MANAS HOSPITALITY P. LTD, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 4650/MUM/2011

• Counselvise Citation: 465019914 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Date of conversion

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.4650/MUM/2011 ( / ASSESSMENT YEAR : 2006-07) MANAS HOSPITALITY PRIVATE LIMITED, 5A,NAV MEGHDOOT CHS, LINKING ROAD, KHAR (W), MUMBAI-400052 / VS. INCOME TAX OFFICER, 8(2)(3), MUMBAI. ( / APPELLANT) .. ( / RESPONDENT) ./ !' ./PAN/GIR NO. :AAECM3686K # / APPELLANT BY: SHRI ANIL SATHE AND MS.KAVITA MEHENDALE $ # / RESPONDENT: SHRI ASGHAR ZAIN % & $ ' ( / DATE OF HEARING : 7.12015 )* $ ' ( / DATE OF PRONOUNCEMENT :7. 1.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 25.02.2011 PASSED BY LD CIT(A)-17, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE DISALLOWANCE OF REMUNERATI ON AND INTEREST ON CAPITAL PAID TO THE PARTNERS. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E LD A.R SUBMITTED THAT THE ASSESSEE HEREIN IS A PRIVATE LIMITED COMPA NY FORMED BY CONVERTING THE ERSTWHILE PARTNERSHIP FIRM UNDER PART IX OF THE COMPANIES ACT. THE ERSTWHILE PARTNERS HAVE BECOME DIRECTORS OF THE COM PANY. THE ASSESSEE ITA NO.4650/M/11 2 HAD DEBITED THE INTEREST ON CAPITAL PAYABLE TO THE PARTNERS TO THE TUNE OF RS.2,50,000/- AND ALSO THE REMUNERATION PAYABLE TO THE PARTNERS TO THE TUNE OF RS.2,00,000/-. THE AO HELD THAT BOTH THE E XPENSES DO NOT PERTAIN TO THE ASSESSEE COMPANY, BUT IT RELATES TO THE ERST WHILE PARTNERSHIP FIRM AND ACCORDINGLY HELD THEY CANNOT BE ALLOWED IN THE HANDS OF THE ASSESSEE COMPANY. ACCORDINGLY HE DISALLOWED BOTH THE CLAIMS AND THE LD CIT(A) ALSO CONFIRMED THE SAID DISALLOWANCE. 3. THE LD A.R FURTHER SUBMITTED THAT THE REMUNER ATION TO THE PARTNERS WAS PAID FOR FULL YEAR. HE SUBMITTED THAT THE PART NERSHIP FIRM WAS CONVERTED INTO PRIVATE LIMITED COMPANY ONLY FROM 29 -08-2005. HOWEVER, THE RETURN OF INCOME WAS FILED DECLARING THE PROFIT OF WHOLE YEAR. ACCORDINGLY IT WAS CONTENDED THAT THE ASSESSING OFF ICER SHOULD EXAMINE THE CLAIM PUT FORTH BY THE ASSESSEE IN TERMS OF THE PAR TNERSHIP DEED UPTO THE DATE OF CONVERSION AND AFTER THAT DATE, FROM THE PO INT OF VIEW OF THE PRIVATE LIMITED COMPANY, MORE PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS ASSESSED THE PROFIT OF WHOLE YEAR. IN THE ALTERNATIVE, HE SUBMITTED THAT THE TAX AUTHORITIES MAY EXAMINE T HE CLAIM FROM THE ANGLE OF COMPANY ONLY FOR WHOLE YEAR, SINCE THE ERS TWHILE PARTNERS HAVE BECOME DIRECTORS OF THE COMPANY. ACCORDINGLY, THE LD A.R SUBMITTED THAT THIS ISSUE REQUIRES FRESH EXAMINATION. 4. THE LD D.R, HOWEVER, PLACED RELIANCE ON THE ORD ERS OF TAX AUTHORITIES. 5. WE NOTICE THAT THE ASSESSING OFFICER HAS DISALL OWED BOTH THE CLAIMS ON THE REASONING THAT THE SAME PERTAINS TO THE PART NERSHIP FIRM. HOWEVER, THE SUBMISSION OF THE LD A.R IS THAT THE A SSESSING OFFICER HAS ASSESSED THE INCOME OF THE WHOLE YEAR, I.E., PERTAI NING TO THE PARTNERSHIP FIRM ALSO. ACCORDINGLY IT WAS SUBMITTED THAT BOTH THE CLAIMS ARE REQUIRED TO BE EXAMINED, NOT ONLY FROM THE POINT OF VIEW OF THE PARTNERSHIP FIRM, ITA NO.4650/M/11 3 BUT ALSO FROM THE POINT OF VIEW OF THE COMPANY, SIN CE THE ERSTWHILE PARTNERS HAVE BECOME THE DIRECTORS OF THE COMPANY. WE NOTICE THAT THE ASSESSEE IS SUBMITTING NEW CONTENTIONS THAT WERE NO T EXAMINED BY THE ASSESSING OFFICER AND HENCE IN OUR VIEW, THESE SAID CONTENTIONS REQUIRE EXAMINATION AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE TH E SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE BY DULY CONSIDERING ALL THE CONTENTIONS OF THE ASSE SSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW, AF TER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7TH JAN, 2015. )* % + , - 7TH JAN, 2015 * $ .& / SD SD ( . . /I.P. BANSAL ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % & MUMBAI: 7TH JAN,2015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. % 2' ( ) / THE CIT(A)- CONCERNED 4. % 2' / CIT CONCERNED 5. 6. 34 . '5 , ( 5 , % & / DR, ITAT, MUMBAI CONCERNED . 6 7 & / GUARD FILE. 8 % / BY ORDER, TRUE COPY 9 ! (ASSTT. REGISTRAR) ( 5 , % & /ITAT, MUMBAI