVISIONS OF SECTION 40(B)(V) OF THE ACT. ACCORDINGLY, THE ADDIT ION AS MADE BY AO AND CONFIRMED BY CIT(A) IS DELETED. THE APPEAL OF ASSESSEE IS ALLOWED. 9 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON - 0 8 - 2015 10/09/2015 SD/ - DATED : - 0 8 - 2015 [ MAHAVIR SINGH, JUDICIAL MEMBER ] 10/09/2015 *PP /SR.P.S. COPY OF THE ORDER FORWARDED TO: 1. APPELLANT - M/S. SUMAN ENTERPRISE KHIDIRPUR, P.O CHHBGHATI, MURSHIDABAD 742201. 2 RESPONDENT : DY. COMMISSIONER OF INCOME TAX, CIR - MURSHID ABAD, AAYKAR BHABAN 39 R.N TAGORE ROAD, BERHAMPORE, MURSHIDABAD 742101. 3 . THE CIT, 4 . THE CIT(A), KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY, / BY ORDER ASSTT. REGISTRAR