The ACIT, Bhopal V. M/s. Agarwal Jewellers, Bhopal

ITA 508/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2843 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 03-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: R N GUPTA
• Keywords: Business expenditure

Judgement Text

PAGE 1 OF 4 -. I.T.A.NO. 508/IND/2009 M/S.AGARWAL JEWLLERS, BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAFFA7758N I.T.A.NO. 508/IND/2009 A.Y. : 2004-05 ACIT, M/S.AGARWAL JEWELLERS 2(1), VS JAWAHAR BHAWAN, TT NAGAR, BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SMT.APARNA KARAN, CIT DR RESPONDENT BY : SHRI R.N. GUPTA, CA. DATE OF HEARING : 26.05.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I, BHOPAL , DATED 19.01.2009, FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 READS AS UNDER :- ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 16 ,72,318/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE INT EREST PAGE 2 OF 4 -. I.T.A.NO. 508/IND/2009 M/S.AGARWAL JEWLLERS, BHOPAL. WHICH WAS PAID TO THE PERSONS WHO WERE NOT PARTNERS AS PER THE PARTNERSHIP DEED DATED 21.3.1996 AND, THUS, WAS BEYOND THE PURVIEW OF THE PARTNERSHIP DEED ? 4. THE FACTS, IN BRIEF, ARE THAT THERE WERE FUNDS OF S HRI RAJ MOHAN AGARWAL AND SHRI SHASHI MOHAN AGRAWAL, HUF WITH THE ASSESSEE FIRM AND THE ASSESSEE FIRM PAID INTEREST THEREON @ 12 %. THE AO HELD THAT THE INDIVIDUAL PERSONS WERE THE PARTNERS. HENCE, THE IN TEREST PAID ON FUNDS BORROWED FROM HUF WAS NOT ALLOWABLE. AGGRIEVED BY T HIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO HELD THAT THERE WAS NO DISPUTE AS REGARD TO UTILIZATION OF SUCH FUNDS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE FIRM. HENCE, THE INTEREST ON SUCH FUND WAS ALLOWABLE U/S 36(1)((III)/37 OF THE INCOME-TAX ACT, 1961. ACCORDI NGLY, HE DELETED THE IMPUGNED ADDITION. AGGRIEVED BY THIS, THE REVENUE I S IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. SR. DR RELIED ON THE ORDER OF THE A.O., WHEREAS THE LD. COUNSEL FOR THE ASSESS EE RELIED ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 7. IT IS NOTED THAT THE IMPUGNED FUNDS HAVE BEEN BORRO WED FORM THE HUF OF INDIVIDUAL PARTNERS AND THE UTILIZATION OF SUCH FUNDS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE FIRM IS NOT IN DISPUTE. HENCE, SUCH PAGE 3 OF 4 -. I.T.A.NO. 508/IND/2009 M/S.AGARWAL JEWLLERS, BHOPAL. INTEREST IS ALLOWABLE AS BUSINESS EXPENDITURE. ACCO RDINGLY, WE CONFIRM THE FINDINGS OF THE LD. CIT(A). HENCE, THIS GROUND OF THE REVENUE IS DISMISSED. 8. GROUND NO.2 READS AS UNDER :- ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 13 ,64,350/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE DISALLOWANCE OF SHARE IN PROFIT PAID TO THE PERSONS WHO WERE NOT PARTNERS AS PER THE PARTNERSHIP DEED DATED 21.3 .1996 AND, THUS, WAS BEYOND THE PURVIEW OF THE PARTNERSHIP DEE D ? 9. THE FACTS, IN BRIEF, ARE THAT THE ULTIMATE FACT AS ACCEPTED BY BOTH THE PARTIES IS THAT THE ASSESSEE FIRM DID NOT CLAIM ANY DEDUCTION ON ACCOUNT OF SHARE OF PROFITS CREDITED TO THE PARTNER S ACCOUNT. HENCE, IN OUR VIEW, THERE CANNOT BE ANY DISALLOWANCE OF THE SAME. ACCORDINGLY, WE CONFIRM THE FINDINGS OF THE LD. CIT(A)IN THIS REGAR D. THUS, THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. PAGE 4 OF 4 -. I.T.A.NO. 508/IND/2009 M/S.AGARWAL JEWLLERS, BHOPAL. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH MAY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :28 TH MAY, 2010. CPU* 265