Gadana Properties LLP., CHENNAI V. ITO, CHENNAI

ITA 711/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5803 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M PALANICHAMY
• Assessee Lawyers: D ANAND

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: CHENNAI , # , ' ( BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ ITA NO.711/MDS/2017 '# # /ASSESSMENT YEAR: 2012-13 M/S.GADANA PROPERTIES LLP., NO.24, DR.B.N.ROAD, T.NAGAR, CHENNAI-600 017. V S. THE INCOME TAX OFFICER, NON-CORPORATE WARD-1(2), CHENNAI-34. [PAN: AAJFG 3013 C ] ( * /APPELLANT) ( +,* /RESPONDENT) * - / APPELLANT BY : MR.D. ANAND, ADVOCATE +,* - /RESPONDENT BY : MR.M.PALANICHAMY, JCIT - /DATE OF HEARING : 14.11.2017 - /DATE OF PRONOUNCEMENT : 15.11.2017 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.711/MDS/2017 IS AN APPEAL FILED BY THE ASSE SSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2 , CHENNAI, IN ITA NO.23/CIT(A)-2/2015-16 DATED 20.01.2017 FOR THE AY 2012-13. 2. MR.M.PALANICHAMY, JCIT REPRESENTED ON BEHALF OF THE REVENUE AND MR.D.ANAND, ADVOCATE, REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.711/MDS/2017 :- 2 -: 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ASSESSEE IS A PARTNERSHIP FIRM UNDER LLP BEING THE LIMITED LIABILITY PARTNERS HIP. THE SAME WAS CONSTITUTED BY PARTNERSHIP DEED DATED 25.06.2010. IT WAS A SUBMISSION THAT A SUPPLEMENTARY PARTNERSHIP DEED AMENDING THE ORIGINAL LLP WAS CREATED ON 27.01.2011. IT WAS A SUBMISSION THAT HO WEVER, THE SAID SUPPLEMENTARY DEED WAS NOT REGISTERED. CONSEQUENTL Y, THE AO HAD DISALLOWED THE INTEREST PAID TO THE PARTNERS AND CO NSEQUENTLY REDUCED THE LOSS DISCLOSED. IT WAS A SUBMISSION THAT THE PARTN ERS OF THE ASSESSEES FIRM HAD DISCLOSED THE INTEREST IN THEIR RETURNS AN D HAD PAID TAXES THEREON. IT WAS A SUBMISSION THAT IN CIRCULAR NO.636 OF THE CBDT DATED 31.08.1992, PARA NOS.48.1 & 48.2 IN VIEW OF THE EXP LANATION WHICH HAD BEEN ADDED TO SEC.10(2A), THE REMUNERATION OF INTER EST WHICH IS DISALLOWED IN THE HANDS OF THE FIRM IS NOT TO SUFFE R TAX IN THE HANDS OF THE PARTNERS. IT WAS A PRAYER THAT THE AO MAY BE DIREC TED TO EXCLUDE THE INTEREST WHICH HAS BEEN OFFERED BY THE PARTNERS IN THEIR RESPECTIVE HANDS AND WHICH HAS BEEN DISALLOWED IN THE HANDS OF THE F IRM IN VIEW OF THE PROVISIONS OF SEC.155(1A). 4. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE LD.CIT(A) AND THE AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, IN THE HANDS OF THE FIRM, THE AO HAS DISALLOWED THE INTEREST PAI D TO THE PARTNERS TO THE EXTENT OF RS.28,68,361/-. THE AO HAS DISALLOWED TH IS AMOUNT IN VIEW OF ITA NO.711/MDS/2017 :- 3 -: THE PROVISIONS OF SEC.40(B)(II) ON THE GROUND THAT THE SAME IS NOT AUTHORIZED BY THE PARTNERSHIP DEED OR ANY OF THE SU PPLEMENTARY DEEDS WHICH IS REGISTERED. THIS HAS ALSO BEEN APPROVED B Y THE LD.CIT(A). THE ASSESSEE HAS BEEN UNABLE TO SHOW BEFORE US THAT THE SUPPLEMENTARY AGREEMENT DATED 25.01.2011 IS A REGISTERED AGREEMEN T. THIS BEING SO, WE FIND NO ERROR IN THE FINDINGS OF THE LD.CIT(A) ON T HIS ISSUE. HOWEVER, IN VIEW OF THE CIRCULAR ISSUED BY THE CBDT IN CIRCULAR NO.636 DATED 31.08.1992 CLEARLY SHOWS THAT IF ANY INTEREST OR RE MUNERATION PAID TO THE PARTNERS IS DISALLOWED IN THE HANDS OF THE FIRM OR THE AMOUNT IS VARIED IN THE SUBSEQUENT PROCEEDINGS, THE PARTNERS ASSESSMEN T IS TO BE RECTIFIED IN VIEW OF THE PROVISIONS OF SEC.155(1A). THE LD.AR H AS SUBMITTED BEFORE US THAT THIS HAS NOT BEEN DONE IN THE CASE OF THE PART NERS OF THE ASSESSEES FIRM. IN THESE CIRCUMSTANCES, THE AO HAS TO VERIFY AS TO WHETHER THE PARTNERS ASSESSMENT HAVE BEEN RECTIFIED AS PER THE PROVISIONS OF SEC.155(1A) AND IF IT HAS NOT BEEN DONE, AS THE DIS ALLOWANCE OF THE INTEREST PAID TO THE PARTNERS HAVE BEEN DISALLOWED IN THE HANDS OF THE FIRM AND THE SAME HAS BEEN CONFIRMED BY THIS TRIBUNAL IN THE EARLIER PARAGRAPHS, THE AO HAS TO RECTIFY THE ASSESSMENT IN THE CASE OF THE PARTNERS GRANTING APPROPRIATE RELIEF IN APPROPRIATE PROCEEDINGS, FOR WHICH THE CONCERNED PARTNER/S SHALL MOVE THE AO. IN THES E CIRCUMSTANCES, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.711/MDS/2017 :- 4 -: 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 15, 2017, AT CHENNAI. SD/- SD/- ( ) ( SANJAY ARORA ) /ACCOUNTANT MEMBER ( # ) (GEORGE MATHAN) ' /JUDICIAL MEMBER /CHENNAI, 3 /DATED: NOVEMBER 15, 2017. TLN - +'45 65 /COPY TO: 1. * /APPELLANT 4. 7 /CIT 2. +,* /RESPONDENT 5. 5 +'' /DR 3. 7 ( ) /CIT(A) 6. # /GF