ASST CIT CIR 3, KALYAN V. SAGAR SAI ENTERPRISES, DOMBIVALI

ITA 7671/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8475 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: SANJIV G BRAHME
• Keywords: Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E,MUM BAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7671/MUM/2014 (ASSESSMENT YEAR- 2010-11) ACIT, CIRCLE-3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W)-421301. VS. M/S. SAGAR SAI ENTERPRISES, SHOP NO. 6, VENKATESH DARSHAN, SUBHASH ROAD, VISHNU NAGAR, DOMBIVILI (W), MUMBAI-421201 PAN: ABFFS2332B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.S. BIST (DR) ASSESSEE BY : SHRI SANJIV G. BRAHME (AR) DATE OF HEARING : 30.01.2017 DATE OF PRONOUNCEMENT : 01.02.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THIS APPEAL BY REVENUE U/S 253 OF THE INCOME-TAX AC T (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S) [FOR SHORT THE CIT(A)] I, THANE DATED 12.09.2014 FOR ASSESSMENT YEAR (AY) 201 0-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. ON ACCOUNT OF DISALLOWANCE OF PARTNER'S REMUNERATION U/S 40(B)(V) WITHOUT APPRECIATING THE FACT THAT THE SAME HAS BEEN DONE BY THE A.O. ON THE BASIS OF CIRCULAR NO. 739 DT. 25.03.1996 OF THE CBDT RELATING TO THE ALLOWABILITY OF THE REMUNERATION TO THE PARTNERS AFTER OBSERVING THAT IN THE PRESENT CASE T HE PARTNERSHIP DEED DID NOT SPECIFY THE AMOUNT OF REMUNERATION PAYABLE TO THE W ORKING PARTNERS OR LAID DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION' . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 15.10.2010 DECLARING TOTAL INCOME OF RS. 34,52,822/ -. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 25.03.2013. THE ASSESSING OFFICER (AO) WHILE MAKING THE ASSESSMENT ORDER DISALLOWED A SUM OF RS. 54,04,231/ - ON ACCOUNT OF REMUNERATION 2 ITA NO.7671/M/2014 M/ S. SAGAR SAI ENTERPRISES PAID TO ITS PARTNER. ON APPEAL BEFORE THE LD. CIT(A ), THE DISALLOWANCE WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REV ENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. AT THE OUTSET OF HEARING, THE AUTHORIZED REPRESENTA TIVE (AR) OF THE ASSESSEE ARGUED THAT THE GROUND OF APPEAL RAISED IN THE PRESENT APP EAL IS SQUARELY COVERED IN HIS FAVOUR BY THE DECISION OF CO-ORDINATE BENCH OF PUNE TRIBUN AL IN ACIT VS. SUMAN CONSTRUCTION AND A SUBSEQUENT DECISION OF HONBLE R AJASTHAN HIGH COURT IN CIT VS. ASIAN MARKETING (2012) 254 CTR 0543. THE LD. AR OF THE ASSESSEE FURTHER DRAWN OUR ATTENTION TO THE REMUNERATION CLAUSE IN THE PARTNER SHIP WHICH IS REPRODUCED BY AO IN PARA 4 OF HIS ORDER. ON GOING THROUGH THE PARA 4 O F THE ORDER OF AO AND THE DECISION OF CO-ORDINATE BENCH OF THE PUNE TRIBUNAL, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE FAIRLY AGREED THAT THE GROUND OF AP PEAL RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED AGAINST THE REVENUE. 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE DECISION CITED BY LD. AR OF THE ASSESSEE. THE HONBLE RAJASTHAN HIGH COURT IN CIT VS. ASIAN MARKETING (SU PRA) HELD AS UNDER: THE ONLY DISPUTE BY THE REVENUE IS THAT THE AMOUNT OF REMUNERATION HAS NOT BEEN QUANTIFIED IN THE PARTNERSHIP DEED. IT IS MENT IONED IN CLAUSE 8 OF THE PARTNERSHIP DEED THAT REMUNERATION WILL BE PAYABLE AS PER NORMS FIXED BY THE RELEVANT PROVISIONS OF THE INCOME-TAX ACT. THUS THE QUANTIFICATION OF THE REMUNERATION IS APPARENT FROM THE CLAUSE 8 OF THE P ARTNERSHIP DEED. THE REQUIREMENT IN LAW IS THAT REMUNERATION SHOULD HAVE BEEN AUTHORIZED AND THE AMOUNT OF REMUNERATION SHALL NOT EXCEED THE AMOUNT AS MENTIONED IN SUB-CLAUSE (V) OF SECTION 40 (B) OF THE ACT. THE RE LEVANT PROVISIONS HAS USED THE WORD AUTHORISED AND NOT THE WORD USED QUANTIFY. THE ITAT PUNE BENCH IN THE CASE OF ACIT V. SUMAN CONSTRUCTION 43 SOT 495 (SIC) : (2009) 34 SOT 495 (PUNE- TRIB), HELD THAT REMUNERATION IS TO BE DEDUC TED IN CASE PARTNERSHIP DEED AUTHORIZES THE PAYMENT OF SALARY. WE HAVE ALSO CONS IDERED THE DECISIONS WHICH HAVE BEEN MENTIONED BY THE ID. CIT (A) IN HIS ORDER . WE, THEREFORE, FEEL THAT THE LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE REMUNERAT ION PAYABLE TO THE PARTNERS. BEFORE PARTING WITH THIS APPEAL, WE WOULD LIKE TO S TATE THAT THE REMUNERATION RECEIVABLE BY THE PARTNERS IS TAXABLE IN THEIR HAND S AND IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CLAIMED REMUNERATION TO THE WORKING PARTNERS TO AVOID TAX. IT IS TRUE THAT TAX PAYABLE IN THE HANDS OF THE INDIVIDUAL MAY BE 30% WHILE INTEREST IN THE HANDS OF THE FIRM MAY BE 35%. THUS, TAX EFFECT IS NOT SUBSTANTIAL. HENCE, GROUND NO.1 & 2 OF THE REVENUE ARE DISMISSED. 5. CONSIDERING THE ABOVE LEGAL POSITION, WE FIND THAT THE FINDING OF LD. CIT(A) IS BASED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CIT VS. ASIAN MARKETING (SUPRA) AND THE DECISION OF PUNE TRIBUNAL IN ACIT VS. SUMAN CONSTRUCTION (SUPRA). AFTER, 3 ITA NO.7671/M/2014 M/ S. SAGAR SAI ENTERPRISES CONSIDERING THE FACTS WE FIND THAT THE GROUND OF AP PEAL RAISED BY THE AO/REVENUE IS SQUARELY COVERED AGAINST THEM. THUS, WE DO NOT FIN D ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST FEBRUARY, 2017. SD/- SD/- (B.R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 01/02/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/