ID MOHD. NIZAMUDDIN, TONK V. ACIT, Jaipur

ITA 41/JPR/2013

• Counselvise Citation: 4123114 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MAHENDRA GARGIYEA; S ITA RAM AGARWAL
• Section: 143(3); 244A; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR ( BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI ) ITA NO. 41/JP/2013 ASSESSMENT YEAR: 2009-10 PAN: AAAF 14581 L M/S. ID. MOHD. NIZAMUDDIN VS. THE ACIT SUBHASH BAZAR CIRCLE-7 TONK JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI D.C. SHARMA ASSESSEE BY : SHRI MAHENDRA GARGIYEA AND S ITA RAM AGARWAL DATE OF HEARING : 16.01.2014. DATE OF PRONOUNCEMENT : 28.02.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD CIT(A)-III, JAIPUR DATED 12-10-2012 FOR THE A.Y. 20 09-10. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE IMPUGNED ADDITIONS AND DISALLOWANCES MADE IN TH E ORDER DATED 21.12.2011 U/S 143(3) OF THE ACT, BAD IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER RE ASONS AND HENCE THE SAME KINDLY BE DELETED. 2 2. RS.20,47,000/-: THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS.20,47,000/- ON ACCOUNT OF BONUS PAID TO THE FOURTH PARTNER SHRI NI ZAMUDDIN. THE DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. CIT(A ), IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS HENCE, KINDLY BE DE LETED IN FULL. 3. THE LD. AO FURTHER ERRED IN LAW AS WELL AS ON TH E FACTS OF THE CASE IN CHARGING INTEREST U/S 234A, 234B, 234C & 234D OF TH E ACT AND AS ALSO IN WITHDRAWING OF INTEREST U/S 244A OF THE ACT . THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARGING AND WITHDR AWAL OF ANY SUCH INTEREST. THE INTEREST SO CHARGED/WITHDRAWN, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN F ULL. 3. THE GROUND NO.1 WAS NOT PRESSED BY THE LD. AR A T THE TIME OF HEARING HENCE; THE SAME IS DISMISSED AS NOT PRESSED . 4.1 IN GROUND NO.2 THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE OF RS.20,47,000/- MADE BY THE AO ON A CCOUNT OF BONUS PAID TO THE FOURTH PARTNER NAMELY SHRI NIZAMUDDIN. 4.2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE FIRM HAS FOUR PARTNERS. ON A PERUSAL OF THE PARTNERSHIP DEED DATE D 01.04.2003, COPY OF WHICH IS PLACED AT PAGES 10 TO 12 OF THE ASSESSEES PAPER BOOK, THE AO NOTICED THAT SALARY WAS BEING PAID ONLY TO THREE P ARTNERS NAMELY SHRI MOINUDDIN, SHRI IQBAL ALI AND SHRI ZAHIRUDDIN OUT O F FOUR PARTNERS. HOWEVER, FROM THE PERUSAL OF PROFIT & LOSS A/C FOR THIS YEAR IT WAS FOUND THAT BONUS OF RS.20,47,000/- WAS PAID TO ALL THE FOUR PARTNERS. IN OTHER WORDS, THE BONUS WAS ALSO PAID TO SHRI NIZAMUDDIN BUT NO SALARY WAS PAID. 3 WHEN ASKED TO EXPLAIN, THE ASSESSEE REPLIED VIDE SUBMISSION DATED 09.12.2011 AS UNDER: KINDLY REFER PARA 5 OF THE PARTNERSHIP DEED EFFECT IVE SINCE A.Y. 2004-05. THE SAID PARA MAY KINDLY BE READ IN TWO PARTS A & B . (A) THAT THE PARTIES TO THIS DEED (DENOTES ALL THE PARTNER OF THE FIRM) ARE ACTIVELY ENGAGED IN THE CONDUCT OF BUSINESS OF THE FIRM. (B) BUT ON A/C OF DEVOTION THE PARTIES FROM 2 TO 4 PARTS (MOINUDDIN, IQBAL ALI &ZAHIRUDDIN) SHALL GET SALARY OF RS. 7,00 0/- PER MONTHS. ACCORDINGLY SALARY OF RS. 2,52,000/- HAS BEEN CREDI TED IN THE RESPECTIVE ACCOUNTS OF THE ABOVE PARTNERS I.E. RS. 84,000/- IN EACH A/C & DEBITED THE SAME A/C IN THE P/L A/C. FURTHER IN PARA 6 PARTNERS TO THIS DEED AS AFORESAI D INTENTS ALL THE PARTNERS (SH. NIZAMUDDIN, MOINUDDIN, IQBAL ALI &ZAH IRUDDIN) LINKS WITH A OF PARA 5 ALL THE PARTNERS ARE ACTIVELY ENG AGED IN THE CONDUCT OF BUSINESS OF THE FIRM & AS SUCH FURTHER ENTITLED TO BONUS. NOW WE HAVE TO DETERMINE HOW MUCH BONUS WOULD BE PAYABLE TO PARTNERS AS SUCH MENTIONED WHI CH AFTER INCLUDING THE TOTAL AMOUNT OF SALARY PAYABLE I.E. R S.2,84,000/- SHALL BE EQUAL TO THE AMOUNT SPECIFIED IN THE PROVISION OF S UB-CL (V) OF CL. (B) OF SECTION 40 OF THE I.T. ACT, WHICH ACCORDINGLY BEEN CALCULATED IN THE COMPUTATION SHEET & ITS PERFECTLY IN ORDER. IN THIS REGARD THE ASSESSEE WOULD LIKE TO DRAW YOUR KIND ATTENTION AT THE BOTTOM OF COMPUTATION SHEET WERE FIGURES OF BOO KS PROFIT RS. 2,09,94,210/- APPEARS & ON TOP OF PAGE 2 CALCULATI ON IS AS UNDER. 90% OF FIRST RS. 75,000/- RS. 67,500/- 60% OF NEXT RS. 7 5,000/- RS. 45,000/- 40% OF REMAINING AMOUNT OF RS.2,08,44,210/- RS.83,37,684/- RS.2,09,94,210/- RS.84,50,184/- 4 BUT CLAIMED ONLY RS.84,40,000/- INCLUDING SALARY WH ICH HAS BEEN BIFURCATED IN P&L A/C AS UNDER: SALARY PARTNERS RS. 2,5 2,000/- BONUS RS.8 1,88,000/- RS.84,40,000/- THE SAID PARTNERSHIP DEED OPERATES SINCE ASSTT. YEA R 2004-05 & ALL THE OFFICIALS (AOS) HAVE ACCEPTED THE ABOVE METHOD AS CORRECT AND COMPLETED ASSESSMENT TILL ASSTT. YEARS 2008-09. FUR THER ASSESSEE FIRMS EACH PARTNER IS ASSESSED AT INCOME OF HIGHES T TAX RATE EITHER IN THE HANDS OF FIRM OR PARTNERS. THE AO HOWEVER, WAS NOT SATISFIED WITH THE ABOVE REPLY. AS PER THE AO VIDE PARA 5 OF THE PARTNERSHIP DEED, ALL THE PART NERS ARE ACTIVELY ENGAGED IN THE CONDUCT OF THE AFFAIRS OF THE FIRM, BUT WHY SAL ARY WAS PAID ONLY TO THE THREE PARTNERS FROM CLAUSE 6 OF THE PARTNERSHIP DE ED, HE HAS INFERRED THAT THE BONUS IS TO BE PAID ONLY TO THOSE PARTNERS WH O ARE WORKING PARTNERS. THUS, WHEN ONLY THREE PARTNERS WERE DRAWING SALARY HENCE, THOSE ONLY CAN BE TREATED AS THE WORKING PARTNERS. HENCE, ACCORDIN G TO THE A.O. , BONUS IS PAYABLE TO THOSE PARTNERS ALONE. THE AO NOTICED TH AT THE WORD WORKING IN CLAUSE 6 OF THE PARTNERSHIP DEED HAS BEEN BLACKENED FOR WHICH NO JUSTIFICATION WAS OFFERED BY THE ASSESSEE DESPITE B EING ASKED. ACCORDING TO HIM, ALL THE WORKING PARTNERS SHALL GET THE BONU S IN EQUAL PROPORTION THEN HOW SHRI NIZAMUDDIN WAS NOT DRAWING ANY SALARY ALT HOUGH HE CANNOT BE 5 CALLED A WORKING PARTNER. IN VIEW OF THIS STAND, TH E BONUS PAID TO FOURTH PARTNER (I.E. SHRI NIZAMUDDIN) OF RS.20,47,000/- WA S DISALLOWED BY THE A.O. IN THE FIRST APPEAL, THE LD. CIT(A) HAS ALSO CONFI RMED THIS DISALLOWANCE FOR THE REASONS MENTIONED IN HIS ORDER. 4.3 FEELING FURTHER AGGRIEVED, THE ASSESSEE HAS F ILED THIS SECOND APPEAL. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. THE LD. AR APPEARING B EFORE US FILED A DETAILED WRITTEN SUBMISSION. HE FURTHER SUBMITTED THAT WHEN THE A.O. HAS AGREED TO THE FACT, RATHER, HE HAS ADMITTED THIS FACT, THEN H OW CAN HE SIMULTANEOUSLY HOLD THAT ALL THE PARTNERS ARE NOT THE WORKING PART NERS AND WITHOUT ANY MATERIAL AND PARTICULARLY WHEN SALARY IS BEING PAI D TO THE PARTNERS FOR DISCHARGING VOLUMINOUS WORK OF THE FIRM I.E WATCHI NG PROGRESS OF PROCUREMENT OF TENDU LEAVES FROM THE DENSE FOREST A REAS, TRAVEL IN THE MID OF SUMMER SEASON AND ALSO ASSISTING THE HEAD/MAIN C ONTROLLER OF BUSINESS SHRI NIZAMUDDIN. HE STATED THAT SHRI NIZAMUDDIN, B EING THE SENIOR MOST PARTNER AND PATRON OF THE FIRM , IS COMPLETELY DEV OTED TO THE BUSINESS AND TO THE OVERALL ACTIVITIES OF THE FIRM. HE REGULARLY VI SITED THE FACTORY, ARRANGES FINANCE, SIGNS CHEQUES, FRAMES POLICES AND TAKES PO LICY DECISIONS. HE IS ALSO IN CLOSE CONTACT OF THE PROSPECTIVE BUYERS OF THE T ENDU PATTAS. THESE FACTS NOT HAVING BEEN DENIED IT HAS TO BE ACCEPTED THAT A LL THE FOUR PARTNERS WERE 6 WORKING PARTNERS. THIS WAS A COMMERCIAL DECISION TA KEN BY ALL THE PARTNERS WITH MUTUAL CONSENT AND IT IS ALSO NOT DENIED THAT SUCH MUTUAL CONSENT WAS DULY RECORDED VIDE THE CLAUSES NO. 5 & 6 OF THE PAR TNERSHIP DEED, COPY OF WHICH IS PLACED AT PAGES 10 TO 12 OF THE ASSESSEES PAPER BOOK. HE DREW OUR ATTENTION TOWARDS THE EXPLANATION 4 BELOW SEC. 40(B ) WHICH DEFINES THE TERM 'WORKING PARTNER' AS UNDER: EXPLANATION 4.FOR THE PURPOSES OF THIS CLAUSE, 'W ORKING PARTNER' MEANS AN INDIVIDUAL WHO IS ACTIVELY ENGAGED IN COND UCTING THE AFFAIRS OF THE BUSINESS OR PROFESSION OF THE FIRM OF WHICH HE IS A PARTNER; HE SUBMITTED THAT THIS TERM HAVING BEEN SPECIFICALL Y DEFINED TO MEAN AN INDIVIDUAL WHO IS ACTIVELY ENGAGED IN CONDUCTING TH E AFFAIRS OF THE BUSINESS, BY THE STATUE FOR THIS PURPOSES, HENCE, NO OTHER ME ANING COULD BE ASSIGNED AND THEREFORE, THE INTERPRETATION BY THE AO AND THE LD. CIT(A) THAT ONLY THOSE PARTNERS WHO WERE PAID THE SALARY ARE THE WOR KING PARTNERS AND NOT THE OTHERS, IS A COMPLETE MISREADING OF THE PROVISION. HE FURTHER SUBMITTED THAT THE LD. CIT(A) MISINTERPRETED BY SAYING THAT THE ME ANING OF THE WORD WORKING PARTNER ASSIGNED BY THE STATUTE WAS CONFINED ONLY AND ONLY TO CLAUSE (V) TO SEC. 40(B) WHICH IS A COMPUTATION CLA USE. HOWEVER, EXPLANATION 4 PROVIDES THE MEANING OF WORKING PARTN ER FOR THE CLAUSE (B) TO SECTION 40 AND NOT FOR THE PURPOSE OF SUB CLAUSE (I V) ONLY. HR FURTHER 7 SUBMITTED THAT THE AUTHORITIES BELOW UNDULY STRESSE D UPON THE WORD WORKING AND THAT THIS WORD WAS PURPORTEDLY BLACKENED OUT (E RASED), FOR THE SIMPLE REASON THAT IN CLAUSE 5 OF THE SAID DEED IT IS STAT ED THAT ALL THE PARTIES TO THE PARTNERSHIP DEED ARE ACTIVELY ENGAGED IN THE CONDUC T OF THE BUSINESS AND IN CLAUSE 6 STATES THAT AS AFORESAID WHICH IMPLIES THAT ALL THE PARTNERS ARE THE WORKING PARTNERS AND HENCE, ARE ENTITLED TO BONUS. THIS ASPECT WAS CLARIFIED ALSO VIDE A DETAILED REPLY DATED 20.12.2011 COPY OF WHICH WAS PLACED AT PAGE 8 AND 9 OF THE ASSESSEES PAPER BOOK. THUS, AL L THE PARTNERS, WHO ARE ALREADY WORKING PARTNERS, WERE MADE ENTITLED TO THE BONUS. AS PER THE LD. AR THE ONLY CONDITION FOR THE ALLOWABILITY OF THE DEDU CTION U/S 40 (B) IS THAT THE REMUNERATION SHOULD BE PAID TO WORKING PARTNERS ONL Y AND SUCH REMUNERATION BY WHATEVER NAME CALLED, HAS TO BE AUTHORISED BY AND SHOULD BE IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DE ED AND ALL THESE CONDITIONS ARE FULLY SATISFIED IN THIS CASE. IT IS NOT DENIED THAT ALL THE PARTNERS ARE ACTIVELY ENGAGED AND HENCE, ARE WORKING PARTNER S AND CLAUSE 5 AUTHORIZES PAYMENT OF SALARY WHEREAS CLAUSE 6 AUTHORIZES PAYME NT OF BONUS. HE FURTHER ARGUED THAT THE CLAIM SO MADE WAS WITHIN THE OVERAL L PERMISSIBLE LIMIT IN AS MUCH AS THE TOTAL AMOUNT PERMISSIBLE WAS RS.84,50,1 84/- AGAINST WHICH THE ASSESSEE CLAIMED ONLY RS.84,40,000/- AND OUT OF THI S AFTER PAYING SALARY TO THREE PARTNERS OF RS.2,52,000/- THE BALANCE OF RS.8 1,88,000/- WAS PAID AS 8 BONUS TO ALL THE PARTNERS. EVEN ASSUMING THE SAME W AS TO BE PAYABLE TO THREE PARTNERS ONLY THEN ALSO THIS ENTIRE BALANCE WAS TO BE DISTRIBUTED AMONGST THEM. THUS, THE BALANCE AMOUNT WAS FULLY ALLOWABLE WHETHER IT WAS TO BE DISTRIBUTED AMONGST THREE PARTNERS OR FOUR PARTNERS . LASTLY, HE SUBMITTED THAT THE FIRM WAS CONSTITUTED IN A.Y.2004-05 AND SINCE T HEN THE FIRM HAS BEEN MAKING PAYMENT OF SALARY AND BONUS IN A SIMILAR MAN NER AND THE REVENUE NEVER MADE ANY DISALLOWANCE IN THE PAST. HE REFERRE D TO A CHART PLACED AT PAGE 13 OF THE PAPER BOOK AS ALSO DREW OUR ATTENTIO N TOWARDS THE COPIES OF THE ASSESSMENT ORDERS PLACED AT PAPER BOOK PAGES 14 TO 24 OF THE ASSESSEES PAPER BOOK. IN SUPPORT, HE ALSO RELIED UPON THE DEC ISIONS IN THE CASES OF EQBAL AHMED & CO. V/S ITO (2005) 1 SOT 202 (KOL) AC IT V/S LAXMI SAILAJA TRADERS (2005) 1 SOT 608 (HYD) , ACIT V/S SUMAN CONSTRUCTION (2009) 121 TTJ 847 (PUNE), ITO V/S J.M.P. ENTERPRIS ES (2006) 99 TTJ 305 (ASR), ITO V/S TULSI RAM TEJ CHAND (2004) 91 TTJ 45 2(CHD). LASTLY, HE MADE AN ALTERNATIVE PRAYER THAT IF IN ANY CASE, THE DISALLOWANCE SO MADE IS UPHELD THAN THE BENEFIT OF THE PROVISO BELOW U/S 28 (V) HAS TO BE GIVEN, IN THE HANDS OF PARTNERS, WHICH PROVIDES THAT IN CASE OF D ISALLOWANCE OF ANY AMOUNT OF SALARY OR BONUS IN THE HANDS OF THE FIRM, THE IN COME TO SUCH EXTENT HAS TO BE ADJUSTED IN THE HANDS OF THE PARTNERS. 9 4.5 PER CONTRA, THE LD. DR HAS STRONGLY RELIED UPO N THE FINDINGS RECORDED BY THE AO AND LD. CIT(A) IN THEIR RESPECTIVE ORDERS AND PRAYED TO DISMISS THIS GROUND RAISED BY THE ASSESSEE. 4.6 WE HAVE CAREFULLY CONSIDERED THE SUBMISSION MA DE BY BOTH THE PARTIES. WE HAVE ALSO CAREFULLY PERUSED THE MATERIA L PLACED ON RECORD AND CONSIDERED THE CASE LAWS CITED. IT IS NEITHER DISP UTED NOR ESTABLISHED BY THE AUTHORITIES BELOW THAT ALL THE FOUR PARTNERS WERE A CTIVELY ENGAGED IN THE CONDUCT OF THE BUSINESS OF THE FIRM AND THUS, ARE T HE WORKING PARTNERS. THE PROVISIONS CONTAINED U/S 40(B) PROVIDE THAT ANY RE MUNERATION BY WHATEVER NAME CALLED, SHALL NOT BE ALLOWABLE IF SUCH PAYMENT IS NOT MADE TO A WORKING PARTNER. SECONDLY, SUCH PAYMENT IS NOT FOUND TO BE AUTHORIZED BY OR IS NOT FOUND TO BE IN ACCORDANCE WITH THE TERMS OF THE PAR TNERSHIP DEED. THUS, THE SUBJECTED PAYMENT HAS TO BE AUTHORIZED BY AND HAS T O BE IN ACCORDANCE WITH THE PARTNERSHIP DEED. THIS FURTHER IMPLIES THAT THE LAW DOES NOT INTERFERE IN THE DECISION MAKING BY THE PARTNERS AND IT IS WITHI N THE SOLE DISCRETION OF THE PARTNERS TO DECIDE THE AMOUNT PAYABLE (WHICH IS CER TAINLY ALLOWABLE AS PER THE LIMITS PRESCRIBED) AND ALSO THE PARTICULAR PART NER TO WHOM ANY PAYMENT OF SALARY OR BONUS HAS TO BE MADE. THE SAID CLAUSES NO. 5 AND 6 OF THE PARTNERSHIP DEED READS AS UNDER:- 10 5. THAT THE PARTIES TO THIS DEED ARE ACTIVELY ENGA GED IN THE CONDUCT OF THE BUSINESS OF THE FIRM BUT ON ACCOUNT OF DEVOTION THE PARTIES FROM SE COND TO FOURTH PART (SHRIMOINUDDIN, SHRIIQBAL ALI AND SHRIZAHIRUDDDIN) SHALL GET SALARY OF RS.7000/- P.M. SINCE 01.04.2003 UNLESS OTHERWISE MUTUALLY AGREED UPON BY AND BETWEE N THE PARTIES TO THIS DEED. 6. THAT THE PARTNERS TO THIS DEED AS AFORESAID SHAL L BE FURTHER ENTITLED TO BONUS/ COMMISSION AT THE END OF EACH YEAR, WHICH AFTER INC LUDING THE TOTAL AMOUNT OF SALARY PAYABLE TO THE PARTIES FROM SECOND TO FOURTH PART D URING THE YEAR, SHALL BE EQUAL TO THE SUM COMPUTED ACCORDINGLY TO THE METHOD OF COMPUTATI ON AS LAID DOWN IN SUB-CLAUSE (V) OF CLAUSE (B) OF SECTION 40 OF THE INCOME TAX, AS R EPRODUCED BELOW:- IN THE PRESENT CASE, CLAUSE 5 AUTHORIZED PAYMENT OF SALARY TO THREE PARTNERS WHEREAS CLAUSE 6 AUTHORIZED PAYMENT OF BONUS TO ALL THE FOUR PARTNERS. THIS WAY, ALL THE CONDITIONS PROVIDED U/S 40(B) STAND FU LFILLED. WE DO NOT AGREE WITH THE CONTENTION OF THE LD. CIT (A) THAT ALL THE PARTNERS WERE NOT WORKING PARTNERS, WHICH FINDING IS RECORDED WITHOUT ANY BAS IS. WE FURTHER AGREE WITH THE CONTENTION OF THE LD. A/R THAT THE AO AND CIT ( A) HAVE UNDULY STRESSED UPON THE ERASING OF THE WORD WORKING BEFORE THE WORD PARTNER IN AS MUCH AS CLAUSE 6 OF THE PARTNERSHIP DEED, PROVIDES THAT WORKING PARTNERS TO THIS DEED (ASSUMING THE WORD WORKING IS NOT ERASED) IMPLIES ALL THE FOUR PARTNERS; AND AS AFORESAID IMPLIES THAT THEY ARE ACTIVELY ENGAGED IN CONDUCT OF THE BUSINESS AS PER CLAUSE 5. NOW EVEN I N ABSENCE OF THE WORD WORKING , A COMBINED READING CONVEYS THE SAME MEANING. FURTHER, IT WAS DECISION TAKEN BY THE PARTNERS BY MUTUAL CONSENT TH AT OUT OF ALL THE FOUR PARTNERS, SALARY WOULD BE PAYABLE TO ONLY THREE PAR TNERS AS PER CLAUSE 5 WHEREAS BONUS SHALL PAYABLE TO ALL THE FOUR PARTNER S AS PER CLAUSE 6, IN WHICH 11 THE LAW DOES NOT PERMIT INTERFERENCE BY THE REVENUE . THE LD. CIT (A) FURTHER WRONGLY INTERPRETED SEC. 40(B)(V) WHILE HOLDING THA T THE DEFINITION OF WORKING PARTNERS WAS MEANT ONLY FOR SEC.40(B)(V) WHEREAS EXPLANATIO N 4 BELOW SEC.40(B) CLEARLY READS THAT FOR THE PURPOSES OF THIS CLAUSE WHICH MEANS CLAUSE (B) TO SECTION 40. IT IS NOTICED THAT ALTHOUGH THE FIRM WAS CONSTITUTED IN A.Y. 2004-05 AND IT IS NOT DISPUTED THAT THE ASSESSEE FIRM HAS BEEN MAKING THIS CLAIM RIGHT SINCE A.Y. 2004-05 BUT ALL ALONG THE REVENUE HAS BEEN ACCEPTING SUCH A CLAIM EVEN IN THE ASSESSM ENT MADE UNDER SCRUTINY HENCE WE DO NOT FIND ANY JUSTIFICATION TO MAKE A DE PARTURE FROM THE SETTLED POSITION IN THE PAST WITHOUT BRINGING ANY MATERIAL CHANGE IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE IN THIS YEAR. IN ANY CASE , THE ISSUE IN HAND IS REVENUE IS NEUTRAL IN AS MUCH AS EVEN ASSUMING A CE RTAIN PART OF THE CLAIMED REMUNERATION IS DISALLOWED IN THE HANDS OF THE FIRM , THE SAME CANNOT BE TREATED TO BE AN INCOME FROM BUSINESS IN THE HANDS OF THE PARTNERS AND A NECESSARY SAFEGUARD HAS ALREADY BEEN PROVIDED UNDER THE PROVISO BELOW THE SEC.28(V) AGAINST THE DOUBLE TAXATION OF THE SAME I NCOME HENCE, EVEN IF THE DISALLOWANCE SO MADE IS UPHELD, DEDUCTION TO THAT E XTENT HAS TO BE ALLOWED IN THE HANDS OF THE PARTNERS/S. THUS, REVENUE SHALL NO T BE PUT TO ANY LOSS IF THE REMUNERATION AS CLAIMED, IS ALLOWED IN THE HANDS OF THE ASSESSEE FIRM. WE THUS, FIND NO JUSTIFICATION IN THE DISALLOWANCE SO MADE AND CONFIRMED, FOR THE 12 DETAILED REASONS STATED HEREIN ABOVE, HENCE, THE DI SALLOWANCE OF RS. 20,47,000/- MADE U/S 40(B) IS HEREBY DELETED. THERE FORE, GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 5.1 IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED T HE CHARGING OF INTEREST U/S 234A, 234B, 234C & 234D OF THE ACT. SUCH CHARGI NG OF INTEREST IS CONSEQUENTIAL IN NATURE AND SHALL BE COMPUTED BY TH E AO ACCORDINGLY, AFTER GIVING EFFECT TO THIS ORDER. 6.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28-0 2-2014. SD/- SD/- ( N.K. SAINI ) (HARI OM MARATHA ) ACCOUNTANT MEMBER JUDICIAL MEMBER *MISHRA COPY FORWARDED TO :- 1.M/S. ID. MOHD. NIZAMUDDIN, TONK 2. THE ACIT, CIRCLE-7, JAIPUR 3. THE LD.CIT(A) BY ORDER 4. THE LD CIT 5. THE D/R 6. GUARD FILE (ITA NO.41/JP/2013) AR ITAT, JAIPUR 13 14 15