GAGRATS, MUMBAI V. ACIT-16(2), MUMBAI

ITA 4189/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9612 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 11-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Assessee Lawyers: DHARMENDRA SINGH
• Keywords: Diversion of income
• Section: 143(3); 72; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI S. RIFA UR RAHMAN, ACCOUNTANT MEMBER IT A NO. 4189/MUM./2019 ( ASSESSMENT YEAR : 20 14 15 ) GAGRATS 12 TH FLOOR, NIRMAL NARIMAN POINT, MUMBAI 400 021 PAN AAGFG0728H . APPELLANT V/S ASSTT. C OMMISSIONER OF INCOME TAX CIRCLE 1 6 ( 2 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI DHARMENDRA SINGH REVENUE BY : SHRI T.S. KHALSA DATE OF HEARING 31.05.2021 DATE OF ORDER 17.07.2021 O R D E R PER S. RIFAUR RAHMAN, A.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER DATED 30 TH APRIL 2019, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS ) 5 , MUMBAI, FOR THE ASSESSMENT YEAR 20 14 15 . 2. THE ONLY ISSUE THAT NEEDS TO BE ADJUDICATED BY US IS, WHETHER OR NOT THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF 2 GAGRATS A NNUITY PAYMENT OF ` 12,00,000, MADE TO WIFE OF A DECEASED PARTNER OF THE FIRM. 3. BRIEF FACTS RELATING TO AFORESAID ISSUE ARE, THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE PROFESSION OF ADVOCATES, SOLICITORS AND NOTARIES. THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION, FILED ITS RETURN OF INCOME ON 26 TH NOVEMBER 2014, DECLARING TOTAL INCOME OF ` 4,31,05,490. THE ASSESSING OFFICER PROCESSED THE RETURN OF INCOME UNDER SECTION 143(3) OF THE ACT DETERMINING THE ASSESSEES INCOME AT ` 4,51,18,241, AGAINST THE DECLARED INCOME OF ` 4,31,05,490 . THE ASSESSING OFFICER, ON A PERUSAL OF THE AUDIT REPORT, FOUND THAT AN AMOUNT OF ` 12 LAKH, WAS PAID TO SMT. MANECK JAHANGIR GARAT, WHO IS THE WIFE OF THE DECEASED PARTNER OF THE ASSESSEE FIRM SHRI JAHANGIR GARAT , WHICH WAS CLAIMED AS DEDUCTIBLE WHILE COMPUTING THE TOTAL INCOME BY THE ASSESSEE. THE ASSESSING OFFICER REQUESTED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD BE DISALLOWED. IN REPLY , THE ASSESSEE SUBMITTED THAT THE AMOUNT OF ANNUITY PAYMENT IS SPREAD OVER DURING THE PREVIOUS YEAR OVER 12 MONTHS EQUALLY AND THE SAME HAS BEEN PAID A S PER THE CLAUSE 12:4 OF THE PARTNERSHIP DEED DATED 22 ND JUNE 2006, AND WAS NOT DIVERSION OF INCOME RATHER IT WAS AN OVERRIDING OBLIGATION OF THE FIRM THAT THE PAYMENT TO THE SPOUSE OF THE DECEASED PARTNER IS REQUIRED TO BE MADE AND, HENCE NEEDS TO BE ALLO WED IN THE HANDS OF THE ASSESSEE FIRM. THE ASSESSING OFFICER 3 GAGRATS CONSIDERING THE REPLY OF THE ASSESSEE DISALLOWED THE CLAIM HOLDING THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN FAVOUR OF THE REVENUE IN ASSESSMENT YEAR 2007 08. THE ASSESSEE BEING AGGRIEVED CONTESTED SUCH DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE THE LEARNED CIT(A), THE ASSESSEE FILED FOLLOWING SUBMISSIONS IN SUPPORT OF ITS CLAIM. 'IN THIS GROUND THE APPELLANT HAD CHALLENGED THE ADDITION MADE BY LD. AO IN REGARDS TO PAYMENT OF ANNUITY TO WIFE OF A DECEASED PARTNER MR. J GAGRAT. DURING THE YEAR UNDER CONSIDERATION THE APPELLANT WAS ASKED TO EXPLAIN AS TO WHY SUCH PAYMENT SHOULD NOT B E DISALLOWED. IN RESPONSE TO THE SOME, THE APPELLANT HAD SUBMITTED THAT MRS. MANECK J. GAGRAT, WIFE OF DECEASED PARTNER MR. J EHANGIR RUSTOM GAGR A T, WAS PAID RS. 12,00,0001 - DURING THE PREVIOUS YEAR SPREAD OVER 72 MONTHS EQUALLY AND THE SOME HAS BEEN PAID AS PER THE CLAUSE 12:4 OF THE PARTNERSHIP DEED DATED 22.06.2006. THE APPELLANT ALSO CONTENDED THAT ITS CASE WAS SQUARELY COVERED BY THE RATIO OF THE DECISION LAID DOWN IN THE CASE OF JURISDICTIONAL BOMBAY HIGH COURT (CIT V/S MULLA AND MULIA AND CRAIGIE. BLUN T AND CAROE (190 ITR 198)). HOWEVER THE LEARNED A.O HAS NOT APPRECIATED THE FACTS OF THE CASE AND ADDED THE SUM OF RS. 72.00,000/ - TO THE INCOME OF THE APPELLANT FIRM. AGGRIEVED BY THE SAID ADDITION THE APPELLANT HAS FILED THE PRESENT APPEAL BEFORE YOUR HO NOUR'S. THE CONTENTIONS OF THE APPELLANT FIRM ARE AS UNDER: MRS. MANECK J. GAGRAT, WIFE OF THE DECEASED PARTNER MR. J. GOGRAT, WAS PAID RS. 72,00,000 DURING THE PREVIOUS YEAR SPREAD OVER 12 MONTHS EQUALLY. THE SOME HAS BEEN PAID AS PER THE CLAUSE 12:4 OF THE PARTNERSHIP DEED DOTED 22.06.2006 WHICH IS REPRODUCED AS BELOW: 'AS AGREED TO BY AND BETWEEN THE THEN PARTNERS OF GAGRATS PURSUANT TO THE AFOREMENTIONED SUPPLEMENTARY DEED OF PARTNERSHIP DATED 3RD DECEMBER 2005, SO LONG AS THE PARTNERS ARE DESIROUS OF CONTINUING THE PRACTICE IN THE NAME AND STYLE OF THE FIRM, THEY WILL BE PERMITTED TO DO SO, ONLY SO LONG AS THEY MAKE A PAYMENT TO MRS. MANECK J. GAGRAT FOR AND DURING 4 GAGRATS HER LIFETIME OF RS. 12,00,000/ - (RUPEES TWELVE LA KHS ONLY) PER ANNUM. SUCH PAYMENT TO MR S. MANECKJ. GAGRAT. EACH MONTH OR IN SUCH INSTALLMENTS, AS SHE MAY REQUIRE, SUCH ANNUITY SHALL BE TREATED AS A CHARGE ON THE PROFITS OF THE FIRM.' FROM THE ABOVE IT IS CLEAR THAT THESE PAYMENTS WERE TO BE MADE TO MRS . MANECK J GAGRAT UNDER ALL CIRCUMSTANCES AND HENCE IT IS AN OVERRIDING OBLIGATION ON THE FIRM THAT THE PAYMENTS BE MADE TO HER. IT IS NOT A DIVERSION OF INCOME AND HENCE NEEDS TO BE ALLOWED IN THE HANDS OF THE FIRM. IN SUPPORT FITS CLAIM THE APPELLANT HAS PLACED RELIANCE ON THE FOL LOWING JUDICIAL PRONOUNCEMENTS. I) CIT VS MULLA AND MULLA AND CRAIGIE. BLUNT AND CAROE 190 ITR 198 (BOM.); II) CIT VS. CRAWFORD BAYLEY AND CO. 106 ITR 884 (BOM.); III) CCIT VS. LUCAS INDIA SERVICES LTD 239 OR 429 (MAD.); IV) ACIT VS. RONI PRITAM KUNWAR 125 ITR 102 (MUM.) AND V) CIT VS. M . P . PONCHO 211 IT R 1005 (BOM. ) . 5. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DISALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER DATED 4 TH MARCH 2015, PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN GAGRATS V / S ACIT, ITA NO.1885/MUM./2012, A.Y. 2008 09, WHEREIN THE T RIBUNAL HAS DISMISSED THE ASSESSEES APPEAL BY DECIDING THE ISSUE IN FAVOUR OF THE REVENUE. THE ASSESSEE BEING AGGRIEVED IS IN FURTHER APPEAL BEFORE TRIBUNAL. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT ` 12 LAKH WAS PAID TO THE WIFE OF THE DECEASED PARTNER OF THE FIRM LATE SHRI JAHANGIR GARAT, WHICH WAS SPREAD FOR 12 MONTHS EQUALLY DURING THE PREVIOUS YEAR AND THE SAME HAS BEEN PAID AS PER CLAUSE 12:4 OF 5 GAGRATS THE PARTNERSHIP DEED DATED 22 ND JUNE 2006 . IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S MULLA AND MULLA AND GRAIGE, BLUNT AND CAROE, 190 ITR 198 (BOM.) AND CIT V/S CRAWFORD BAYLEY AND CO, [1977] 106 ITR 884 (BOM.) AND SUBMITTED THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE. THE LEARNED COUNSEL FURTHER SUBMITTED THAT PAYMENT MADE TO SMT. MANECK JAH ANGIR GARAT, IS DIVERSION OF INCOME AND NOT APPLICATION OF INCOME WHICH IS ALSO EVIDENT FROM THE CLAUSE 12:4 OF THE PARTNERSHIP DEED. ACCORDINGLY, HE PRAYED FOR ALLOWING THE CLAIM OF THE ASSESSEE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE OBSERVATIONS OF THE AUTHORITIES BELOW. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSEE FIRM HAD MADE A PAYMENT OF ` 12 LAKH AS PAYMENT OF ANNUITY TO SMT. MANECK JAHANGIR GARAT, WHO IS THE WIFE OF THE DECEASED PARTNER OF THE ASSESSEE FIRM SHRI JAHANGIR GARAT . THIS PAYMENT WAS MADE AS PER THE AGREED TERMS VIDE CLAUSE 12:4 OF THE PARTNERSHIP DEED DATED 22 ND JUNE 2006 AND, HENCE, THE CLAIM HAS TO BE ALLOWED. THE REVENUE AUTHO RITIES HAVE DISALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE IN PRECEDING ASSESSMENT YEAR I.E., 2008 09 IN 6 GAGRATS GAGRATS V/S ACIT, ITA NO.1885/MUM/2012, ORDER DATED 4 TH MARCH 20 15, WHEREIN EXACTLY SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY FOLLOWING THE PRECEDENCE BEING MAINTAINED ON THIS ISSUE BY THE TRIBUNAL IN ASSESSEES OWN CASE CITED SUPRA. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD WHICH IS CONTRARY TO THE DECISION OF THE TRIBUNAL AS AFORESAID TO ENABLE THIS BENCH TO TAKE A DIFFERENT VIEW. CONSEQUENTLY, WE DO NOT FIND ANY COGENT REASON WARRANTING US TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY , WE UPHOLD THE ORDER OF THE LEARNED CIT(A) BY DISMISSING THE GROUND RAISED BY THE ASSESSEE. 9. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 12.07.2021 SD/ - SAKTIJIT DEY JUDICIAL MEMBER SD/ - S. RIFAUR RAHMAN ACCOUNTANT MEMBER MUMBAI, DATED: 12.07.2021 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI