Saxon Fluid Sealing Devices, New Delhi V. ACIT, circle-41(1), New Delhi

ITA 7921/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7314 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 13-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.7921/DEL/2018 ASSESSMENT YEAR: 2015-16 SAXON FLUID SEALING DEVICES, SHOP NO.102, GUPTA PLAZA, BHERA ENCLAVE, PASCHIM VIHAR, NEW DELHI PAN NO. AAMFS3731J VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 41 (1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. PRAMOD JAIN, FCA RESPONDENT BY SH. S. L. ANURAGI, SR. DR DATE OF HEARING: 25/04/2019 DATE OF PRONOUNCEMENT: 26/04/2019 ORDER PER N. K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDER OF THE CIT(A)-14, NEW DELH I DATED 27.09.2018 PERTAINING TO A. Y. 2015-16. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE CIT(A) ERRED IN SUSTAINING THE ADDITION MADE BY THE ASSESS ING OFFICER 2 ON ACCOUNT OF DISALLOWANCE OF RS.579082/- AS REMUNE RATION TO PARTNERS. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAI D RS.9,60,000/- TO PARTNER A. K. SONI, RS.9,40,000/- TO PARTNER ANSHUMAN SONI, RS.9,60,000/- TO PARTNER ANUJ SAXENA AND RS.7,20,000/- TO PARTNER MITHLESH SAXENA. 4. ON PERUSAL OF THE PARTNERSHIP DEED DATED 01.06.2 011 THE ASSESSING OFFICER FOUND THAT FOLLOWING REMUNERATION WAS TO BE PAID TO THE PARTNERS :- 1. MR. A. IK. SONI RS.60,000/- PER MONTH 2. MR. ANSHUMAN SONI RS.40,000/- PER MONTH 3. MR. ANUJ SAXENA RS.60,000/- PER MONTH 4. MRS. MITHLESH SAXENA RS.40,000/- PER MONTH 5. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE EXCESS AMOUNT GIVEN TO PARTNERS AS SALARY SHOULD NOT BE DISALLOWE D. VIDE LETTER DATED 05.12.2017 THE ASSESSEE EXPLAINED THAT BY MUT UAL AGREEMENT IT WAS AGREED BY THE PARTNERS TO INCREASE THE REMUNERATION WITHOUT AMENDING THE PARTNERSHIP DEED. 6. REPLY OF THE ASSESSEE DID NOT FIND ANY FAVOUR WI TH THE ASSESSING OFFICER WHO DISALLOWED THE EXCESS REMUNER ATION OF RS.5,79,082/-. 3 7. THE ASSESSEE AGITATED THE MATTER BEFORE THE CIT( A) BUT WITHOUT ANY SUCCESS. 8. BEFORE ME THE COUNSEL FOR THE ASSESSEE DREW MY A TTENTION TO THE PARTNERSHIP DEED WHICH IS AT PAGES 6 TO 9 OF TH E PAPER BOOK AND POINTED OUT THAT IT HAS BEEN SPECIFICALLY MENTI ONED IN THE PARTNERSHIP DEED THAT THE PARTNERS SALARY MAY BE RE VISED AS MUTUALLY AGREED BY THE PARTNERS BUT THE SAME SHALL REMAIN WITHIN THE LIMITS PRESCRIBED UNDER THE ACT. IT IS THE SAY OF THE COUNSEL THAT IT IS NOT THE CASE OF THE ASSESSING OF FICER THAT THE SALARY PAID TO THE PARTNERS IS NOT AS PER THE LIMIT PRESCRIBED U/S 40 (B) (V). THE COUNSEL FURTHER DREW MY ATTENTION TO PAGE 10 OF THE PAPER BOOK AND POINTED OUT THAT A SUPPLEMENTARY DEED WAS MADE TO INCREASE THE REMUNERATION TO PARTNERS. 9. THE DR STRONGLY SUPPORTED THE FINDINGS OF THE CI T(A). IT IS THE SAY OF THE DR THAT THE SUPPLEMENTARY DEED BY WH ICH THE SALARY HAS BEEN INCREASED IS NOT A REGISTERED DOCUM ENT AND DOES NOT HAVE ANY EVIDENTIARY VALUE. 10. I HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. IT IS TRUE THAT IN THE PARTNERSHIP DEED DATED 01.06 .2011 THE PARTNERS HAVE AGREED TO REVISED THE REMUNERATION AS MUTUALLY AGREED BY THEM. IT IS EQUALLY TRUE THAT IT IS NOT THE CASE OF THE REVENUE THAT THE REMUNERATION PAID TO PARTNERS IS I N EXCESS OF THE REMUNERATION PROVIDED U/S. 40 (V) (B) OF THE AC T. THE SUPPLEMENTARY DEED WHICH CONTAINS THE REVISION OF S ALARY AND ENDORSES THE FACT THAT THE SALARIES PAID TO PARTNER S IS WITHIN THE 4 LIMIT OF SECTION 40 (B) (V) OF THE ACT. IN MY UNDE RSTANDING THE PARTNERSHIP ACT DOES NOT REQUIRE THE DEED TO BE REG ISTERED. 11. CONSIDERING THE FACTS OF THE CASE IN TOTALITY I AM OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED FOR T HE REMUNERATION AS CLAIMED BY IT. THEREFORE, THE ASSE SSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.5,79,082/- . 12. IN THE RESULT, THE APPEAL IS FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2019. SD/- (N. K. BILLAIYA) ACCO UNTANT MEMBER *NEHA* DATE:- 26.04.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI 5 DATE OF DICTATION 2 5 .04.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.04.2019 DA TE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER