R J Industrial Corporation, Roorkee V. DCIT, Haridwar Range, Haridwar

ITA 5816/DEL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1354 (ITAT-DEHRADUN)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 07-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HEMANT ARORA
• Keywords: Business income
• Section: 143(3); 40(b)

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES, NEW DELHI (CIRCUIT BENCH AT DEHRADUN ) BEFORE SHRI SUDHANSHU SRIVASTAVA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5816 /DEL/2018 (ASSESSMENT YEAR: 2013 - 14 ) RJ INDUSTRIAL CORPORATION, C/O. HEMANT ARORA & CO LLP, 354 - B, 30 - CIVIL LINES, ROORKEE, UTTARAKHAND PAN: AABFR8502P VS. DCIT, HARIDWAR RANGE, HARIDWAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HEMANT ARORA, CA REVENUE BY: SHRI BHOPAL SINGH, JCIT DATE OF HEARING 28/02 / 2020 DATE OF PRONOUNCEMENT 1 3 / 05 / 2020 O R D E R PER PRASHANT MAHARISHI , A. M. 1 . THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A), DEHRADUN DATED 19.06.2018. THE ASSESSEE IS CHALLENGING THE DISALLOWANCE OF COMMISSION PAID TO THE PARTNER OF RS. 578326/ - . 2 . THE FACTS OF THE CASE SHOW THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF WIRES AND CAB LES. IT FILED ITS RETURN OF INCOME ON 30.09.2013 AT RS. 3011180/ - . THE LD AO FOUND THAT THE ASSESSEE HAS DEBITED COMMISSION OF RS. 578326/ - TO ONE OF THE WORKING PARTNER SHRI PIYUSH JINDAL . THE LD AO QUESTIONED THE ASSESSEE. A SSESSEE SUBMITTED THAT COMMISS ION @ 0 .5% OF THE TURNOVER IS SUPPORTED BY SUPPLEMENTARY PARTNERSHIP DEED DATED 01.04.2010. THE LD AO HELD THAT THE SUPPLEMENTARY DEED WHEN COMPARED WITH THE ORIGINAL PARTNERSHIP DEED DATED 01.04.2008; THERE WERE NO PROVISION OF PAYMENT OF THE COMMISSION TO THE PARTNERS IN ORIGINAL PARTNERSHIP DEED . HE FURTHER REFERRED ASSESSMENT AND APPELLATE PROCEEDINGS FOR ASSESSMENT YEAR PAGE | 2 2011 - 12 , WHERE IDENTICAL ISSUE AROSE AND LDCIT ( A) CONFIRMED THE DISALLOWANCE OF THE PAYMENT OF COMMISSION ON THE GROUND THAT SUCH COMMISSION PAYMENT WAS NOT AUTHORIZED BY THE ORIGINAL PARTNERSHIP DEED. THE SUPPLEMENTARY PARTNERSHIP DEED WAS NOT ACCEPTED. ACCORDINGLY, FOR THIS YEAR ALSO DISALLOWANCE OF RS. 578326/ - WAS MADE AND TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 35895 06/ - AS PER ORDER DATED 08.03.2016 U/S 143(3) OF THE ACT. 3 . THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT ( A) WHO ON THE BASIS OF ORDER OF HIS PREDECESSOR CONFIRMED THE ADDITION; THEREFORE, ASSESSEE IS IN APPEAL BEFORE US. 4 . THE LD AR SHRI HEMANT ARORA, CHAR TERED ACCOUNTANT SUBMITTED THAT THE COMMISSION PAYMENT IS SUPPORTED BY THE PARTNERSHIP DEED IN THE FORM OF SUPPLEMENTARY PARTNERSHIP DEED AUTHORIZING THE PAYMENT OF COMMISSION TO THE PARTNERS AND HENCE IT COMPLIES WITH PROVISION OF SECTION 40(B) OF THE INCOME TAX ACT, 1961 . HE THEREFORE SUBMITTED THAT DISALLOWANCE DESERVES TO BE DELETED. 5 . THE LD DR VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. BOTH THE PARTIES DID NOT REPLY TO THE QUERY WHETHER THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD CIT ( A) FOR EARLIER YEARS BEFORETHE COORDINATE BE NCH OR NOT. THEREFORE, IN ABSENCE OF THIS WE DECIDE THE ISSUE ON THE MERITS OF THE CASE AVAILABLE BEFORE US. 7 . ADMITTEDLY THE ASSESSEE HAS PAID COMMISSION TO THE WORKING PARTNER WHICH IS SUPPORTED BY SUPPLEMENTARY PARTNERSHIP DEED. THE RATE OF COMMISSION, N AME OF THE PARTNER AND MANNER IN WHICH COMMISSION WOULD BE WORKED ARE ADMITTEDLY AGREED IN THE SUPPLEMENTARY PARTNERSHIP DEED. ADMITTEDLY ALSO ORIGINAL PARTNERSHIP DEED DID NOT HAVE ANY AUTHORIZATION FOR PAYMENT OF COMMISSION. LOWER AUTHORITIES DISALLOW ED THE SAME MERELY BECAUSE OF THE FACT THAT ORIGINAL PARTNERSHIP DEED DID NOT HAVE ANY SUCH AUTHORIZATION FOR PAYMENT OF COMMISSION TO SHRI PIYUSH JINDAL. HOWEVER IT IS ALSO ACCEPTED BY THE REVENUE THAT CLAUSE 7 AMENDED W.E.F. 01.04.2010 BY WAY OF SUPPLEME NTARY DEED ALLOWED THE PAYMENT OF COMMISSION TO THE PARTNERS @ 0.5% OF THE TOTAL SALES. THE REVENUE ALSO PAGE | 3 CONTENDED THAT THE SAID SUPPLEMENTARY PARTNERSHIP DEED IS A N AFTERTHOUGHT . ACCORDING TO THE PROVISION OF SECTION 40(B) OF THE ACT FOR PAYMENT OF SALARY , BONUS, COMMISSION OF REMUNERATION , BY WHATEVER NAME CALLED , IF PAID TO A WORKING PARTNER , AUTHORIZED AND IS IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED , SHALL NOT BE DIS ALLOWED , SUBJECT TO CERTAIN OUTER LIMITS. IN THE PRESENT CASE IT IS NOT THE C ASE OF THE REVENUE THAT PAYMENT OF COMMISSION IS ALLOWED BEYOND SPECIFIC MONETARY LIMIT. IT IS ALSO THE FACT ASSESSEE HAS EXECUTED A SUPPLEMENTARY DEED WHICH AUTHORIZED THE PAYMENT OF COMMISSION TO THE PARTNER. COMMISSION PAID IS ALSO @0.5% OF THE TOTAL SALES IN ACCORDANCE WITH THE PARTNERSHIP DEED. IT IS ACCEPTED THAT MR . PIYUSH JINDAL, PARTNER WAS A WORKING PARTNER . P ROVISION OF THE INCOME TAX ACT NOWHERE PROHIBITS THE ASSESSEE IN AMENDING THE ORIGINAL PARTNERSHIP DEED BY THE SUPPLEMENTARY PARTNERSHIP D EED , AMENDING OR MODIFYING CERTAIN CLAUSES OF THE PARTNERSHIP DEEDS. THE MERE ALLEGATION OF THE LD AO FOR SUPPLEMENTARY PARTNERSHIP DEED IS A N AFTERTHOUGHT AND HENCE ABOVE SUM IS DISALLOWED IS DEVOID OF MERITS AND IS NOT IN ACCORDANCE WITH THE LAW. THE ORDER OF THE LD CIT ( A) FOLLOWING THE DECISION OF THE PREDECESSOR FOR AY 2011 - 12 ALSO CANNOT BE UPHELD AS IT IS NOT IN ACCORDANCE WITH THE LAW. IN VIEW OF THE PAYMENT OF COMMISSION TO A WORKING PARTNER WHICH IS DULY AUTHORIZED BY AND IN ACCORDANCE WITH THE PARTNERSHIP DEED FOR THE FINANCIAL YEAR, IT IS ALLOWABLE. ACCORDINGLY, SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED , ORDER OF THE LD CIT (A) IS REVERSED, THE LD AO IS DIRECTED TO DELETE THE DISALLO WANCE OF COMMISSION PAID TO PARTNER OF RS. 578346/ - . 8 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 / 05 / 2020 . - SD/ - - SD/ - ( SUDHANSHU SRIVASTAVA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 05 / 2020 A K KEOT COPY FORWARDED TO 1 . APPLICANT PAGE | 4 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI