M/s. Light Metals, New Delhi V. ACIT, New Delhi

ITA 4830/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7066 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 15-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 23-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: A K KHANNA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH : SMC-II, NEW DELHI BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO. 4830/DEL/2015 ASSESSMENT YEAR : 2011-12 LIGHT METALS, C/O. G.P. AGARWAL & CO., VIJAY TOWER, 252A, SHAHPUR JAT, NEW DELHI 110 049. PAN: AAAFL 2199R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 39(1), NEW DELHI. APPELLANT RESPONDENT APPELLANT BY : SHRI A.K. KHANNA, CA RESPONDENT BY : SHRI S.K. JAIN, SR. DR DATE OF HEARING : 15.09.2016 DATE OF PRONOUNCEMENT : 21.09.2016 O R D E R THIS APPEAL IS PREFERRED AGAINST THE ORDER DATED 8.5.2015 OF THE CIT(APPEALS)-20, NEW DELHI ON A SOLITARY GROUND THA T THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF TOTAL REMUNERATIO N OF RS.5,40,000 PAID TO THE PARTNERS, WHEREAS IN THE PARTNERSHIP DEED SPECI FIC PROVISIONS WERE PRESCRIBED; THOUGH VARIOUS GROUNDS ARE RAISED BY TH E ASSESSEE IN THE APPEAL. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS CONTENDED THAT IN THE PARTNERSHIP DEED, THERE WAS A SPECIFIC PROVISION FOR ITA NO.4830/DEL/2015 PAGE 2 OF 4 THE PAYMENT OF SALARY TO THE PARTNERS, SHRI B.R. CH OUDHARY AND SHRI SANJAY KUMAR SHARMA AT RS.5,000 PER MONTH AND THEREAFTER S ALARY OF BOTH THE PARTNERS WILL BE INCREASED BY RS.1,000 PER MONTH W. E.F. 1.4.1995. IT WAS ALSO CLARIFIED IN THE PARTNERSHIP DEED THAT THE PAR TNERS MAY HOWEVER DEFER TO LATER DATE INCREASE IN REMUNERATION AS MAY BE MU TUALLY DECIDED. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SIN CE SPECIFIC CLAUSE WAS PROVIDED IN THE PARTNERSHIP DEED, THE FINDINGS OF L OWER AUTHORITIES ARE INCORRECT THAT THERE WAS A VIOLATION OF PROVISIONS OF SECTION 40(B) OF THE ACT. 3. THE LD. DR, ON THE OTHER HAND, HAS PLACED RELIAN CE ON THE ORDER OF CIT(APPEALS). 4. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS AND THE PARTNERSHIP DEED, I FI ND THAT IN CLAUSE 6 OF THE PARTNERSHIP DEED, A SPECIFIC PROVISION WAS MADE FOR PAYMENT OF SALARY OF RS.5,000 PER MONTH TO SHRI B.R. CHAUDHARY AND SHRI SAJJAN KUMAR SHARMA AND AS PER CLAUSE 7, THE SALARIES TO BOTH THE PARTN ERS WILL BE INCREASED BY RS.1,000 PER MONTH W.E.F. 1.4.1995 AND OPTION WAS G IVEN TO THE PARTNERS TO DEFER THE INCREASE IN REMUNERATION. FOR THE SAKE O F REFERENCE, CLAUSES 6 & 7 OF THE PARTNERSHIP DEED ARE EXTRACTED HEREUNDER:- 6. THE PARTIES OF THE IST AND IIND PART WILL BE P AID THE FOLLOWING SALARY FOR EFFECTIVELY LOOKING AFTER THE BUSINESS OF THE FIRM. ITA NO.4830/DEL/2015 PAGE 3 OF 4 SHRI B.R. CHAUDHARY (IST PARTY) RS.5,000/- P.M. SHRI SAJJAN KUMAR SHARMA (IIND PARTY) RS.5,000/- P .M. 7. THE SALARIES OF BOTH THE PARTNERS WILL BE INCREA SED B RS.1,000/- PER MONTH WITH EFFECT FROM 1.4.95 EACH Y EAR. THE PARTNERS MAY HOWEVER DEFER TO LATER DATE INCREASED IN REMUNERATION AS MAY BE MUTUALLY DECIDED. 5. I HAVE ALSO EXAMINED THE SUBMISSION OF THE ASSES SEE THAT IN SOME OF THE YEARS ON ACCOUNT OF LOW PROFIT, THE SALARIES WERE NOT INCREASED, BUT IT DOES NOT MEAN THAT THE RIGHT TO INCREASE SALARY OF THE PARTNERS WAS EXTINGUISHED. BUT IN THE IMPUGNED ASSESSMENT YEAR , WHERE THERE IS SUFFICIENT PROFIT, THE SALARY WAS PROPORTIONATELY I NCREASED IN ACCORDANCE WITH THE TERMS OF PARTNERSHIP DEED. SINCE A SPECIF IC PROVISION HAS BEEN MADE FOR THE INCREASE OF SALARY PER YEAR, I FIND N O INFIRMITY IN THE INCREASE IN SALARY MADE BY THE ASSESSEE. MOREOVER, IT IS TH E OPTION OF THE ASSESSEE TO MAKE INCREASE IN SALARY AS PER PARTNERSHIP DEED IN A PARTICULAR YEAR OR IT MAY BE DEFERRED. BUT IT DOES NOT MEAN THAT IN SUBS EQUENT YEAR, THE ASSESSEE LOST THE RIGHT TO INCREASE THE SALARY RELA TING TO THE YEARS WHICH HAVE BEEN EXPIRED. ACCORDINGLY, I FIND NO UNJUSTIF ICATION IN THE INCREASE IN SALARY CLAIMED BY ASSESSEE. THEREFORE, I DO NOT FI ND MYSELF IN AGREEMENT WITH THE ORDER OF CIT(APPEALS) AND ACCORDINGLY I SE T ASIDE HIS ORDER AND DIRECT THE ASSESSING OFFICER TO ALLOW THE SALARY CL AIMED BY THE ASSESSEE. 6. THE LAST GROUND RELATES TO DISALLOWANCE OF TELEP HONE, CONVEYANCE AND VEHICLE EXPENSES @ 10% ON ACCOUNT OF PERSONAL U SE. SINCE THE ELEMENT OF PERSONAL USE IS ALWAYS THERE, I FIND NO UNJUSTIFICATION IN THE ITA NO.4830/DEL/2015 PAGE 4 OF 4 DISALLOWANCE OF 10% OF THE TOTAL EXPENSES OF TELEPH ONE, CONVEYANCE AND VEHICLE EXPENSES. ACCORDINGLY THE FINDINGS OF THE CIT(APPEALS) IN THIS REGARD ARE CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF SEPTEMBER 2016. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER NEW DELHI, DATED, THE 21 ST SEPTEMBER, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR, ITAT, NEW DELHI.