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

ITA 5087/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6753 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 15-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: SHAILENDRA KR BAJAJ

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 5087/DEL./2014 ASSESSMENT YEAR: 2010-11 BEC INDUSTRIES C-108, MAYAPURI INDL. AREA, PHASE-2 NEW DELHI PAN : AAFB4450B (APPELLANT) VS. JCIT RANGE-39 NEW DELHI (RESPONDENT) REVENUE BY SH. S.L.ANURAGI, SR. DR ASSESSEE BY SHAILENDRA KR. BAJAJ, CA ORDER PER B.R.R.KUMAR, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 19/06/2014 OF CIT (A)-XXVIII, NEW DELHI FOR ASSESSMENT YEAR 2010-11 FOLLOWING THE GROUNDS OF AP PEAL :- 1. THAT THE LD. CIT (A) HAS ERRED BOTH IN FACTS AND IN LAW WHILE SUSTAINING THE DISALLOWANCE OF WORKING ALLOWANCE OF RS. 9,60,000/- PAID TO THE PARTNERS BY HOLDING THAT IT IS NOT IN A CCORDANCE WITH SECTION 40(B)(V). 2. THAT THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW WHILE SUSTAINING THE DISALLOWANCE OF INTEREST OF RS. 4,50 ,000/- PAID TO THE PARTNERS BY HOLDING THAT IT IS NOT IN ACCORDANCE WI TH SECTION 40(B)(IV). 3. THAT THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW WHILE SUSTAINING THE DISALLOWANCE OF RS. 39,936/- BEING 1 0% OF TELEPHONE EXPENSES ON ESTIMATE BASIS . 4. THAT THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW WHILE DATE OF HEARING 1 8 .0 4 .201 8 DATE OF PRONOUNCEMENT 04 .0 7 .201 8 ITA NO.5087/DEL./2014 2 SUSTAINING THE DISALLOWANCE OF RS. 53,163/- BEING 1 0% OF TRAVELLING, PETROL AND CONVEYANCE EXPENSES ON ESTIMATE BASIS . 5A. THAT THE LD. CIT(A) HAS ERRED BOTH IN FACTS AND IN LAW WHILE SUSTAINING THE DISALLOWANCE OF RS. 75,000/- ,ON EST IMATE BASIS, OUT OF DIWALI AND SALES PROMOTION EXPENSES ON ESTIMATE BAS IS . 5B.THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT DI WALI EXPENSES AND SALES PROMOTION EXPENSES INCURRED WERE WHOLLY AND E XCLUSIVELY FOR BUSINESS PURPOSES. 6. THAT THE ORDER OF THE CIT(A) IS BAD IN LAW AND AGAI NST THE FACTS OF THE CASE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER 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 LAY S DOWN THE MANNER OF QUANTIFY SUCH REMUNERATION. THE ASSESSING OFFICER HELD THAT THE PARTNERSHIP DEED OF THE ASSESSEE HAS NOT D EFINED THE CONDITIONS REQUIRED FOR ALLOWING THE REMUNERATION PA ID TO THE PARTNERS U/S 40(B)(V). THE LD. CIT(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 PARTNERS HIP DEED VIDE PARA NO. 7 CLEARLY MENTIONS THAT IT HAS BEEN MUTU ALLY DECIDED THAT PARTY OF THE FIRST PART AND THIRD PART SHALL BE THE WORKING PARTNERS AND WILL BE PAID FOR RENDERING SERVICES TO THE FIRM. IT HAS BEEN MUTUALLY DECIDED TO PAY WORKING ALLOWANCES OF RS. 1,0 0,000/- PER MONTH EACH HOWEVER, THE PARTIES MAY MUTUALLY VARY T HE AMOUNT OF WORKING ALLOWANCE DEPENDING UPON PROFITS OF THE BUSIN ESS. THE LD. AR FURTHER SUBMITTED THAT THE PAYMENT WAS MADE AT TH E RATE OF 40,000/- PER MONTH TO EACH PARTNER WHICH IS BELOW TH E TERMS OF THE ITA NO.5087/DEL./2014 3 PARTNERSHIP 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 FO UND THAT THE AMOUNT OF REMUNERATION PAYABLE AND ALSO MANNER OF QUANTIFICATION OF SUCH REMUNERATION HAS BEEN CLEARL Y MENTIONED IN THE PARTNERSHIP DEED. HENCE THE FINDING OF THE LD. CIT(A) THAT THE PARTNERSHIP DEED DOES NOT MENTION THE EXTENT OF REM UNERATION AND ALSO THE RELIANCE ON THE CASE OF SOOD BRIJ ASSOCIAT ES WHICH IS ON A DIFFERENT SET OF FACTS CANNOT BE ACCEPTED AS THE CA SE DEALT WITH THE SUPPLEMENTARY PARTNERSHIP DEED WHERE THE REMUNERATI ON WAS NOT QUANTIFIED, WHOSE FACTS OR IN CONTRARY TO THE FACTS ARE IN THE INSTANT CASE WHEREIN THE REMUNERATION AND THE MANNER OF QUAN TIFICATION HAS BEEN CLEARLY DETERMINED IN THE PARTNERSHIP DEED . HENCE THE APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. 5. REGARDING THE GROUND NO. 2 PERTAINING TO THE INTERE ST OF RS. 4,50,000/-, IT IS OBSERVED THAT TERMS OF INTEREST P AYMENTS WERE ALSO MENTIONED IN THE PARTNERSHIP DEED. THE ASSESSEE HAS PAID INTEREST @ 9% TO THE PARTNERS WHICH IS IN CONSONANCE WITH THE TERMS OF THE PARTNERSHIP DEED. HENCE THE AMOUNT OF INTEREST CLAI MED BY THE ASSESSEE IS HEREBY ALLOWED. 6. THE APPEAL OF THE ASSESSEE ON HIS GROUND IS ALLOWED 7. GROUND NO. 3, 4 RELATES TO DISALLOWANCE OF 10% O F EXPENSES ON ACCOUNT OF TELEPHONE AND TRAVELLING AND GROUND NO. 5 A RELATES TO DISALLOWANCE OF 75,000/- ON ACCOUNT OF DIWALI AND SAL ES EXPENSES. 8. DURING THE HEARING WHEN ASKED ABOUT THE AVAILABIL ITY OF THE COMPLETE DETAILS AND USE OF TELEPHONE AND TRAVELLIN G AND DIWALI EXPENSE PURELY FOR THE BUSINESS PURPOSES, THE LD. A R HAS FAIRLY ITA NO.5087/DEL./2014 4 CONCEDED AND NOT PRESSED THE MATTERS FURTHER. SINCE THE PERSONAL NATURE OF THESE EXPENSES CANNOT BE RULED OUT, WE H EREBY DECLINE TO INTERFERE IN THE DISALLOWANCES CONFIRMED BY THE LD. CIT(A). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.07.2018 SD/- SD/- (AMIT SHUKLA) (B.R.R.KUM AR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04.07.2018 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.5087/DEL./2014 5