AMRITLAL HIRACHAND SHANKLESHA, MUMBAI V. DCIT CEN CIR-1, THANE

ITA 3890/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1954 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI. BEFORE SHRI SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMB ER AND SHRI V.D. RAO, JUDICIAL MEMBER. I.T.A. NO. 30 89/MUM/2008 ASSESSMENT YEAR : 2003-04. NITIN B. KARVE, ASSTT. COMMISSIONER OF C/O BSR & CO., KPMG HOUSE, VS. INC OME TAX- CIR. 11(3), KAMLA MILLS COMPOUND, MUMBAI. 448, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI-400013. PAN AAEAK1859M. APPELLANT RESPONDENT APPELLANT B Y : SHRI ARVIND SONDE. RESPONDENT BY : SMT. APARNA AG ARWAL. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS) DATED 27-3-2008. 2. FACTS IN BRIEF. THE ASSESSEE IS A CHARTERED ACCOUNTANT AND IS A P ARTNER OF M/S BHARAT S. RAUT & CO. (NOW KNOWN AS BSR & CO.). HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 29 TH MARCH, 2004 DECLARING A TOTAL INCOME OF RS.30,86,420/-. DURING THE PREVIOUS YEAR THE ASSESSEE HAD RECEIVED REMUNERATION FROM THE PARTNER SHIP AND OFFERED THE SAME TO TAX UNDER THE HEAD INCOME FROM BUSINESS AN D PROFESSION. HE CLAIMED CERTAIN EXPENSES AGAINST THIS PROFESSIONAL INCOME. THE EXPENSES 2 CONSTITUTED 5.02% OF THE GROSS PROFESSIONAL INCOME AND WERE IN THE NATURE OF BOOKS AND PERIODICALS PURCHASED, CAR EXPENSES D RIVERS SALARY ETC. THE AO HELD THAT THIS EXPENDITURE WAS PERSONAL IN NATUR E AND DISALLOWED THE SAME. ON APPEAL, THE FIST APPELLATE AUTHORITY UPHEL D THE ORDER OF THE AO. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE MR. ARVIND SONDE SUBMITTED THAT SIMILAR ISSUE HAS C OME UP BEFORE DIFFERENT BENCHES OF THE TRIBUNAL AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE.HE FILED COPIES OF THOSE ORDERS AND RE QUESTED THAT THE PRINCIPLES LAID DOWN THEREIN BE APPLIED TO THE FACT S OF THIS CASE AND RELIEF GRANTED. 4. THE LEARNED DR, MRS. APARNA AGARWAL, THOUGH NOT LEAVING THE GROUND, ULTIMATELY AGREED THAT THE TRIBUNAL HAD ON EARLIER OCCASIONS, ON SIMILAR FACTS, DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE. 5. AFTER HEARING RIVAL SUBMISSIONS, WE FIND THAT T HIS BENCH OF THE TRIBUNAL IN THE CASE OF SUDHIR D. PATIL VS. DCI T REPORTED IN 2 SOT 678, J-BENCH, MUMBAI HAD CONSIDERED THE QUESTION O F ALLOWING EXPENDITURE, WHILE COMPUTING INCOME FROM A PARTNER, AGAINST SALARY RECEIVED BY THE PARTNER FROM THE FIRM. THE TRIBUNAL HAD TAKEN THE VIEW THAT THE SALARY FROM THE FIRM IN WHICH THE ASSESSEE IS A PARTNER, IS IN THE NATURE OF BUSINESS INCOME U/S 28(V) AND, THEREFORE, INTEREST PAID BY THE PARTNER ON MONEY BORROWED FOR CONTRIBUTING CAPITAL HAS TO BE ALLOWED AS A DEDUCTION IN THE HANDS OF THE ASSESSEE. IN RESPECT OF THE NATURE OF THE SHARE IN THE PROFITS OF THE FIRM, IN THE HANDS OF T HE PARTNER, THE SUPREME COURT HAS CONSIDERED THE ISSUE IN THE CASE OF CIT, MADRAS VS.R.M. CHIDAMBARAM PILLAI 106 ITR 292 AND HELD THAT SALARY PAID TO A PARTNER IS BUSINESS INCOME. APPLYING THOSE CASE LAWS TO A PART NER OF A CHARTERED 3 ACCOUNTANT FIRM, THE C-BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SUDHIR KAPADIA VS. ITO, ORDER DATED 26 TH FEB., 2007, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SIMILAR VIEW WAS TAKEN BY THE J-B ENCH OF THE TRIBUNAL IN THE CASE OF MR. ANAND J. VASHI VS. ITO IN ITA NO. 3269/MUM/2006, ORDER DATED 23 RD JANUARY, 2009. RESPECTFULLY APPLYING THE RATIOS LA ID DOWN IN THESE DECISIONS TO THE FACTS OF THIS CASE, WE DI RECT THE AO TO ALLOW THE CLAIM OF EXPENSES MADE BY THE ASSESSEE AGAINST HIS PROFESSIONAL INCOME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 19 TH DAY OF JANUARY, 2010. SD/- SD/- (V.D. RAO) (J. SUDHAKARY REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 19 TH JANUARY, 2010. WAKODE COPY FORWARDED TO : 1. APPLICANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, I-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES