ACIT 16(3), MUMBAI V. RATNASAGAR IMPEX, MUMBAI

ITA 3246/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9296 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 25-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Revised return
• Section: 143(3)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 3246/M/2013 (AY:2008 - 2009) ACIT - 16(3), MATRU MANDIR, 2 ND FLOOR, R.NO.206, TARDEO ROAD, MUMBAI 400 007. VS. M/S. RATNASAGAR IMPEX, 819, PRASAD CHAMBERS 311, OPERA HOUSE, MUMBAI - 400004. ./ PAN : AAJFR1843F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LOVE KUMAR, DR / RESPONDENT BY : NONE / DATE OF HEARING : 26 .2.2015 / DATE OF PRONOUNCEMENT : 11 .3.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FI LED BY THE REVENUE ON 26.4.2013 IS AGAINST THE ORDER OF THE CIT (A) - 28, MUMBAI DATED 23.1.2013 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS CASE, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN ALLOWING REMUNERATION CLAIMED PAID TO PARTNER SHRI RAJESH RAMANLAL SHAH OF RS. 2,02,70,796/ - . 2. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN NOT CONSIDERING THE ISSUE RAISED IN REPORT OF ASSESSING OFFICER DATED 4.8.2011 AND FORWARDING L ETTER DATED 9.9.2011 OF ADDL. CIT, RANGE 16(3), MUMBAI. 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) ERRED IN NOT CONSIDERING THE PROVISION OF SECTION 40(B)(V) OF THE INCOME TAX ACT. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIAMOND TRADER AND MANUFACTURER. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 5,08,26,991/ - . ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 5, 08,26,990/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE ADDITION OF RS. 2,02,70,796/ - THE 2 REMUNERATION PAID TO THE PARTNERS. THIS ADDITION IS THE SUBJECT MATTER OF DISPUTE IN THE PRESENT APPEAL. IN THE BOOKS OF ACCOUNTS, THE ASSESSEE DEBITED THE SAID REMU NERATION . HOWEVER, IN THE COMPUTATION OF INCOME ENCLOSED TO THE RETURN OF INCOME, ASSESSEE ADDED BACK THE SAID AMOUNT AND MISSED TO CLAIM THE SAME IN THE LATER PART OF THE COMPUTATION OF INCOME. BY THIS ASSESSEE FAILED TO CLAIM THE REMUNERATION PAID TO T HE PARTNERS WHICH IS OTHERWISE ALLOWABLE U/S 40(B) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE MADE A CLAIM FOR THE DEDUCTION OF THE REMUNERATION AND THE SAME WAS IGNORED. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE RAISED THE GROUNDS ON THE ALLOWABILITY OF REMUNERATION. IT IS THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT (A) THAT THE PROVISIONS OF SECTION 40(B)(V) ALLOWS THE REMUNERATION AS A DEDU CTIBLE ONE. FURTHER, THE PARTNERSHIP DEED PERMITS THE SAID CLAIM. THE QUANTIFICATION OF THE REMUNERATION IS IN ACCORDANCE WITH THE SAID PROVISIONS ON THE DEED DATED 9.8.2007. THIS IS THE FINDING OF THE CIT (A) THAT AFTER OBTAINING THE REMAND REPORT FROM THE ASSESSING OFFICER. CIT (A) ATTENDED TO THE REMAND REPORTS OF THE ASSESSING OFFICER DATED 4.8.2011 AND 19.10.2012 AND OTHER FORWARDING LETTERS BEFORE COMING TO THE CONCLUSIONS. ACCORDINGLY, AS PER THE DISCUSSION GIVEN IN PARAS 13 AND 16 OF THE OF TH E IMPUGNED ORDER, CIT (A) HELD THAT THE REMUNERATION RECEIVED BY THE PARTNERS WAS ALSO SUBJECT TO TAX AS PER THE PROCEDURE. CONSIDERING ALL THE FACTS, CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, NON E APPEARED ON BEHALF OF THE ASSESSEE TO REPRESENT ITS CASE. 5. ON THE OTHER HAND, LD DR MENTIONED THAT THE ISSUE UNDER CONSIDERATION IS VERY SIMPLE AND IT RELATES TO THE ALLOWABILITY OF CLAIM OF REMUNERATION OF RS. 2,02,70,796/ - . BRINGING OUR ATTENTION TO THE GROUNDS RAISED BY THE REVENUE, LD DR SUBMITTED THAT REMUNERATION SHOULD NOT HAVE BEEN ALLOWED WHEN THE SAME PROPERLY CLAIMED IN THE RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 40(B)(V) PERMITS CLAIM OF DEDUCTION OF REMUNERAT ION FROM THE PROFITS OF THE FIRM. HE HOWEVER RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE LD DR AND PERUSED THE FACTS OF THE CASE BROUGHT OUT IN THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFO RE US. IT IS AN UNDISPUTED FACT THAT THE PROVISIONS OF SECTION 40(B)(V) PERMITS CLAIM OF REMUNERATION FROM THE PROFITS OF THE FIRM AND THE SUM OF RS. 2,02,70,796/ - 3 IS QUANTIFIED AS PER THE SAID PROVISIONS AS WELL AS THE CONTENTS OF PARTNERSHIP DEED. IN TH E ABOVE GROUNDS, THE REVENUE HAS NOT DISPUTED PERMITTING THE CLAIM OF REMUNERATION WITHOUT FILING THE REVISED RETURN OF INCOME. REVENUES OBJECTIONS ARE VERY RESTRICTIVE AND THE SAME ARE RELATED TO THE ALLOWABILITY OF REMUNERATION IN PRINCIPLE THE QUANTIF ICATION THERETO. IN OUR OPINION, THE SAME IS ANSWERED BY THE CIT (A) VIDE PARA 13 AND 16 OF THE IMPUGNED ORDER. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PARAS ARE REPRODUCED AS UNDER: 13. I HAVE CONSIDERED THE FACTS OF THE CASE, REMAND REPOR T OF THE ASSESSING OFFICER, WRITTEN SUBMISSIONS AND ARGUMENTS OF THE ASSESSEE. FROM THE MATERIAL ON RECORD, IT IS CLEAR THAT THE ASSESSEE HAD DEBITED THE AMOUNT OF REMUNERATION AT RS. 2,02,70,796/ - IN P&L A/C. THIS AMOUNT HAS ALSO BEEN DISCLOSED BY THE AS SESSEE IN THE HANDS OF THE WORKING PARTNER, WHILE FILING HIS TAX RETURN FOR AY 2008 - 09. IT IS A DIFFERENT CASE THAT THIS REMUNERATION HAS NOT RESULTED INTO A SIGNIFICANT LIABILITY IN THE CASE OF THE WORKING PARTNER BECAUSE THERE WERE CERTAIN LOSSES UNDER OTHER HEADS AGAINST WHICH THIS INCOME LARGELY GOT ADJUSTED. BUT THE ASSESSEE CANNOT BE DENIED BENEFIT OF THIS REMUNERATION ON THIS ACCOUNT. FURTHER, THE PAYMENT OF REMUNERATION IS DULY IN ACCORDANCE WITH THE TERMS OF ADDENDUM TO PARTNERSHIP DEED DATED 9. 8.2007. THE GENUINENESS OF THE PARTNERSHIP DEED AND THE PURCHASE OF STAMP PAPERS HAS BEEN INDEPENDENTLY VERIFIED BY THE ASSESSING OFFICER AND WAS FOUND TO BE CORRECT, AS PER REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER. FROM THE SEQUENCE OF THE EVENT S, IT APPEARS THAT THE ASSESSEE MISTAKENLY FAILED TO MAKE THIS CLAIM IN THE COMPUTATION OF INCOME BUT SUCH CLAIM WAS REITERATED BEFORE THE ASSESSING OFFICER, VIDE LETTER DATED 16.12.2010, BEFORE THE COMPLETION OF ASSESSMENT, BUT THE ASSESSING OFFICER, VIDE LETTER DATED 16.12.2010, BEFORE THE COMPLETION OF ASSESSMENT BUT THE ASSESSING OFFICER FAILED TO CONSIDER SUCH CLAIM. THE RECEIPT OF THE LETTER HAS NOT BEEN DENIED BY THE ASSESSING OFFICER. 14. 15 16. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, I FEEL THAT THE CLAIM OF THE ASSESSEE TOWARDS REMUNERATION TO THE WORKING PARTNER AMOUNTING TO RS. 2,02,70,796/ - IS JUSTIFIED AND SHOULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW THE SAME. 7. CON SIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE DECISION OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 1 T H MARCH, 2015. S D / - S D / - (D. MANMOHAN) (D. KARUNAKARA RAO) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 11/3/2015 . . ./ OKK , SR. PS 4 / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI