M/s. BEC Industries, New Delhi V. ACIT, New Delhi

ITA 4993/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7420 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHAILENDRA BAJAJ

Judgement Text

ITA NO. 4993/DEL/2015 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.4993/DEL/2015 ASSESSMENT YEAR: 2011-12 BEC INDUSTRIES, C-108, MAYAPURI INDUSTRIAL AREA,PHASE-2, NEW DELHI-110064 (PAN: AAAFB4450B) VS ACIT, CIRCLE 39(1), 22 ND FLOOR, E-2 BLOCK, CIVIC CENTRE, NEW DELHI-110002 APPELLANT RESPONDENT ASSESSEE BY : SHRI SHAILENDRA BAJA J, CA DEPARTMENT BY: SHRI SRIDHAR DORA, SR. DR DATE OF HEARING : 26.11.2018 DATE OF PRONOUNCEMENT : 16.01.2019 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER DATED 5.5.2015 PASSED BY THE LD. CIT (APPEALS)-20 F OR ASSESSMENT YEAR 2011-12. THE MAIN ISSUES IN DISPUT E BEFORE US ARE THE DISALLOWANCE OF REMUNERATION PAID TO THE PA RTNERS AMOUNTING TO RS. 7,60,000/- OUT OF TOTAL CLAIM OF R S. 9,60,000/- AND A FURTHER DISALLOWANCE OF INTEREST PAID TO PART NERS TO THE TUNE OF RS. 4,50,000/-. ITA NO. 4993/DEL/2015 ASSESSMENT YEAR 2011-12 2 2.0 THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 5087/DEL/2014 VI DE ORDER DATED 4.7.2018. A COPY OF THE SAID ORDER WAS FILED BEFORE THE BENCH. 3.0 THE LD. SR. DR, IN ALL FAIRNESS, AGREED THAT TH E ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT AS AFORESAID. HE, HOWEVER, PLACED RELIANCE ON THE ORD ER OF BOTH THE LOWER AUTHORITIES. 4.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE SEE THAT THE AVE RMENT OF THE LD. AR IS CORRECT INASMUCH AS THE ISSUES REGARDING REMUNERATION AND INTEREST PAID TO PARTNERS ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 5087/DEL/2014 FOR ASSESSMENT YEAR 2010-11. THE RELEVANT OBSERVATIONS AND FINDINGS OF THE TRIBUNAL ARE CONTAINED IN PARAGRAPHS 2,3, 4 & 5 OF THE AFORESAID ORDER AND THE SAME ARE REPRODUCED HERE IN UNDER FOR A READY REFERENCE:- 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS DISALLOWED REMUNERATION PAID TO THE PARTNERS IN THE GROUNDS THAT THE PARTNERSHIP DEED DOES NOT SPECIFY THE AMOUNT OF THE REMUNERATION PAYABLE TO EACH WORKING PARTNER OR LAYS DOWN THE MANNER OF QUANTIFY SUCH REMUNERATION. THE ASSESSING OFFICER HELD THAT THE ITA NO. 4993/DEL/2015 ASSESSMENT YEAR 2011-12 3 PARTNERSHIP DEED OF THE ASSESSEE HAS NOT DEFINED TH E CONDITIONS REQUIRED FOR ALLOWING THE REMUNERATION P AID TO THE PARTNERS U/S 40(B)(V). THE ID. C1T(A) CONFIRMED THE ADDITION ON THE GROUNDS THAT THE MATTER IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SOOD BRIJ & ASSOCIATES VS. CIT, NEW DELHI 2011 , 15 TAXMAN. COM 76 (DELHI). 3. BEFORE US THE LD. AR SUBMITTED THAT THE PARTNER SHIP DEED VIDE PARA NO. 7 CLEARLY MENTIONS THAT IT HAS BEEN MUTUALLY DECIDED THAT PARTY OF THE FIRST PART AND T HIRD PART SHALL BE THE WORKING PARTNERS AND WILL BE PAID FOR RENDERING SERVICES TO THE FIRM. IT HAS BEEN MUTUALL Y DECIDED TO PAY WORKING ALLOWANCES OF RS. 1,00,000/- PER MONTH EACH HOWEVER, THE PARTIES MAY MUTUALLY VARY T HE AMOUNT OF WORKING ALLOWANCE DEPENDING UPON PROFITS OF THE BUSINESS. THE LD. AR FURTHER SUBMITTED THAT TH E PAYMENT WAS MADE AT THE RATE OF 40,000/- PER MONTH TO EACH PARTNER WHICH IS BELOW THE TERMS OF THE PARTNE RSHIP DEED AND HENCE THE DISALLOWANCE MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) WAS WRONG ON FACTS. 4. WE HAVE GONE THROUGH THE PARTNERSHIP DEED AND FOUND THAT THE AMOUNT OF REMUNERATION PAYABLE AND ALSO MA NNER OF QUANTIFICATION OF SUCH REMUNERATION HAS BEEN CLE ARLY MENTIONED IN THE PARTNERSHIP DEED. HENCE THE FINDIN G OF THE LD. CIT(A) THAT THE PARTNERSHIP DEED DOES NOT M ENTION THE EXTENT OF REMUNERATION AND ALSO THE RELIANCE ON THE CASE OF SOOD BRIJ ASSOCIATES WHICH IS ON A DIFFEREN T SET OF FACTS CANNOT BE ACCEPTED AS TH6 CASE DEALT WITH THE SUPPLEMENTARY PARTNERSHIP DEED WHERE THE REMUNERATI ON WAS NOT QUANTIFIED, WHOSE FACTS OR IN CONTRARY TO T HE FACTS ARE IN THE INSTANT CASE WHEREIN THE REMUNERATION AN D THE MANNER OF QUANTIFICATION HAS BEEN CLEARLY DETERMINE D IN THE PARTNERSHIP DEED. HENCE THE APPEAL OF THE ASSE SSEE ON THIS GROUND IS ALLOWED. 5. REGARDING THE GROUND NO. 2 PERTAINING TO THE INTER EST OF RS. 4,50,000/-, IT IS OBSERVED THAT TERMS OF INTERE ST PAYMENTS WERE ALSO MENTIONED IN THE PARTNERSHIP DEE D. THE ASSESSEE HAS PAID INTEREST @ 9% TO THE PARTNERS WHICH IS IN CONSONANCE WITH THE TERMS OF THE PARTNERSHIP DEED. ITA NO. 4993/DEL/2015 ASSESSMENT YEAR 2011-12 4 HENCE THE AMOUNT OF INTEREST CLAIMED BY THE ASSESSE E IS HEREBY ALLOWED. 4.1 THUS, AS THE LD. SR. DR COULD NOT POINT OUT ANY CHANGE IN FACTS DURING THE YEAR UNDER CONSIDERATION AS COMPAR ED TO ASSESSMENT YEAR 2010-11, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE, WE ALLOW G ROUND NOS. 1.A, 1.B, 2.A AND 2.B OF THE ASSESSEES APPEAL. 4.2 APART FROM THIS, THE ASSESSEE IS ALSO CHALLENGI NG 10% DISALLOWANCE SUSTAINED BY THE LD. COMMISSIONER OF I NCOME TAX (A) OUT OF TELEPHONE EXPENSES AND A FURTHER DISALLO WANCE OF RS. 53,163/- BEING 10% OUT OF TRAVELLING, PETROL AND CO NVEYANCE EXPENSES AND DISALLOWANCE OF RS. 75,000/- OUT OF DI WALI AND SALES PROMOTION EXPENSES. DURING THE COURSE OF HEAR ING, THE LD. AR HAS FAIRLY CONCEDED AND HAS NOT PRESSED THE MATT ER FURTHER. THEREFORE, THESE ISSUES DO NOT CALL FOR ANY INTERFE RENCE FROM US AND ACCORDINGLY GROUND NOS. 3.A, 3.B, 4.A, 4.B, 5.A AND 5.B STAND DISMISSED. 4.3 GROUND NO. 6 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SEPARATE ADJUDICATION. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED. ITA NO. 4993/DEL/2015 ASSESSMENT YEAR 2011-12 5 ORDER PRONOUNCED IN THE OPEN COURT ON 16.01.2019. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTA VA) VICE PRESIDENT JUDICIAL MEMBER DATED: 16 TH JANUARY, 2019 GS COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER