The DCIT, Circle-3(3), Surat V. Shri Babubhai Shambubhai Sakaria, Surat

ITA 668/AHD/2017

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1899 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS R KAVITHA
• Assessee Lawyers: SHRIKUSHALGHEEWALA
• Keywords: Earning of tax free income; Tax effect; Set aside

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.668/AHD/2017/SRT [ [ / ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(3), SURAT. VS. SHRIBABUBHAISHAMBHUBHAISAKARIA, 27, SAVANI DIAMOND INDUSTRIAL ESTATE, B/H. GITANJALI CINEMA, VARACHHA ROAD, SURAT 395 006. [PAN: ADAPS 5946E] ( / APPELLANT) ( /RESPONDENT) . / ITA NO.669/AHD/2017/SRT [ [ / ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(3), SURAT. VS. SHRICHHAGANBHAITIDABHAISAKARIA, 26, SAVANI DIAMOND INDUSTRIAL ESTATE, B/H. GITANJALI CINEMA, VARACHHA ROAD, SURAT 395 006. [PAN: ADAPS 5947F] ( / APPELLANT) ( /RESPONDENT) / ASSESSEE BY : SHRIKUSHALGHEEWALA, C.A /DEPARTMENT BY : MRS. R. KAVITHA, SR. D.R /DATE OF HEARING : 09-03-2018 /DATE OF PRONOUNCEMENT : 20-03-2018 2 ITA NOS.668 & 669 /AHD/2017/SRT (A.Y: 2010-11) SHRIBABUBHAISHAMBHUBHAISAKARIA&SHRICHHAGANBHAITIDABHAISAKARIA / ORDER PERC.M.GARG, JUDICIAL MEMBER : THESE TWO APPEALSHAVE BEEN FILED BY THE REVENUE CHALLENGING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3,SURAT (CIT(A) FOR SHORT) DATED 16.12.2016 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: IN ITA.NO.668/AHD/2017/SRT : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 6,11,108/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE OF SHARE OF PROFIT FROM FIRM CLAIMED AS EXEMPT U/S. 10(2A) OF THE ACT BY THE ASSESSEE AND AS PER COMPUTATION OF PROFIT OF FIRM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE IMPUGNED ADDITION IN VIEW OF CBDTS CIRCULAR NO.8/2014 DATED 31.03.2015. 3. THE RATIO OF CIRCULAR RELIED UPON BY THE LD. CIT(A) IS NOT APPLICABLE IN THIS CASE AS THE FIRM HAS NOT CLAIMED ANY EXEMPTION/DEDUCTION AS ENVISAGED IN THE CIRCULAR. 4. EVEN THOUGH TAX EFFECT INVOLVED IN THIS CASE IS BELOW THE PRESCRIBED LIMIT FOR FILING APPEAL BEFORE HON'BLE ITAT, APPEAL IS FILED AS CASE FALLS IN EXCEPTIONAL CRITERIA MENTIONED IN PARA 8(C) OF CIRCULAR NO.21/2015 DATED 10.12.2015. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) SURAT MAY BE SET ASIDE TO THAT EXTENT AND THAT OF THE AOS MAY BE RESTORED THAT EXTENT. IN ITA.NO.669/AHD/2017/SRT : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 4,88,886/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE OF SHARE OF PROFIT FROM FIRM CLAIMED AS EXEMPT U/S. 10(2A) OF THE ACT BY THE ASSESSEE AND AS PER COMPUTATION OF PROFIT OF FIRM. 3 ITA NOS.668 & 669 /AHD/2017/SRT (A.Y: 2010-11) SHRIBABUBHAISHAMBHUBHAISAKARIA&SHRICHHAGANBHAITIDABHAISAKARIA 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE IMPUGNED ADDITION IN VIEW OF CBDTS CIRCULAR NO.8/2014 DATED 31.03.2015. 3. THE RATIO OF CIRCULAR RELIED UPON BY THE LD. CIT(A) IS NOT APPLICABLE IN THIS CASE AS THE FIRM HAS NOT CLAIMED ANY EXEMPTION/DEDUCTION AS ENVISAGED IN THE CIRCULAR. 4. EVEN THOUGH TAX EFFECT INVOLVED IN THIS CASE IS BELOW THE PRESCRIBED LIMIT FOR FILING APPEAL BEFORE HON'BLE ITAT, APPEAL IS FILED AS CASE FALLS IN EXCEPTIONAL CRITERIA MENTIONED IN PARA 8(C) OF CIRCULAR NO.21/2015 DATED 10.12.2015. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) SURAT MAY BE SET ASIDE TO THAT EXTENT AND THAT OF THE AOS MAY BE RESTORED THAT EXTENT. 3. BOTH THE PARTIES AGREED TO THE FACTS AND CIRCUMSTANCES OF BOTH APPEALS ARE QUITE IDENTICAL AND SIMILAR. FOR THE SAKE OF ADJUDICATION, WE ARE TAKING UP ITA NO.668/AHD/2017 AS LEAD CASE. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTING THE ASSESSMENT ORDER SUBMITTED THAT THE PARTNERSHIP FIRM, IN WHICH THE ASSESSEE WAS THE PARTNER, HAS CREDITED SHARE PROFIT OF RS. 14,83,797/- TO THE PARTNERS ACCOUNT IN THE FIRM HOWEVER, THE PARTNER HAS CREDITED SHARE OF PROFIT OF RS. 20,94,905/- TO HIS CAPITAL ACCOUNT. ACCORDING TO THE CIRCULAR NO.8/2014, THE ASSESSEE COULD HAVE CLAIMED EXEMPT INCOME OF RS. 14,83,797/- AS PARTNERSHIP FIRM HAS CREDITED SAID AMOUNT TO THE ASSESSEES ACCOUNT IN THE FIRM. THUS, THIS CONTENTION OF THEASSESSE IS ALSO NOT ACCEPTABLE. THEREFORE, THE ASSESSING OFFICER (AO) WAS RIGHT IN MAKING ADDITION AND THE CIT(A) HAS DELETED THE SAME WITHOUT 4 ITA NOS.668 & 669 /AHD/2017/SRT (A.Y: 2010-11) SHRIBABUBHAISHAMBHUBHAISAKARIA&SHRICHHAGANBHAITIDABHAISAKARIA ANY BASIS THEREFORE, FIRST APPELLATE ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 5. REPLYING TO THE ABOVE, THE LD. ASSESSEESREPRESENTATIVE (AR) DREW OUR ATTENTION TOWARDS PARA 7 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT AS PER RATION OF DECISION OF HONBLEKARNATATAHIGH COURT IN THE CASE OF VIDYA INVESTMENT & TRADING CO. (P) LTD. VS. UNION OF INDIA REPORTED IN 367 ITR 33 (KARNATAKA) THAT THE ENTIRE SHARE OF INCOME CREDITED TO THE PARTNERS ACCOUNT IS EXEMPT U/S. 10(2A) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT AS PER S. 10(2A) OF THE ACT THE ENTIRE SHARE OF PROFIT OF THE FIRM CREDITED TO THE PARTNERS ACCOUNT IS EXEMPT IN THE HANDS OF PARTNER AND AS PER RATIO OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF VIDYA INVESTMENT & TRADING CO. (P) LTD. (SUPRA) THE HONBLE HIGH COURT HAS RENDERED A PROPOSITION THAT THE ENTIRE SHARE OF INCOME CREDITED TO PARTNERS ACCOUNT IS EXEMPT U/S. 10(2A) OF THE ACT. THE LD. DR COULD NOT SHOW ANY CONTRADICT DECISION OR LEGAL POSITION WHICH IS EMERGING FROM THE ABOVE NOTED DISCUSSION. AS PER CBDT CIRCULAR NO.8/2014 DATED 31.03.2014 IT HAS BEEN CLARIFIED THAT THE ENTIRE PROFIT CREDITED IN THE PARTNERS ACCOUNT IN THE FIRM WOULD BE EXEMPT FROM TAX IN THE HANDS OF SUCH PARTNERS, EVEN IF THE INCOME CHARGEABLE TO TAX BECOMES NIL IN THE HANDS OF FIRM ON ACCOUNT OF ANY EXEMPTION OR DEDUCTION AS PER PROVISIONS OF THE ACT. 5 ITA NOS.668 & 669 /AHD/2017/SRT (A.Y: 2010-11) SHRIBABUBHAISHAMBHUBHAISAKARIA&SHRICHHAGANBHAITIDABHAISAKARIA 7. IN THE PRESENT CASE, AS PER COPY OF THE COMPUTATION OF INCOME FILED BY THE D MILAN EXPORT, WHEREIN THE ASSESSEE WAS A PARTNER, ALONG WITH RETURN FOR AY 2010-11 PLACED AT PAGES 35-38 OF THE ASSESSEES PAPER BOOK IT IS CLEAR THAT THE TOTAL AMOUNT OF RS.20,83,797/- HAS BEEN CREDITED AND ALLOCATED TO PRESENT ASSESSEE I.E., SHRIBABUBHAI S. SAKARIA WHICH INCLUDESREMUNERATION AND PROFIT BOTH. BUT THE AO ALLOWED EXEMPTION REGARDING PROFIT SHARE BUT MADE DISALLOWANCE OF REMAINING AMOUNT WHICH WAS REMUNERATION TO THE PARTNER. AT THIS JUNCTURE, WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. AR THAT GIVING REMUNERATION ETC., IS A METHOD OF ALLOCATION PROFITS OF A FIRM WHICH CERTAINLY FALLS WITHIN THE AMBIT OF PROFITS ATTRIBUTED OR ALLOCATED TO THE PARTNERS AS AGREED BETWEEN THE PARTNERS. THEREFORE, WE ARE INCLINED TO HOLD THAT THE AO IN MAKING ADDITION ON THE BASIS OF HYPER TECHNICAL APPROACH AND THE LD. CIT(A) WAS RIGHT IN ALLOWING THE CLAIM OF ASSESSEE BY FOLLOWING RATIO OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT (SUPRA) AND AS PER LETTERS AND SOUL OF PROVISION OF S. 10(2A) OF THE ACT. IN THIS SITUATION, WE ARE UNABLE TO ANY VALID REASON TO INTERFERE WITH THE CONCLUSION DRAWN BY THE LD. FIRST APPELLATE AUTHORITY AND HENCE WE UPHOLD THE SAME. ACCORDINGLY, GROUNDS OF REVENUE BEING DEVOID OF MERITS AND ARE DISMISSED. 8. OUR CONCLUSION DRAWN FOR ITA NO.668/AHD/2017/SRT WOULD APPLY MUTATIS MUTANDIS TO THE OTHER APPEAL I.E., ITA NO.669/AHD/2017/SRT HAVING 6 ITA NOS.668 & 669 /AHD/2017/SRT (A.Y: 2010-11) SHRIBABUBHAISHAMBHUBHAISAKARIA&SHRICHHAGANBHAITIDABHAISAKARIA IDENTICAL FACTS AND CIRCUMSTANCES AND THUS GROUNDS OF REVENUE THEREIN ARE ALSO DISMISSED. 9. IN THE RESULT,BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20 TH MARCH, 2018. / SURAT ; DATED :20 TH MARCH, 2018 EDN / COPY OF THE ORDER IS FORWARDED TO : / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR , / ITAT, SURAT SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) / JUDICIAL MEMBER 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)03, SURAT; 4. THE PRL. CIT-III, SURAT 5. , , / DR, ITAT, SURAT; 6. [ / GUARD FILE.