M/s. Rock Enterprises, Pune V. Income-tax Officer, Ward - 7(1), Pune

ITA 455/PUN/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0660 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-12-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 12-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.455/PUN/2018 / ASSESSMENT YEAR : 2013-14 M/S. ROCK ENTERPRISES, A-6, HERMES PARK CO-OP. HOUSING SOCIETY, BUND GARDEN ROAD, PUNE - 411 001 PAN : AAHFR0525J VS. ITO, WARD-7(1), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-5, PUNE ON 10-11-2017 IN RELATION TO THE ASSESSMENT YEAR 2013-14. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF REMUNERATION TO PARTNERS AMOUNTING TO RS.8 LAKHS. APPELLANT BY SHRI P.S. SHINGTE RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 04-12-2018 DATE OF PRONOUNCEMENT 04-12-2018 ITA NO.455/PUN/2018 M/S. ROCK ENTERPRISES 2 3. BRIEFLY STATED, THE FACTS AS RECORDED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE FIRM EARNED INTEREST INCOME. T HE ASSESSEE WAS CALLED UPON TO SUBMIT PROOF REGARDING THE AC TUAL WORK DONE BY THE PARTNERS FOR CLAIMING REMUNERATION. TH E AO RECORDED THAT THE ASSESSEE FAILED TO PRODUCE SUCH EVIDENCE . THE LD. AR WAS ASKED TO EXPLAIN AS TO WHY REMUNERATION TO PARTNERS AMOUNTING TO RS.8 LAKHS SHOULD NOT BE DISALLOWED, TO WHICH HE AGREED FOR THE ADDITION. THIS LED TO THE MAKING O F AN ADDITION OF RS.8 LAKHS IN THE ASSESSMENT ORDER. THE LD. CI T(A) UPHELD THE AOS ACTION. THE ASSESSEE IS AGGRIEVED BY THE SUSTENANCE OF ADDITION. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE R ELEVANT MATERIAL ON RECORD. IT IS MANIFEST FROM THE ASSESSEES RE TURN OF INCOME, A COPY OF WHICH HAS BEEN PLACED ON RECORD, THAT TOTAL INCOME OF RS.18,06,480/- WAS DECLARED. A COPY OF THE COMPUTATION OF TOTAL INCOME, PLACED IN THE PAPER BOOK, DEPICTS THAT SUCH INCOME WAS OFFERED UNDER THE HEAD `PROFITS AND G AINS OF BUSINESS OR PROFESSION. THE ASSESSEES PROFIT AND LOS S ACCOUNT HAS BEEN PLACED ON RECORD WHICH SHOWS OPENING A ND CLOSING STOCK OF WORK IN PROGRESS AT RS.17,15,268/-. INTE REST ITA NO.455/PUN/2018 M/S. ROCK ENTERPRISES 3 INCOME HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT AND DEDUCTION HAS BEEN CLAIMED TOWARDS CERTAIN EXPENSES, SUCH AS, SALARIES AND WAGES, ACCOUNT WRITING CHARGES, BANK INTEREST, PROFESSIONAL FEES, DEPRECIATION AND SALARY TO PARTNERS. THIS SHOWS THAT EVEN THOUGH THERE WAS NO DIRECT BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE, BUT IT WAS ONLY A CASE OF TEM PORARY LULL IN AS MUCH AS THE ASSESSEE KEPT THE BUSINESS INTACT BY PAYING SALARIES AND WAGES APART FROM INCURRING OTHER EXPEN SES WHICH HAVE BEEN NARRATED ABOVE. THE FACT THAT THE ASSES SEE AGREED FOR ADDITION OF SALARY TO PARTNERS HAS BEEN ASSAILE D BY THE LD. AR TO HAVE BEEN FORCIBLY EXTRACTED BY THE AO. WHEN THE FIRM IS CONTINUING ITS BUSINESS, INCURRING OTHER EXPENSES, IT CANNOT BE PRESUMED THAT THE BUSINESS IS BEING RUN WITHOUT THE INVOLVEMENT OF WORKING PARTNERS. IT IS FURTHER RELEVANT TO NOTE THAT THE SALARY PAID TO PARTNERS WAS OFFERED FOR TAXATION IN THEIR INDIVIDUAL RETURNS AND THE SAME HAS BEEN CHARGED TO TAX. I N THAT VIEW OF THE MATTER, IT BECOMES OVERT THAT REMUNERATION WAS PAID TO PARTNERS FOR FACILITATING THE WORKING OF THE FIRM. SUCH AN AMOUNT, BEING WITHIN THE CEILING PRESCRIBED U/S. 40(B ) OF THE ACT, IN MY CONSIDERED OPINION, CANNOT BE DISALLOWED. I, ITA NO.455/PUN/2018 M/S. ROCK ENTERPRISES 4 THEREFORE, OVERTURN THE IMPUGNED ORDER ON THIS SCORE AND ORER TO DELETE THE ADDITION. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH DECEMBER, 2018. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 04 TH DECEMBER, 2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-5, PUNE 4. / THE PR. CIT-4, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.455/PUN/2018 M/S. ROCK ENTERPRISES 5 DATE 1. DRAFT DICTATED ON 04-12-18 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 04-12-18 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *