M/s. Gandhinagar Telerads, Gandhinagar V. The Income Tax Officer, Ward-2, Gandhinagar

ITA 3184/AHD/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0862 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 03-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 271(1)(c); 143(3); 40(b); 234B; 80IB; 10B; 144

Judgement Text

, CKH CKHCKH CKH IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW;] U;KF;D ] U;KF;D ] U;KF;D ] U;KF;D LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.3184/AHD/2014 ( / ASSESSMENT YEAR : 2011-12) M/S. GANDHINAGAR TELERADS 314, MANGAL MURTI PARK, SECTOR 8, GANDHINAGAR 382 008 / VS. ITO, WARD 2, GANDHINAGAR. ./ ./ PAN/GIR NO. : AAHFG 9008 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BANDISH SOPARKAR, A.R. / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. / DATE OF HEARING 26/09/2018 !'# / DATE OF PRONOUNCEMENT 15/11/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) GANDHINAGAR, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEA L NO.CIT(A)/GNR/510/2013-14 DATED 17.09.2014 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 28.02.2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE A RE AS UNDER:- 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIR MING ACTION OF AO IN COMPUTING INTEREST AND REMUNERATION TO PARTNERS NOT DEBITED TO PROFIT AND LOSS ACCOUNT FOR GRANTING DEDUCTION U /S 10A OF THE ACT. LD. CIT (A) FAILED TO APPRECIATE THAT ARBITRAR Y FOISTING OF COMPULSORY CLAIM IS NOT PERMISSIBLE IN ABSENCE OF A NY PAYMENT MADE TO THE PARTNERS. IT BE SO HELD NOW AND DEDUCTI ON U/S 10A BE DIRECTED TO BE GIVEN AS CLAIMED. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING VIEW OF AO THAT THE APPELLANT ABSTAINED FROM CLAIMING INTEREST AND REMUNERATION TO PARTNERS DESPITE SPECIFIC PROVISION IN PARTNERSHIP DEED IN ORDER TO CLAIM HIGHER DEDUCTION U/S 10A OF THE ACT. LD. CIT (A) OUGHT NOT TO HAVE SUBSCRIBED T O SUCH ARBITRARY AND BASELESS CONCLUSION DRAWN BY AO. IT B E SO HELD NOW. 3. LD. CIT (A) ERRED IN LAW IN NOT APPRECIATING RATIO OF DECISIONS RELIED UPON THAT AO CANNOT COMPEL THE APPELLANT TO CHARGE INTEREST AND REMUNERATION BY INVOKING PROVISIONS OF SECTION 40(B) OF THE ACT. LD. CIT (A) OUGHT TO HAVE HELD TH AT IT IS DISCRETIONARY & NOT MANDATORY FOR THE APPELLANT TO MAKE SUCH A CLAIM. IT BE SO HELD NOW. 4. LEVY OF INTEREST U/S 234B OF THE ACT IS NO T JUSTIFIED. 5. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT ALL 3. THE INTERCONNECTED ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY ALLOWING THE DEDUCTION U/S 40(B) OF THE ACT. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 3 - 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF MED ICAL TRANSCRIPTION. THE FIRM IS COMPRISING OF TWO PARTNERS WHO ARE A QU ALIFIED DOCTOR. THE FIRM IS PROVIDING SERVICES TO THE HOSPITAL SITUATED IN AUSTRALIA. AS SUCH, THE ASSESSEE RECEIVES SCANNED IMAGES (X-RAYS) THROU GH E-MAIL AND ACCORDINGLY, THE FIRM ON THE BASIS OF SUCH X-RAY FO RMS THEIR PROFESSIONAL OPINION WHICH IS DELIVERED TO THE HOSPITAL THROUGH E-MAIL. THE ASSESSEE FOR THESE SERVICES RECEIVES PROFESSIONAL FEES FROM THE HOSPITAL IN AUSTRALIAN DOLLARS. 4.1 THE ASSESSEE IS ALSO CLAIMING DEDUCTION U/S 10A OF THE ACT FOR THE SERVICES RENDERED BY IT TO THE HOSPITAL. THE ASSESS EE DURING THE YEAR HAS SHOWN GROSS RECEIPT OF RS. 1,21,23,715/- AND FOREIG N EXCHANGE PROFIT OF RS. 57428.70 ONLY. THE ASSESSEE AGAINST SUCH GROSS RECEIPT HAS SHOWN A PROFIT OF RS. 1,19,49,056/- WHICH IS 98.56% AS PROF IT FROM SUCH PROFESSIONAL ACTIVITY. THE ASSESSEE FURTHER CLAIMED DEDUCTION U/S 10A OF THE ACT FOR ITS PROFIT OF RS. 1,19,49,056/-. THE AS SESSEE IN SUPPORT OF HIS CLAIM ALSO FILED REPORT U/S 10A OF THE ACT IN FORM NO.56F DULY SIGNED BY THE QUALIFIED CHARTERED ACCOUNTANT. 4.2 THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT HAS NOT CLAIMED ANY REMUNERATION/INTEREST ON CAPITAL TO THE PARTNERS. T HE ASSESSEE IN RESPONSE TO THE QUERY RAISED BY THE AO ABOUT THE APPLICABILI TY OF THE PROVISION OF SECTION 10A(7) R.W.S. 80-IA(8) AND 80-IA(10), SUBM ITTED THAT THERE IS NO ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 4 - CONNECTION BETWEEN THE ASSESSEE AND THE COMPANY/HOS PITALS BASED IN AUSTRALIA. 4.3 THE FEES WERE RECEIVED FOR THE SERVICES RENDERE D BY THE ASSESSEE TO THE HOSPITALS IN AUSTRALIA. THESE HOSPITALS WERE AL SO AVAILING THE SERVICES AT THE RATE WHICH WERE PAID TO THE ASSESSEE. THESE SERVICES WERE RECEIVED BY THE HOSPITAL FROM OTHER RADIOLOGISTS BASED IN IN DIA AND OUTSIDE INDIA. 4.4 THERE WAS NO TRANSFER OF FUND OUTSIDE INDIA FRO M THE ASSESSEE. AS SUCH, THE ENTIRE FUND RECEIVED FROM THE HOSPITAL BA SED IN AUSTRALIA WAS UTILIZED IN INDIA ONLY. 4.5 IN PROVIDING THE SERVICES ABOVE THERE IS A NEED OF HIGH-SPEED INTERNET CONNECTION ALONG WITH HIGH-QUALITY COMPUTE R AND SCANNERS. THE SERVICES BEING SPECIALIZED IN NATURE WERE RENDERED BY THE PARTNERS OF THE FIRM ONLY. THEREFORE, THERE WAS NO NEED TO HIRE EMP LOYEES FOR ITS BUSINESS. 4.6 THE MARGIN EARNED BY THE ASSESSEE WAS HIGH DUE TO THE FACT OF THE DIFFERENCE IN THE FOREIGN EXCHANGE RATE. 4.7 THE ASSESSEE ALSO CLAIMED THAT ITS PARTNERS DID NOT DRAW ANY SALARY AND CHARGE ANY INTEREST ON THEIR CAPITAL THOUGH THE CLAUSE FOR THE REMUNERATION AND INTEREST ON THE CAPITAL WAS MENTIO NED IN THE DEED OF ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 5 - PARTNERSHIP. HOWEVER, THE ASSESSEE CLAIMED THAT THE REMUNERATION TO THE PARTNERS AND INTEREST ON THE CAPITAL IS NOT MANDATO RY. THEREFORE THE SAME WAS NOT CLAIMED. HOWEVER, THE AO DISAGREED WITH THE SUBMISSION OF TH E ASSESSEE ON THE FOLLOWING GROUNDS: I. THERE WAS A SPECIFIC CLAUSE IN THE DEED OF PARTNERS HIP FOR MAKING THE PAYMENT OF THE REMUNERATION AND INTEREST ON THE PARTNERS CAPITAL. II. THE STATUS OF THE PARTNER IS DIFFERENT FROM THE FIR M. AS SUCH, THE PARTNERS BEING PROFESSIONALLY QUALIFIED DOCTORS WER E RENDERING SERVICES TO THE FIRM AND ACCORDINGLY THEY WERE ENTI TLED TO COMPENSATION FOR THE SERVICES RENDERED TO THE FIRM. III. SIMILARLY, THE PARTNERS HAVE INVESTED MONEY IN THE CAPITAL OF THE FIRM. THEREFORE, THEY WERE ENTITLED TO THE INTEREST ON THE CAPITAL CONTRIBUTED BY THEM TO THE FIRM. IV. THERE WAS REGULAR/MONTHLY WITHDRAWAL FROM THE FIRM BY THE PARTNERS. THE ACT OF THE ASSESSEE SHOWS THAT INSTEA D OF DEBITING THE REMUNERATION IN THE PARTNERS ACCOUNT AS WELL A S INTEREST ON PARTNERS CAPITAL ACCOUNT, THE PARTNERS HAVE CHOSEN TO DRAW A SHARE OF PROFIT FROM THE FIRM. THEREFORE, THE ACT O F THE ASSESSEE TO TAKE A SHARE OF PROFIT INSTEAD OF REMUNERATION/I NTEREST IS NOTHING BUT A COLORABLE DEVICE TO ESCAPE FROM THE T AX LIABILITY WHICH WAS SUPPOSED TO BE IMPOSED ON THE PARTNERS OF THE FIRM. V. THE ASSESSEE IN THE IMMEDIATELY SUCCEEDING YEAR, I. E. A.Y. 2012-13 IN WHICH IT WAS NOT ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT HAS CLAIMED PARTNERS REMUNERATION AMOUNTIN G TO RS.18,00,000/-. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 6 - IN VIEW OF ABOVE, THE AO DEDUCTED THE AMOUNT OF REM UNERATION AND INTEREST ON CAPITALS AGAINST THE PROFIT DECLARED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT, AS PER THE PROVISION OF SECTION 4 0(B) OF THE ACT BEFORE APPLYING THE PROVISION OF SECTION 10A R.W.S. 80IA(8 ) AND 80IA(10) OF THE ACT. THE NECESSARY WORKING MADE BY THE AO FOR ALLOW ING THE CLAIM OF DEDUCTION U/S 40(B) OF THE ACT STANDS AS UNDER: NET PROFIT AS PER P&L A/C 1,19,49,056.06 ROUNDED OFF TO 1,19,49,056.00 LESS: INTEREST @12% ALLOWED TO PARTNERS ON AVERAGE BASIS 6,29,284.00 BALANCE AMOUNT FOR REMUNERATION TO PARTNERS 1,13,19,772.00 LESS: REMUNERATION TO PARTNERS (PROVIDED AS PER PARTNERSHIP DEED) (WORKING ENCLOSED) 68,81,863.00 TOTAL INCOME 44,37,909.00 ELIGIBLE DEDUCTION UNDER SECTION 10A 44,37,909.00 LESS: DEDUCTION CLAIMED IN THE RETURN OF INCOEM 1,19,49,056.00 EXCESS DEDUCTION CLAIMED DISALLOWED AND ADDED TO THE TOTAL INCOME 75,11,147.00 TAXABLE INCOME OF THE ASSESSEE RS.75,11,1 47.00 IN VIEW OF THE ABOVE, THE AO DISALLOWED A SUM OF RS . 75,11,147/- BEING EXCESS DEDUCTION CLAIMED U/S 10A OF THE ACT AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 7 - 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE C LAIM FOR THE REMUNERATION AND INTEREST ON CAPITAL AS DEDUCTION U /S 40(B) OF THE ACT IS NOT MANDATORY. THEREFORE, THE SAME CANNOT BE ALLOWE D AS DEDUCTION COMPULSORILY IN THE STATEMENT OF INCOME OF THE ASSE SSEE. 5.1 THE ASSESSEE ALSO SUBMITTED THAT EVEN AFTER ALL OWING THE DEDUCTION FOR THE REMUNERATION AND INTEREST ON CAPITAL THE TA XABLE INCOME OF THE ASSESSEE WILL REMAIN NIL. IT IS BECAUSE THE BALANCE AMOUNT WILL BE ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. THE PARTNERS OF THE FIRM WERE ENTITLED TO DRAW THE MONEY FROM THE FIRM WHICH WAS CREDITED AS A SHARE OF PROFIT IN THEIR CA PITAL ACCOUNT. THERE IS NO COMPULSION UNDER THE PROVISION OF THE ACT TO DRA W THE AMOUNT FROM THE FIRM IN THE NAME OF REMUNERATION ONLY. AS SUCH, IT WAS THE DECISION OF THE PARTNERS OF THE FIRM TO DRAW THE AMOUNT AS A SH ARE OF PROFIT IN PLACE OF REMUNERATION/INTEREST ON CAPITAL WHICH IS WITHIN TH E PURVIEW OF THE PROVISION OF THE ACT. THUS, IT CANNOT BE CONCLUDED THAT THE ASSESSEE USED A COLORABLE DEVICE TO ESCAPE FROM THE TAX LIABILITY BY NOT CLAIMING THE REMUNERATION AND INTEREST ON CAPITAL. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON VARIOUS ORDERS WHICH ARE RECORDED IN THE ORDER OF LD. CIT(A). 5.2 WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE AL SO CLAIMED THAT EVEN IF IT CLAIMS DEDUCTION U/S 40(B) OF THE ACT ON ACCO UNT OF REMUNERATION AND ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 8 - INTEREST TO THE PARTNERS THEN ALSO THERE WILL BE NO TAXABLE PROFIT IN THE HANDS OF THE FIRM. THEREFORE, THE AO HAS EXCEEDED J URISDICTION BY TREATING THE EXCESS DEDUCTION CLAIM BY THE ASSESSEE AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) AFTER CON SIDERING THE SUBMISSION OF THE ASSESSEE HELD THAT THE ASSESSEE W AS TO CLAIM A DEDUCTION ON ACCOUNT OF REMUNERATION AND INTEREST O N CAPITAL. BUT AT THE SAME TIME THE LD. CIT(A) DIRECTED THE AO TO TAX SUC H AMOUNT OF REMUNERATION AND INTEREST ON CAPITAL IN THE INDIVID UAL HANDS OF THE PARTNERS. AS PER THE LD. CIT(A) THE AMOUNT OF REMUN ERATION AND INTEREST ON CAPITAL NOT CLAIMED BY THE ASSESSEE CANNOT BE CH ARGED IN THE HANDS OF THE FIRM. THE RELEVANT EXTRACT OF THE ORDER IS REPR ODUCED BELOW: 6. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESS MENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT, THE AO HAS OBSERV ED THAT APPELLANT HAS NOT SHOWN ANY REMUNERATION TO WORKING PARTNER A ND NOT CHARGED 12% INTEREST ON PARTNERS' CAPITAL ACCOUNT AS PROVID ED IN PARTNERSHIP DEED. THE AO HAS ALSO COMPARED PROFIT & LOSS ACCO UNT OF YEAR UNDER CONSIDERATION WITH PROFIT & LOSS ACCOUNT FOR SUBSEQ UENT YEAR AND CAME TO CONCLUSION THAT WHEN APPELLANT WAS CLAIMING DEDUCTION U/S 10A IT HAS NOT CHARGED ANY REMUNERATION A ND INTEREST IN PROFIT & LOSS ACCOUNT TO CLAIM HIGHER DEDUCTION AND IN SUBSE QUENT YEAR EVEN DEDUCTION U/S 10A WAS NOT CLAIMED, BOTH INTEREST A ND REMUNERATION WAS CLAIMED IN PROFIT & LOSS ACCOUNT, IT WAS ALSO OBS ERVED THAT BOTH THE PARTNERS ARE REGULARLY WITHDRAWING FROM THEIR CAPIT AL ACCOUNT AND TOTAL WITHDRAWAL OF BOTH THE PARTNERS IS RS. 58.5 LAC IN THE CASE OF BHAVESH DAVE AND RS. 57.0 LAC IN THE CASE OF MAMTA DAVE, T HE PARTNERS OF THE FIRM ARE NOT PAYING ANY TAX ON SUCH WITHDRAWAL AND IF ENTRIES RELATING TO REMUNERATION AND INTEREST WERE PASSED IN APPELLANT' S CASE, PARTNERS WOULD HAVE TO PAY TAXES ON SUCH INCOME. THUS, THI S ENTIRE MODUS OPERANDI WAS TO AVOID TAXES. ON THIS BASIS ASSESS ING OFFICER HAS COMPUTED INTEREST PAYABLE TO PARTNERS AT RS. 6,29,284/- AND REMUNERATION TO PARTNERS AT RS.68,81,863/-. TH US, THE AGGREGATE AMOUNT OF RS. 75,11,147/- WAS CONSIDERED TO B E PAYMENT PERTAINING ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 9 - TO INTEREST AND REMUNERATION NOT DEBITED TO PROFIT & LOSS ACCOUNT. THE AO HAS ALSO ASSESSED TOTAL INCOME OF APPELLANT AT R S.75,11,147/- AND NO DEDUCTION U/S 10A WAS ALLOWED ON SUCH INCOME. ON THE OTHER HAND, APPELLANT HAS ARGUED THAT AO HAS NO RIGHT TO COMPEL THE APPELLANT TO COMPULSORILY CLAIM REMUNERATION TO PARTNERS AND INT EREST ON PARTNERS' CAPITAL IN SPITE OF THE FACT THAT SAME HAS BEEN ME NTIONED IN THE PARTNERSHIP DEED AS PROVISIONS OF INCOME TAX ACT OV ERRIDE THE PARTNERSHIP DEED. FURTHER, WITHDRAWALS MADE BY PART NERS ARE OUT OF CREDIT BALANCE OF PARTNERS LYING IN FIRM AND SAID F ACT CANNOT LEAD TO CONCLUSION THAT APPELLANT HAS INDULGED IN TAX EVASI ON. IN SUPPORT OF IT5 ARGUMENT APPELLANT HAS RELIED UPON VARIOUS DECISION S INCLUDING DECISION OF JODHPUR ITAT, AMRITSAR ITAT, CHANDIGARH ITAT, ETC. THE APPELLANT IN IT:; ALTERNATE SUBMISSION HAS ARGUED T HAT AFTER CHARGING OF INTEREST AND REMUNERATION, PROFIT DERIVED BY INDUST RIAL UNDERTAKING CLAIMING DEDUCTION UNDER SECTION IDA WOULD BE REDUC ED AND ON SUCH REDUCED AMOUNT APPELLANT WOULD BE ELIGIBLE FOR DEDU CTION UNDER SECTION 10A WHICH MEANS THAT ADDITION MADE BY ASSES SING OFFICER FOR REMUNERATION AND INTEREST WOULD NOT RESULT INTO ANY TAXABLE INCOME IN THE CASE OF APPELLANT. ON CAREFUL CONSIDERATION OF ENTIRE FACTS, IT IS OBS ERVED THAT PARTNERSHIP FIRM IS ESTABLISHED BY PARTNERS AS PER THEIR MUTUAL CONSENT AND SAME ARE CATEGORICALLY NOTED IN PARTNERSHIP DEED. THE VARIOU S CLAUSES OF SUCH DEED DECIDE THE NATURE OF ACTIVITIES TO BE CARRIED OUT, WHAT WILL BE THE OBLIGATION OR FIRM TO PARTNERS AND VICE VERSA, ETC. EVEN AT THE TIME OF DISPUTE AMONG THE; PARTNERS, THE PARTNERSHIP DEED I S ESSENTIAL FOR RESOLVING SUCH ISSUES OF ADJUDICATING LEGAL MATTERS . IN THE PRESENT CASE IT IS AN UNDISPUTED FACT THAT PARTNERSHIP DEED CATE GORICALLY STATES THAT PARTNERS ARE ENTITLED TO INTEREST AND REMUNERATION AS PER PROVISIONS OF INCOME TAX ACT. THE APPELLANT HAS NOT BROUGHT ANY E VIDENCE TO SUGGEST THAT THESE CLAUSES ARE MODIFIED SUBSEQUENTLY BY ENT ERING INTO SUPPLEMENTARY PARTNERSHIP DEED. IN VIEW OF THESE FA CTS AO OFFICER WAS CORRECT IN COMPUTING INTEREST AND REMUNERATION PAYA BLE TO PARTNERS AS PER PROVISIONS OF INCOME TAX ACT. IT IS ALSO OBSERV ED THAT APPELLANT IS NOT PAYING ANY INTEREST OR REMUNERATION WHEN IT IS CLAIMING DEDUCTION UNDER SECTION IDA BUT IN SUBSEQUENT YEAR WHEN APPEL LANT DID NO; CLAIM SUCH DEDUCTION, IT HAS PAID INTEREST AND REMUNERATI ON TO PARTNERS. THUS, THE NET EFFECT IN PRESENT CASE OF APPELLANT IS THAT WHEN ENTIRE PROFIT I:; ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 10 - ELIGIBLE FOR DEDUCTION UNDER SECTION 10A, APPELLANT HAS NOT CLAIMED ANY INTEREST AND REMUNERATION WHILE COMPUTING TOTAL INC OME OF THE FIRM WHICH MEANS THAT RESPECTIVE PARTNERS HAVE NOT SHOWN SUCH AMOUNT AS INCOME IN THEIR RESPECTIVE RETURNS. HAD APPELLANT C HARGED INTEREST AND REMUNERATION THERE WOULD NOT BE ANY CHANGES IN TAXA BLE INCOME OF THE FIRM BUT THE RESPECTIVE PARTNERS HAD TO PAY TAXES ON SUCH INCOME . THIS MODUS OPERAND ITSELF SUGGESTS THAT APPELLANT HAS CL EARLY EVADED TAXES. SIMILAR ISSUE WAS DECIDED BY JURISDICTIONAL RAJKOT ITAT IN THE CASE OF ACIT VS. MERIDIAN IMPEX [2013] 37 TAXMANN.COM 22 WH EREIN IT IS HELD AS UNDER: 'SECTION 10B EXEMPTS FROM TAX ANY PROFIT AND GAIN D ERIVED BY A 100% EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SUBJECT TO THE FULFILME NT OF CONDITIONS STIPULATED IN SECTION 10B THE PROFITS AN D GAINS ELIGIBLE FOR EXEMPTION UNDER SECTION 10B CAN NEITHE R BE ARTIFICIAL NOR INFLATED PROFITS AND GAINS BUT ACTUAL PROFITS A ND GAINS. IN OTHER WORDS, ALL OUTGOINGS INCLUDING EXPENSES ELIGI BLE FOR DEDUCTION NEED TO BE CONSIDERED WHILE COMPUTING THE PROFITS AND GAINS OF THE BUSINESS. PAYMENT OF INTEREST ON CAPIT AL AND REMUNERATION TO PARTNERS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 37 SUBJECT TO THE RESTRICTIONS PLACED BY SECTION 40 (B). SECTION 40(B) HOWEVER PLACES CERTAIN RESTRICTIONS ON I HE D EDUCIBILITY OF AMOUNT OF INTEREST AND REMUNERATION PAYABLE TO PART NERS. THE RELEVANT CLAUSES IN THE COPIES OF PARTNERSHIP DEEDS FILED DO NO! VIOLATE THE PRESCRIPTION OF SECTION 40(B) THEREFORE INTEREST ON CAPITAL AND REMUNERATION PAYABLE TO PARTNERS WERE A DMISSIBLE FOR DEDUCTION UNDER SECTION 37 AND IS THEREFORE REQ UIRED TO BE TAKEN INTO ACCOUNT FOR COMPUTING THE PROFITS ELIGIB LE FOR EXEMPTION UNDER SECTION 10B, (PARA 12) PERUSAL OF THE PARTNERSHIP DEED DATED 28-11-2002 RE QUIRES PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS. THERE IS SIMILAR STIPULATION IN PARTNERSHIP DATED 1 4-09-2005. IT IS INTERESTING TO OBSERVE THAT THE PARTNERSHIP DEED WA S EXECUTED ON 14,09.2005 WHICH IS NOT ONLY DULY SIGNED BY THE EXI STING PARTNERS AS WELL AS RETIRING PARTNERS BUT ALSO REGISTERED WI TH SUB- REGISTRAR, THE SUPPLEMENTARY ALSO STATED TO HAVE BE EN EXECUTED ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 11 - ON 14-09-2005 BUT IT IS NOT REGISTERED SUB-REGISTRA R. BOTH THE DEEDS, IE., THE PARTNERSHIP DEED AND THE SUPPLEMENT ARY PARTNERSHIP DEED, HAVE REPORTEDLY BEEN EXECUTED ON 14-09-2005. SUPPLEMENTARY DEED WAS NOT FILED BEFORE THE ASSESSI NG OFFICER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THE SU PPLEMENTARY PARTNERSHIP DEED, IF IT WAS GENUINELY IN EXISTENCE AT THE TIME OF ORIGINS) ASSESSMENT PROCEEDINGS, OUGHT TO HAVE BEEN FILED BEFORE THE AO NOT BECAUSE IT WAS REQUIRED BY LAW BUT BECAU SE IT WAS RELIED UPON BY THE ASSESSES IN SUPPORT OF ITS CLAIM THAT INTEREST AND REMUNERATION WAS NOT PAYABLE TO PARTNERS AS PAR SUPPLEMENTARY PARTNERSHIP DEED. BESIDES, THE SUPPLEMENTARY DEED CONTAINS A RECITAL THAT BOTH THE PARTNERS HAVE MUTUALLY AGREED NOT TO PAY ANY INTEREST OR REMUNERATION ETC. FOR FV 2005- 06. THERE IS NO SIMILAR SUPPLEMENTARY DEED FOR ASSE SSMENT YEAR 2009-10. THERE IS ANOTHER DEED OF PARTNERSHIP DATED 31-03-2006 WHICH ALSO PROVIDES FOR PAYMENT OF INTEREST ON CAPI TAL AND REMUNERATION TO THE PARTNERS, IN FACT, CLAUSE 17 OF THE AFORESAID PARTNERSHIP DEED PROVIDES THAT THE REMUNERATION SHALL BE PAID TO THE PARTNERS AS PER THE DERAILS GIVEN IN THE SAID C LAUSE. [PARA 13] ON CAREFUL PERUSAL OF THE RELEVANT PARTNERSHIP DEED S, PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS IS NOT HIT BY SECTION 40(B). THE MERE FACT THAT THE PARTNERS HAVE CHOSEN TO FOREGO INTEREST ON CAPITAL AND REMUNERATION PAYABLE TO THEM DOES NOT IPSO-FACTO MEAN THAT THEY ARE NOT ADMISSIB LE FOR DEDUCTION. THE FACT THAT THE ASSESSEE HAS NOT DEBIT ED SUCH INTEREST AND REMUNERATION PAYABLE TO PARTNERS TO IT S PROFIT & LOSS ACCOUNT IN SPITE OF THEIR ADMISSIBILITY TO DEDUCTIO N MAKES ITS INTENTION QUITE EVIDENT, NAMELY, LO INFLATE THE PRO FITS ELIGIBLE FOR EXEMPTION UNDER SECTION 10B. SINCE THE ASSESSING OF FICER HAD CORRECTLY WORKED OUT INTEREST ON CAPITAL AND REMUNE RATION PAYABLE TO PARTNERS AND EXCLUDED THEM FROM OVERALL PROFITS OF BUSINESS FOR WORKING OUT PROFITS ELIGIBLE FOR EXEMP TION UNDER SECTION 10B, ORDER OF COMMISSIONER (APPEALS) WAS RE VERSED AND THAT OF THE ASSESSING OFFICER RESTORED. [PARA 14]' THUS, FOLLOWING THE DECISIONS OF JURISDICTIONAL TRI BUNAL WHICH IS DIRECTLY ON THE PRESENT ISSUE, IT IS HELD THAT AO WAS JUSTI FIED IN COMPUTING ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 12 - INTEREST AND REMUNERATION OF RS.75,11,147/- IN THE CASE' OF APPELLANT. HOWEVER, INTEREST AND REMUNERATION ARE ALLOWABLE DE DUCTION WHILE COMPUTING INCOME FROM BUSINESS AND PROFESSION HENCE TO THAT EXTENT PROFIT OF PARTNERSHIP FIRM ELIGIBLE FOR DEDUCTION U NDER SECTION 10A WOULD BE REDUCED AND ON SUCH REDUCED AMOUNT APPELLA NT WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 10A WHICH MEANS THAT NET TOTAL INCOME IN THE CASE OF APPELLANT WOULD BE NIL. AT TH E END OF THE COMPUTATION OF INCOME, THE AO HAS AGAIN TAXED THE S AMO DISALLOWANCE OF INTEREST & REMUNERATION TO THE TUNE OF RS.75,11, 147/- IN THE -HANDS OF THE APPELLANT THROUGH OVERSIGHT AND THE AO WAS N OT JUSTIFIED IN TAXING REMUNERATION AND INTEREST IN THE HANDS OF AP PELLANT FIRM AS SEPARATE TAXABLE INCOME. THEREFORE, IT IS HELD THAT INTEREST AND REMUNERATION SO COMPUTED WOULD BE TAXABLE AS INCOME IN THE HANDS OF PARTNERS OF APPELLANT FIRM HENCE ASSESSING OFFICERS DIRECTED TO TAKE NECESSARY ACTION IN THE HANDS OF BOTH THE PARTIES F OR REMUNERATION AND INTEREST. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1-60 AND SUBMITTED THAT THE ASSESSEE DID NOT CLAIM ANY R EMUNERATION AND INTEREST ON CAPITAL IN THE A.Y. 2009-10, BUT NO ADD ITION WAS MADE IN ITS HAND IN THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT PERTAINING TO THE A.Y. 2009-10. THE LD. AR FURTHER SUBMITTED THAT THE RE WAS ALSO NO ADDITION ON ACCOUNT OF REMUNERATION/INTEREST IN CAP ITALS IN THE A.Y. 2010- 11. THE LD. AR IN SUPPORT OF HIS CLAIM FILED THE CO PIES OF THE ASSESSMENT ORDER PERTAINING TO THE A.Y. 2009-10 & 2010-11 WHIC H ARE PLACED ON RECORD. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 13 - 6.1 ON THE OTHER HAND, THE LD. AR FURTHER SUBMITTED THAT IT IS A FACT ON RECORD THAT NO REMUNERATION/INTEREST ON PARTNERS C APITAL WAS GIVEN TO THE PARTNERS. THEREFORE NO INCOME CAN BE TAXED IN THE H ANDS OF THE PARTNERS ON THE BASIS OF REAL INCOME THEORY. 6.2 THE LD. AR ALSO SUBMITTED THAT EVEN IF THE REMU NERATION IS ALLOWED TO THE FIRM THEN ALSO IT CANNOT BE TAXED IN THE HAN DS OF THE ASSESSEE. 6.3 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE IN THE SUBSEQUENT YEAR HAD CLAIMED THE DEDUCTION ON ACCOUNT OF REMUNE RATION/INTEREST ON PARTNERS CAPITAL AS PER THE PROVISION OF SECTION 4 0(B) OF THE ACT. THE ASSESSEE INTENTIONALLY DID NOT CLAIM THE REMUNERATI ON/INTEREST ON PARTNERS CAPITAL DURING THE PERIOD WHEN THE DEDUCTION U/S 10 A OF THE ACT WAS AVAILABLE TO IT. THUS, THE ASSESSEE MADE THE TAX PL ANNING WITHIN THE PURVIEW OF LAW WHICH CANNOT BE EQUATED WITH TAX EVA SION. 6.4 THE LD. AR ALSO SUBMITTED THAT IT IS NOT COMPUL SORY FOR THE ASSESSEE TO CLAIM THE DEDUCTION U/S 40(B) OF THE AC T ON ACCOUNT OF REMUNERATION/ INTEREST ON PARTNERS CAPITAL ACCOUNT . 7. ON THE OTHER HAND LD. DR SUBMITTED THAT THERE IS A SPECIFIC CLAUSE FOR CLAIMING THE DEDUCTION ON ACCOUNT OF REMUNERATI ON AND INTEREST ON CAPITAL WITHIN THE LIMIT AS SPECIFIED U/S 40(B) OF THE ACT. THEREFORE, IT WAS IMPERATIVE FOR THE ASSESSEE TO CLAIM SUCH A DEDUCTI ON. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 14 - 7.1 THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION ON ACCOUNT OF REMUNERATION AND INTEREST O N CAPITAL IN THE SUBSEQUENT YEAR WHICH PROVES THAT THE ASSESSEE IS N OT MAINTAINING ANY CONSISTENCY IN ITS CONDUCT. AS SUCH, THE ASSESSEE C ANNOT CLAIM THE DEDUCTION ON HIS SURMISE AND CONJUNCTURE, ASSUMPTIO N/PRESUMPTION BASIS. THE LD. DR FURTHER SUBMITTED THAT THE CASE LAWS REL IED BY THE ASSESSEE ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE CONTROVERSY IN THE CASE BE FORE US RELATES TO THE DEDUCTION OF REMUNERATION/INTEREST ON PARTNERS CAP ITAL NOT CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE FACT I S THAT THERE WAS A SPECIFIC CLAUSE IN THE DEED OF PARTNERSHIP. THEREFORE, THE D EDUCTION FOR THE REMUNERATION/ INTEREST ON CAPITAL WAS MADE BY THE A O WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A) WITH THE D IRECTION TO ALLOW THE CLAIM OF DEDUCTION TO THE FIRM FOR THE REMUNERATION /INTEREST ON CAPITAL BUT TAX THE SAME IN THE HANDS OF THE PARTNERS OF THE FI RM. 8.1 IT IS AN UNDISPUTED FACT THAT THE DEED OF PARTN ERSHIP REQUIRES A PARTNER TO CLAIM THE DEDUCTION FOR THE REMUNERATION AND THE INTEREST ON CAPITAL. THE DISPUTE ARISES WHETHER THE CLAUSE MENT IONED IN THE DEED OF PARTNERSHIP IS COMPULSORY/MANDATORY ON THE PART OF THE ASSESSEE. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 15 - 8.2 THE PARTNERSHIP FIRM COMES INTO EXISTENCE WITH MUTUAL UNDERSTANDING BETWEEN THE PERSONS. THESE UNDERSTAND ING CAN BE REDUCED IN WRITING OR WITHOUT IN WRITING THE SAME. THUS, IT IS CLEAR THAT IT IS NOT NECESSARY TO EXECUTE THE DEED OF PARTNERSHIP IN WRI TING. HOWEVER, IN THE CURRENT SCENARIO, IT IS NOT POSSIBLE TO WORK UNDER THE MODULE OF THE PARTNERSHIP WITHOUT EXECUTING THE SAME IN WRITING. IT IS BECAUSE TO RUN THE BUSINESS ONE NEEDS TO HAVE A BANK ACCOUNT, PAN, ETC . WHICH IS NOT POSSIBLE TO OBTAIN WITHOUT HAVING THE DEED OF PARTN ERSHIP IN WRITING. THUS, THE DEED OF THE PARTNERSHIP WILL REVEAL THE U NDERSTANDING ON THE BASIS OF WHICH PARTNERS AGREED TO WORK BETWEEN THEM . FROM THE ABOVE, IT IS CLEAR THAT THE CLAUSES MENTIO NED IN THE PARTNERSHIP DEED ARE NOT MANDATORY BUT MADE TO AVOID ANY AMBIGU ITY AND MISUNDERSTANDING. AS SUCH, THERE IS NO DISPUTE AMON G THE PARTNERS FOR NOT CLAIMING THE REMUNERATION/INTEREST OF ON CAPITAL IN THE PROFIT AND LOSS ACCOUNT OF THE FIRM. THEREFORE, IN OUR CONSIDERED V IEW THE CONDUCT OF THE PARTNERS OF THE FIRM SUGGESTS THAT IT WAS AGREED NO T TO CLAIM ANY REMUNERATION/INTEREST ON THE CAPITAL ACCOUNT. IN H OLDING SO, WE FIND SUPPORT AND GUIDANCE FROM THE ORDER OF AMRITSAR TRI BUNAL IN THE CASE OF ITO VS. MALA TONDON IN ITA NO.319/ASR/2010 VIDE ORD ER DATED 14.06.2011 WHEREIN IT WAS HELD AS UNDER: 6. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR TH OUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED TH E FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD AND ALSO GON E THROUGH THE ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 16 - ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER CLEARLY REVEALS THAT THE LD. CIT(A) , HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, IN GREATER DETA IL, AFTER APPRECIATION OF THE EVIDENCES AND MATERIAL ON RECORD, AS ALSO TH E LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPU GNED APPELLATE ORDER IS WELL REASONED AND BASED ON THE COGENT AND CREDIB LE MATERIAL AND FACTS OF THE CASE. HOWEVER, IT WOULD PERTINENT TO R EPRODUCE THE RELEVANT PART OF THE DECISION OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: '3.4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. AN IDENTICAL ISSUE HAS BEEN DECIDED IN THE CASE OF ROHIT TANDON, HUSBAND OF THE APPELLANT, THE OTHER PARTNER IN M/S. DYNAMECH HOLDI NG 50% SHARE IN THE PARTNERSHIP FIRM FOR THE ASSESSMENT YEAR 2006-07. I N THAT CASE ALSO, THE AO HAD ADDED THE INTEREST PAYABLE ON THE CAPITAL OF SH. ROHIT TANDON AND REMUNERATION PAYABLE TO SH. ROHIT TANDON TO THE TOTAL INCOME OF THE ASSESSEE, I HAVE ADJUDICATED THAT APPEAL VIDE O RDER DATED 14.7.2009 IN APPEAL NO.591/08-09/CIT(A)/JAL AND HAVE DELETED SIMILAR ADDITIONS AS UNDER: '9.5 I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. CLAUSE 4 AND 5 OF THE PARTNERSHIP DEED PROVIDING FOR INTEREST ON C APITAL AND SALARY ARE AS UNDER: '4. THE CAPITAL OF THE PARTNERS IS AS PER THEIR RES PECTIVE ACCOUNTS IN THE BOOKS OF THE PARTNERSHIP. THE PARTNERS SHALL BE ENT ITLED TO INTEREST ON THEIR CAPITAL @ 18% PER ANNUM OR AT SUCH OTHER RATE OR RATES AS THE PARTNERS MAY AT THE END OF EACH FINANCIAL YEAR MUTU ALLY SETTLED SUBJECT TO THE MAXIMUM AMOUNT ADMISSIBLE UNDER THE INCOME-T AX ACT , 1961. 5. BOTH THE PARTNERS SHALL DILIGENTLY ATTEND TO THE BUSINESS OF THE PARTNERSHIP AND CARRY ON THE SAME FOR THEIR GREATES T COMMON ADVANTAGE. BOTH THE WORKING PARTNERS SHALL BE ENTIT LED TO A REMUNERATION OF RS.48,000/- PER ANNUM EACH OR AT SU CH OTHER RATE OR RATES AS THE PARTNERS MAY AT THE END OF EACH FINANC IAL YEAR, MUTUALLY SETTLE SUBJECT TO THE MAXIMUM AMOUNT ADMISSIBLE UND ER THE INCOME-TAX ACT , 1961.' 9.6. THE AFORESAID CLAUSES OF THE PARTNERSHIP DEED ARE CLEARLY ENABLING CLAUSES SINCE THE WORD USED IN BOTH THE CLAUSES ARE 'THE PARTNERS SHALL BE ENTITLED...'. THIS SHOWS THAT THE PARTNERS WERE ENTITLED TO GET INTEREST ON THE CAPITAL AND TO DRAW REMUNERATION FOR THEIR S ERVICES WITHOUT ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 17 - BINDING THEM TO DO SO. THIS, IN MY OPINION, IS NOT A MANDATORY PROVISION IN THE PARTNERSHIP DEED WHICH WOULD BE WORDED LIKE ' THE PARTNERS SHALL BE PROVIDED/GIVEN....'. FURTHER, IT IS ALSO MENTION ED IN BOTH THESE CLAUSES, THAT THE RATE OR RATES OF INTEREST AND THE REMUNERATION WOULD BE MUTUALLY SETTLED BY THE PARTNERS AT THE END OF EACH FINANCIAL YEAR. NOW, A PARTNERSHIP, BY ITS VERY NAME AND AS PER THE PROV ISIONS OF PARTNERSHIP ACT IS BY WILL OF THE PARTNERS. THERE ARE ONLY TWO PAR TNERS IN THIS FIRM, BOTH HAVING EQUAL SHARES. THE ACCOUNTS DRAWN UP AT THE END OF THE YEAR REVEAL THAT NO INTEREST ON THE CAPITAL OR REMUNERAT ION TO THE PARTNERS HAS BEEN PROVIDED IN THE ACCOUNTS OF THE FIRMM/S.DY NAMECH. THIS ACT BY ITSELF SIGNIFIES THAT THE PARTNERS HAVE AGREED NOT TO PROVIDE INTEREST ON THEIR CAPITAL OR TO CHARGE REMUNERATION FOR THEIR S ERVICES. IN MY OPINION, THE TERMS OF THE PARTNERSHIP DEED DO NOT S IGNIFY THAT INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS HAD NECESSARIL Y TO BE PROVIDED IN THE ACCOUNT OF M/S. DYNAMECH.. 9.7. THE AO HAS DRAWN SUPPORT FROM THE PROVISIONS O F SECTION 80IA(10) . THIS SUB-SECTION PROVIDES THAT WHERE THE AFFAIRS BE TWEEN THE ELIGIBLE BUSINESS AND ANY OTHER PERSON IS SO ARRANGED THAT M ORE THAN ORDINARY PROFITS ARISE TO THE ASSESSEE, THE AO SHALL, IN COM PUTING THE PROFIT AND GAINS OF SUCH AN ELIGIBLE PROFITS FOR THE PURPOSES OF DEDUCTION UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASO NABLY TAKEN TO HAVE BEEN DERIVED THEREFROM. THUS SUB-SECTION HAS BEEN M ADE APPLICABLE TO SECTION 80IB BY VIRTUE OF SUB-SECTION (13) OF SECTION 80IB . HOWEVER, THIS SUB-SECTION ONLY ENABLES, THE AO TO EFFECT THE PROFIT OF THE UNDERTAKING CLAIMING DEDUCTION U/S 80IB, WHICH IS M /S. DYNAMECH IN THIS CASE. THIS DOES NOT ENABLE THE AO TO ALTER THE PROFITS OR THE INCOME OF THE OTHER PERSON REFERRED TO IN THIS SUB-SECTION . IT IS A FACT THAT THE ASSESSEE HAS NOT RECEIVED INTEREST AND REMUNERATION FROM M/S. DYNAMECH. AS NOTED EARLIER, THE TERMS OF PARTNERSHI P DEED ARE NOT SO WORDED SO AS TO MAKE PAYMENT OF INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS AS MANDATORY. IT IS ALSO NOT REBUTTED B Y THE AO THAT NO INTEREST OR REMUNERATION HAS BEEN RECEIVED BY THE A PPELLANT IN EARLIER YEARS ALSO. THIS INCOME HAS NOT ACCRUED OR ARISEN T O THE ASSESSEE. I, THEREFORE, HOLD THAT THE AO WAS NOT JUSTIFIED IN MA KING THE ADDITION ON ACCOUNT OF INTEREST ON CAPITAL IN M/S. DYNAMECH AND REMUNERATION RECEIVABLE FROM M/S. DYNAMECH. THIS GROUND OF APPEA L IS ALLOWED.' 3.5. FOLLOWING THE DECISION IN THE CASE OF SH. ROHI T TANDON (SUPRA), GROUND NO.3 OF APPEAL IS ALLOWED.' ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 18 - 6.1. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIR MITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON PROPER APPRECI ATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY, THIS APPEAL OF THE REVENUE IS DISMISSED. FROM THE ABOVE ORDER, WE NOTE THAT IT IS NOT COMPUL SORY TO CLAIM THE REMUNERATION/INTEREST ON PARTNERS CAPITAL ACCOUNT DESPITE THE FACT THERE WAS A SPECIFIC CLAUSE IN THE DEED OF PARTNERSHIP. 8.3 THE NEXT CONTROVERSY ARISES IN THE CASE BEFORE US FROM THE DIRECTIONS GIVEN BY THE LD. CIT(A) TO TAX THE AMOUN T OF REMUNERATION/INTEREST ON PARTNERS CAPITAL ACCOUNT IN THE HANDS OF THE PARTNERS. IT IS A FACT THAT THE AO ALLOWED THE CLAI M OF THE DEDUCTION FOR THE REMUNERATION/INTEREST ON PARTNERS CAPITAL ACCO UNT IN HIS COMPUTATION OF INCOME. BUT THE SAME WAS ADDED BACK BY THE AO ON THE GROUND THAT IT WAS NOT CLAIMED AS A DEDUCTION IN THE PROFIT AND LO SS ACCOUNT. HOWEVER, THE LD. CIT(A) DIRECTED TO DELETE THE ADDITION MADE IN THE HANDS OF THE FIRM AND FURTHER DIRECTED TO TAX THE SAME IN THE HA NDS OF THE PARTNER OF THE FIRM. 8.4 FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE RE WAS NO ISSUE TO TAX THE REMUNERATION/INTEREST ON THE CAPITAL IN THE HANDS OF THE PARTNERS. THUS, IN OUR CONSIDERED VIEW LD. CIT(A) HAS EXCEEDE D HIS JURISDICTION BY GIVING DIRECTION TO THE AO FOR THE DISPUTE WHICH IS NOT ARISING FROM THE ORDER OF THE AO. IN THIS REGARD, WE FIND SUPPORT AN D GUIDANCE FROM THE ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 19 - ORDER OF THIS TRIBUNAL IN THE CASE OF INCOME TAX OF FICER VS. BIOTECH OPHTHALMIC PVT. LTD. REPORTED IN ITA NO.443/AHD/201 1 VIDE ORDER DATED 31.08.2014 WHEREIN IT WAS HELD AS UNDER: 9. THE ASSESSEE HAS ALSO MOVED A CROSS OBJECTION WHICH SEEKS TO EXPUNGE CIT(A)'S DIRECTIONS TO BRING THIS DEEMED DI VIDEND TO TAX IN THE HANDS OF SHRI MEHUL P ASNANI, DIRECTOR IN ASSESSEE' S COMPANY. 10. LEARNED COUNSEL SUBMITS THAT WHILE DECIDING APPEAL OF THE ASSESSEE BEFORE HIM, IT WAS NOT OPEN TO THE CIT(A) TO GIVE A DJUDICATION ON TAXABILITY OF THIS INCOME IN THE HANDS OF A PERSON OTHER THAN THIS ASSESSEE. HE HAS CLEARLY EXCEEDED HIS JURISDICTION IN HOLDING THAT THE AMOUNT IN QUESTION IS TAXABLE IN THE HANDS OF SHRI MEHUL P ASNANI. HE URGES US TO EXPUNGE THESE OBSERVATIONS. IN SUPPORT OF HIS PRAYER, LEARNED COUNSEL FOR THE ASSESSEE INVITES OUR ATTENT ION TO A DECISION OF THE COORDINATE BENCH IN THE CASE OF JAGAT MINERALS (P.) LTD. V. DY. CIT [IT APPEAL NOS 2110, 2403 AND 2750/AHD/11; DATED 22 .4.2015) WHEREBY SIMILAR REMARKS MADE BY THE CIT(A) HAVE BEE N MODIFIED. 11. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIES UPON THE STAND TAKEN BY THE CIT(A). HE SUBMITS THAT WHEN THE IMPUGNED ADDITION WAS DELETED SOLELY ON THE GROUND THAT IT W AS REQUIRED TO BE TAXED IN THE HANDS OF THE DIRECTOR CONCERNED, THE C IT(A) WAS QUITE JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO BRI NG IT TO TAX IN THE HANDS OF THAT DIRECTOR. 12. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 13. IN OUR CONSIDERED VIEW, IT IS IMPORTANT TO FIRST U NDERSTAND THE ROLE PLAYED BY THE FINDINGS OR DIRECTIONS OF THIS NATURE . WE ARE DEALING WITH THE ASSESSMENT YEAR 2006-07 AND THE ORDER OF THE CI T(A) WAS SERVED ON THE ASSESSING OFFICER ON 5TH JANUARY 2011. OBVIOUSL Y, THE ASSESSMENT MUST HAVE ATTAINED FINALITY, BY THE TIME THE ASSESS ING OFFICER CAME TO KNOW OF THESE DIRECTIONS, SINCE IN TERMS OF SECTION 153(1) 'NO ORDER OF ASSESSMENT SHALL BE MADE UNDER SECTION 143 OR SECTI ON 144 AT ANY TIME AFTER THE EXPIRY OF (A) TWO YEARS FROM THE END OF T HE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE; OR (B) ONE Y EAR FROM THE END OF ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 20 - THE FINANCIAL YEAR IN WHICH A RETURN OR A REVISED R ETURN RELATING TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR, IS FILED UNDER SUB-SECTION (4) OR SUB-SECTION (5) OF SECTION 139, WHICHEVER IS LATER'. NO DOUBT, UNDE R SECTION 153(2A), WHEN AN ASSESSMENT IS SET ASIDE OR CANCELLED UNDER SECTION 250, 254, 263 OR 264 A FRESH ASSESSMENT, AS A RESULT OF SUCH A CANCELLATION, CAN BE FRAMED WITHIN ONE YEAR FROM THE END OF THE FINANCIA L YEAR IN WHICH THE ORDER UNDER SECTION 250 OR SECTION 254 IS RECEIVED BY THE COMMISSIONER OR THE ORDER UNDER SECTION 263 OR SECTION 264 IS PA SSED BY THE COMMISSIONER. HOWEVER, THIS PROVISION COMES INTO PL AY ONLY WHEN THE ORDER PASSED UNDER SECTION 250, 254, 263 OR 264 IN THE CASE OF THE ASSESSEE HIMSELF. THAT IS NOT THE SITUATION THAT WE ARE DEALING WITH AT PRESENT. 14. SECTION 153(3), DEALING WITH THE IMPACT OF THE FIN DINGS OR DIRECTION GIVEN BY THE REVISIONARY, APPELLATE OR JUDICIAL AUT HORITIES, PRESCRIBES THAT 'THE PROVISIONS OF' INTER ALIA SECTION 151(1) 'SHALL NOT APPLY TO THE .. ASSESSMENTS, REASSESSMENTS AND RECOMPUTATIONS W HICH MAY, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2A) BE COMPLETED AT ANY TIME WHERE THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION IS MADE O N THE ASSESSEE OR ANY PERSON IN CONSEQUENCE OF OR TO GIVE EFFECT TO A NY FINDING OR DIRECTION CONTAINED IN AN ORDER, UNDER SECTIONS 250 , 254, 260, 262, 263 OR 264 1535 OR IN AN ORDER OF ANY COURT IN A PROCEE DING OTHERWISE THAN BY WAY OF APPEAL OR REFERENCE UNDER THIS ACT'. IN O THER WORDS, WHEN EFFECT OF A FINDING OR DIRECTION OF AN REVISIONARY, APPELLATE OR JUDICIAL AUTHORITY IS TO BE GIVEN, THAT EXERCISE CAN BE CARR IED OUT ANY POINT OF TIME DE HORS THE TIME LIMITS SPECIFIED IN SECTION 1 53(1). HOWEVER, EVEN THIS RELAXATION OF TIME LIMITS IS SUBJECT TO CERTAI N RIDERS, INCLUDING RIDER CONTAINED IN EXPLANATION 3 TO SECTION 153(3) WHICH PROVIDES THAT, WHERE BY A REVISIONARY, APPELLATE OR JUDICIAL ORDER OF THE ABOVE NATURE, AN INCOME IS EXCLUDED FROM THE INCOME OF ONE ASSESS EE AND HELD TO BE INCOME OF THE OTHER ASSESSEE, THE ASSESSMENT OF SUC H AN INCOME IN THE HANDS OF ANOTHER ASSESSEE 'BE DEEMED TO BE ONE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CO NTAINED IN THE SAID ORDER, PROVIDED SUCH OTHER PERSON WAS GIVEN AN OPPO RTUNITY OF BEING HEARD BEFORE THE SAID ORDER WAS PASSED (EMPHASIS BY UNDERLING SUPPLIED BY US).' CLEARLY, THEREFORE, UNLESS THE PE RSON IN WHOSE HAND INCOME IS DIRECTED TO BE ADDED HAS BEEN HEARD BEFOR E SUCH DIRECTIONS ARE ISSUED, THE DIRECTIONS ISSUED BY THE REVISIONAR Y, APPELLATE OR JUDICIAL ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 21 - AUTHORITY ARE AN EXERCISE IN FUTILITY. THIS RIDER I S EQUALLY RELEVANT IN RESPECT OF REOPENING OF AN ASSESSMENT UNDER SECTION 154, AS A RESULT OF THE FINDINGS OR DIRECTIONS OF THE REVISIONARY, APPE LLATE OR JUDICIAL AUTHORITIES. 15. IT IS AN UNDISPUTED POSITION, ON THE FACTS OF THIS CASE, THAT SHRI MEHUL P ASNANI, IN WHOSE HANDS CIT(A) HAS DIRECTED THIS I NCOME TO BE ADDED, HAS NOT BEEN GRANTED AN OPPORTUNITY OF HEARING BY T HE CIT(A) BEFORE THESE DIRECTIONS WERE ISSUED. SUCH BEING THE ADMITT ED FACTS, IT'S BEYOND DOUBT THAT A COMPLETED ASSESSMENT CANNOT BE DISTURB ED OR REOPENED TO GIVE EFFECT TO SUCH FINDINGS OR DIRECTIONS. 16. THERE IS, HOWEVER, AN EVEN MORE FUNDAMENTAL ISSUE, AND THAT ISSUE IS WHETHER THE DIRECTION THAT THE DEEMED DIVIDEND INCO ME BEING BROUGHT TO TAX IN THE HANDS OF SHRI ASNANI IS A DIRECTION NECE SSARY FOR THE DISPOSAL OF CASE. THIS ISSUE ASSUMES SIGNIFICANCE IN VIEW OF THE LEGAL POSITION THAT, AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF RAJINDER NATH V. CIT [1979] 120 ITR 14/2 TAXMAN 204 , 'AS REGARDS THE EXPRESSION 'DIRECTION' IN S. 153(3)(II) OF THE ACT, IT IS NOW WELL SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISPOSAL OF THE CASE BEFORE THE AUTHORITY OR COURT. IT MUST ALSO BE A DIRECTION WHI CH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT.' THEIR LORDSHIPS THEN ADDED THAT 'THE EXPRESSIONS 'FINDING ' AND 'DIRECTION' IN S. 153(3)(II) OF THE ACT MUST BE ACCORDINGLY CONFIN ED' AND THAT 'SEC. 153(3)(II) IS NOT A PROVISION ENLARGING THE JURISDI CTION OF THE AUTHORITY OR COURT.' 17. AS TO WHAT CONSTITUTES 'AN EXPRESS DIRECTION NECES SARY FOR DISPOSAL OF A CASE', WE FIND THE FOLLOWING GUIDANCE FROM THE IR LORDSHIPS: 'TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INV OLVED IN THE DISPOSAL OF THE CASE. IT IS POSSIBLE IN CERTAIN CAS ES THAT IN ORDER TO RENDER A FINDING IN RESPECT OF A, A FINDING IN RESP ECT OF B MAY BE CALLED FOR. FOR INSTANCE, WHERE THE FACTS SHOW THAT THE INCOME CAN BELONG EITHER TO A OR B AND NO ONE ELSE, A FINDING THAT IT BELONGS TO B OR DOES NOT BELONG TO B WOULD BE DETERMINATIVE OF THE ISSUE WHETHER IT CAN BE TAXED AS A'S INCOME. A FINDING RE SPECTING B IS INTIMATELY INVOLVED AS A STEP IN THE PROCESS OF REA CHING THE ULTIMATE FINDING RESPECTING A. IF, HOWEVER, THE FINDING AS T O A'S LIABILITY CAN BE DIRECTLY ARRIVED AT WITHOUT NECESSITATING A FIND ING IN RESPECT OF ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 22 - B, THEN A FINDING MADE IN RESPECT OF B IS AN INCIDE NTAL FINDING ONLY. IT IS NOT A FINDING NECESSARY FOR THE DISPOSAL OF T HE CASE PERTAINING TO A. THE SAME PRINCIPLES SEEM TO APPLY WHEN THE QU ESTION IS WHETHER THE INCOME UNDER ENQUIRY IS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY OTHER ASSESSMENT YEAR. A S REGARDS THE EXPRESSION 'DIRECTION' IN S. 153(3)(II) OF THE ACT, IT IS NOW WELL SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESS ARY FOR THE DISPOSAL OF THE CASE BEFORE THE AUTHORITY OR COURT. IT MUST ALSO BE A DIRECTION WHICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT.' 18. LET US NOW, IN THE ABOVE LIGHT, REVERT TO THE FACT S OF THE CASE BEFORE US. THE AUTHORITIES BELOW WERE DEALING WITH A DEEMI NG FICTION, I.E. DEEMED DIVIDEND, ABOUT AN INCOME. THE CASE OF THE A SSESSEE WAS THAT THIS DEEMING FICTION OF DEEMED DIVIDEND COULD NOT B E INVOKED IN THE PRESENT CASE BECAUSE THE ASSESSEE DID NOT HOLD THE SHAREHOLDINGS IN THE COMPANY WHICH HAD EXTENDED LOAN TO THE ASSESSEE. TH IS PLEA HAS BEEN ACCEPTED BY THE CIT(A), BUT, FOR ACCEPTING SUCH A P LEA, IT IS NOT A CONDITION PRECEDENT THAT THIS DEEMING FICTION MUST COME INTO PLAY IN THE HANDS OF SOME OTHER ASSESSEE OTHER THAN THIS ASSESS EE. WHETHER THE LOAN RECEIVED BY THE ASSESSEE IS HELD TO BE DEEMED DIVID END IN THE CASE OF SOME OTHER PERSON OR NOT IS WHOLLY IRRELEVANT FOR D ECIDING WHETHER OR NOT THIS IS DEEMED DIVIDEND IN THE HANDS OF THIS AS SESSEE OR NOT. LEARNED CIT(A) HOLDS THAT SINCE MEHUL P ASANAI IS A SHAREHO LDER IN THE SAID COMPANY, THE RECEIPT CAN BE ADDED AS DEEMED DIVIDEN D IN THE HANDS OF MEHUL P ASNANI, BUT THEN WHAT HE OVERLOOKS IS THAT ALL THE CONDITIONS PRECEDENT FOR TAXING A RECEIPT AS DEEMED DIVIDEND A RE TO BE SATISFIED QUA THE ASSESSEE IN WHOSE INCOME IS TO BE TAXED, AN D BEING A SHAREHOLDER IS ONLY ONE SUCH PRECONDITION. LEARNED CIT(A) HAS, AS NOTED EARLIER IN THIS ORDER, OBSERVED THAT 'IF THE RECIPIENT OF LOAN IS NOT A SHAREHOLDER AND THE TRANSACTION IS COVERED BY THI S PROVISION, THE ADDITION IS TO BE MADE IN THE HANDS OF THE SHAREHOL DER', BUT THEN IT IS DIFFICULT TO COMPREHEND AS TO HOW ONE CAN COME TO A CONCLUSION THAT A TRANSACTION IS COVERED BY THIS PROVISION, I.E. DEEM ING FICTION OF THE DEEMED DIVIDEND, WITHOUT EXAMINING THE TRANSACTION BETWEEN THE SHAREHOLDER OF THE COMPANY AND THE COMPANY IN WHICH SUCH SHARES ARE HELD. WITHOUT EVEN GIVING A FINDING ABOUT SATISFACT ION OF ALL THESE CONDITIONS, LEARNED CIT(A) PROCEEDS TO HOLD THAT IT IS AN INCOME TO BE TAXED IN THE HANDS OF THE SHAREHOLDER I.E. MEHUL P ASNANI. IT IS A CLASSIC ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 23 - CASE OF PUTTING CART BEFORE THE HORSE AND IS WHOLLY BASED ON FALLACIOUS LOGIC. THE DIRECTION IS THUS NOT ONLY UNNECESSARY B UT PATENTLY INCORRECT. VIEWED THUS, THE DIRECTION GIVEN BY THE CIT(A), FOR TAXABILITY OF THIS DEEMED DIVIDEND IN THE HANDS OF SHRI ASNANI, DOES N OT CONSTITUTE 'AN EXPRESS DIRECTION NECESSARY FOR DISPOSAL OF A CASE' . NOTHING REALLY TURNS ON HIS DIRECTION, AS SUCH. EVEN IF THIS DIRECTION W AS CORRECT, LEARNED CIT(A) HAD NO BUSINESS TO GIVE SUCH A DIRECTION WIT HOUT AFFORDING AN OPPORTUNITY OF HEARING TO THE AFFECTED PARTY AND TH AT TOO WHEN IT WAS ABSOLUTELY NECESSARY TO DECIDE THE ISSUE IN APPEAL BEFORE HIM. THERE IS A CERTAIN DEGREE OF RESTRAINT THAT IS EXPECTED OF THE APPELLATE AUTHORITIES IN DISCHARGE OF THEIR JUDICIAL FUNCTIONING. 19. AS WE PART WITH OUR ADJUDICATION ON THIS ISSUE, WE MAY ALSO TAKE NOTE OF LEARNED DEPARTMENTAL REPRESENTATIVE'S CONTE NTION THAT THE ASSESSEE HAS NO LOCUS STANDI TO RAISE ANY GRIEVANCE AGAINST THESE DIRECTIONS AS HE IS NOT THE AGGRIEVED PARTY VIS--V IS THESE DIRECTIONS. WE ARE UNABLE TO SEE ANY MERITS IN THIS PLEA EITHER. T HE MANNER IN WHICH THE APPEAL HAS BEEN DECIDED BY THE CIT(A) GIVES AN IMPR ESSION, WHICH IS A WHOLLY INAPPROPRIATE IMPRESSION AND WHICH HAS ALSO BEEN REITERATED BEFORE US BY THE LEARNED DEPARTMENTAL REPRESENTATIV E, THAT THE IMPUGNED ADDITIONS HAVE BEEN DELETED IN THE HANDS O F THE ASSESSEE AS THESE ADDITIONS ARE REQUIRED TO BE MADE IN THE HAND S OF SOMEONE ELSE. THE DELETION OF THE IMPUGNED ADDITION IN THE HANDS OF THE ASSESSEE COMPANY HAS BEEN THUS PROJECTED TO BE, THOUGH PERHA PS AT A SOMEWHAT SUBLIMINAL LEVEL, DEPENDENT OF THE ADDITION BEING C ONFIRMED IN THE HANDS OF THE DIRECTOR. THE DIRECTIONS GIVEN BY THE CIT(A) DO PREJUDICE INTERESTS OF THE ASSESSEE INASMUCH AS THESE DIRECTI ONS NOT BEING IMPLEMENTED MAY BE VIEWED AS DETRIMENTAL TO THE INT ERESTS OF THE ASSESSEE BUT THEN THE DIRECTIONS SUFFER FROM LEGAL INFIRMITIES, FROM GLARING PROCEDURAL FLAWS, AND ARE INCAPABLE OF BEIN G IMPLEMENTED ANYWAY. IN ANY CASE, SINCE THESE DIRECTIONS ARE GIV EN IN THE CASE OF THIS ASSESSEE AND THE APPELLATE ORDER BY THE CIT(A) IN T HE CASE OF THIS ASSESSEE CANNOT BE CHALLENGED, IN APPEAL BEFORE US, BY A THIRD PARTY, THE ONLY WAY TO PREVENT THESE DIRECTIONS REACHING THE F INALITY IS A CHALLENGE BY THIS ASSESSEE HIMSELF, PARTICULARLY BECAUSE, AS IS THE SETTLED LEGAL POSITION, THE STATUTORY PROVISIONS ARE TO BE CONSTR UED UT RES MAGIS VALEAT QUAM PEREAT I.E., IN SUCH A MANNER AS TO MAKE IT WO RKABLE RATHER THAN REDUNDANT. THE ASSESSEE BEFORE US, THEREFORE, HAS, IN OUR CONSIDERED VIEW, LOCUS STANDI TO CHALLENGE LEGALITY OF THESE D IRECTIONS. ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 24 - 20. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN M IND ENTIRETY OF THE CASE, WE VACATE THE DIRECTIONS IN QUESTIONS. THE CR OSS OBJECTION IS THUS ALLOWED. IN VIEW OF ABOVE, WE HOLD THAT THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TAX THE AMOUNT OF REMUNERATION AND INTEREST IN THE HANDS OF THE PARTNER OF THE FIRM. THUS, WE SET ASIDE THE ORDER OF LD. CIT(A ) AND DIRECT THE AO TO DELETE THE ADDITION IN TERMS OF THE ABOVE. THUS, TH E GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 15/11/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/11/2018 PRITI YADAV, SR.PS ITA NO.3184/AHD/2014 GANDHINAGAR TELERAD VS. ITO A.Y. 2011-12 - 25 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-GANDHINAGAR, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER , , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD