M/s. Meghachem Industries, Ahmedabad V. The DCIT, Circle-3(2), Ahmedabad

ITA 803/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7511 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-01-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 03-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K GOYAL
• Assessee Lawyers: SOHAN U MASHRUWALA
• Section: 40(b)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH , ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 803 /AHD/2018 & / ASSTT. YEAR: 2014 - 2015 M/S.MEGHACHEM INDUSTRIES , PLOT NO.8, PHASE - II , GIDC , VATVA, AHMEDABAD - 382245 . PA N: AAIFM1621R VS . D .C.I.T. , CIRCLE - 3 ( 2 ) , AHMEDABAD (APPLICANT) (RESPONENT) ASSESSEE BY : SHRI SOHAN U.MASHRUWALA , A.R REVENUE BY : SHRI N.K. GOYAL , SR. DR / DATE OF HEARING : 2 3 / 01 / 2020 / DATE OF PRONOUNCEMENT: 30 / 01/2020 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPLICATION AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 02.02.20 18 PASSED BY THE L EARNED C OMMISSIONER OF INCOME TAX (APPEALS) - 3, AHMEDABAD ARISING OUT OF THE ORDER DATED 26.12.20 16 PAS SED BY THE DCIT, CIRCLE - 3(2) , AHMEDABA D UNDER SECTION 143 (3)OF THE INCOME TAX A CT, 1961(HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT Y EAR 2014 - 15 WHEREBY AND WHEREUNDER DISALLOWANCE OF REMUNERATION TO THE TUNE OF RS. 10 ,25,000/ - PAID BY THE FIRM TO THE PARTNER BEING THE KARTA OF HINDU UNDIVIDED FAMILY (HUF ) WAS MADE . ITA NO. 803 /AHD/2018 A.Y. 2014 - 2015 2 2. A T THE TIME OF HEA RING OF THE INSTANT APPEAL THE LEARNED A DVOCATE APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY AND UNDER DIFFERENT JUDGEMENTS INCLUDING THE JU DGEMENT PASSED BY THE HON BLE APEX C OURT IN THE CASE OF RASIKLAL & CO.VS CIT REPORTED IN (1998 ) 229 ITR 458 (SC) . IT WAS FURTHER ARGUED BY THE LEARNED A DVOCATE THAT IN THE SIMILAR SET OF FACTS THE C O - ORDIN ATE B ENCH IN ITA NO. 1912/AHD/2010 IN THE M ATTER OF M/S. P GAUTAM & C O. VERSUS JCIT, AHMEDABAD , THE SA LARY TO PARTNER A KARTA OF HUF WHO IS OTHERWISE ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF TH E BUSINESS OF THE ASSESSEE FIRM HAS BEEN ALLOWED . A COPY OF THE SAID JUD GEMENT PASSED BY THE HON BLE C O - ORDINATE BENCH HAS ALSO BEEN SUBMITTED BEFORE US. THE L EARNED AR, THEREFORE, PRAYS FOR SIMILAR RELIEF BEFORE US. THE CONTENTION MADE , AS ABOVE , BY THE LEARNED AR HAS, HOWEVER, FA ILED TO BE CONTROVERTE D BY THE L EARNED DR. 3. H EARD THE PARTIES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD INC LUDING THE ORDER PASSED BY THE C O - ORDINATE B ENCH. WHILE ALLOWING THE APPEAL PREFERRED BY THE ASSESSEE THE C O - ORDINATE B ENCH IN IITA NO. 1912/AHD/2010 IN THE M ATTER OF M/S. P GAUTAM & C O. VERSUS JCIT, AHMEDABAD HAS BEEN PLEASED TO OBSERVE AS FOLLOWS; 9. FROM THE ABOVE EXPLANATION - 4 TO SECTION 40(B), IT IS SEEN THAT A WORKING PARTNER CAN BE AN INDIVIDUAL WHO IS ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF BUS INESS OF THE FIRM OF WHICH HE IS A PARTNER, IT IS NOT THE OBJECTION OF THE ASSESSING OFFICER OR OF LD, DR OTTHE REVENUE THAT SALARY WAS NOT PAID BY THE FIRM TO AN INDIVIDUAL. IT IS ALSO NOT AN OBJECTION THAT THE CONCERNED INDIVIDUAL IS NOT ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS OF THE ASSESSEE - FIRM. THE OBJECTION IS THIS THAT SUCH INDIVIDUAL IS NOT A PARTNER OF THE ASSESSEE - FIRM IN HIS INDIVIDUAL CAPACITY BUT HE IS A PARTNER IN THE CAPACITY OF REPRESENTATIVE OF HUF OF WHICH HE IS A KARTA AND FOR THIS REASON, THE REVENUE HAS REJECTED THE CLAIM OF THE ASSESSEE. AS PER THIS JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF RASLK LAL AND CO. (SUPRA), IT WAS HELD THAT IT IS THE INDIVIDUALS CONSTITUTE THE FIRM WHO ARE ITS PARTNERS, ST WAS ALSO HELD THAT A PARTNER DOES NOT ACT IN THE REPRESENTATIVE CAPACITY IN THE PARTNERSHIP AND HE FUNCTIONS IN HIS PERSONAL CAPACITY LIKE ANY OTHER PARTNER. THIS GOES TO SHOW THAT A PARTNER OF A FIRM IS INDIVIDUAL ONLY EVEN IF HE IS PARTNER AS A REPRESENTATIVE OF HUF. IF THAT BE SO, THE REQUIREMENTS OF EXPLANATION - 4 TO SECTION ITA NO. 803 /AHD/2018 A.Y. 2014 - 2015 3 40(B) ARE COMPLIED WITH IN RESPECT OF PAYMENT OF REMUNERATION TO SUCH A PARTNER ALSO WHO IS A PARTNER IN HIS REPRESENTATIVE CAPACITY BEING KARTA OF THE HUF PARTNER. IN OUR CONSIDERED OPINION, IN THE LIGH T OF THIS JUDGMENT OF HON'BLE APEX COURT, THE REQUIREMENT OF EXPLANATION - 4 TO SECTION 40(B) STAND COMPLIED WITH IN THE PRESENT CASE AND HENCE, THERE IS NO VALID REASON FOR MAKING THIS DISALLOWANCE BECAUSE IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT TH E CONCERNED PARTNER, SHRI VIKRAM N GANDHI WAS NOT ACTIVELY ENGAGED IN CONDUCTING THE AFFAIRS OF THE BUSINESS OF THE ASSESSEE - FIRM. WE, THEREFORE, HOLD THAT THE DISALLOWANCE MADE BY ASSESSING OFFICER AND CONFIRMED BY LD. CIT(APPEALS) IS NOT JUSTIFIED AND HE NCE THE SAME IS DELETED. 10. IN THE RESULT, ASSESSEE S APPEAL IS ALLOWED RESPECTFULLY RELYING UPON THE OBSER VATION MADE HEREINABOVE BY THE C O - ORDINATE B ENCH , WE FIND NO JUSTIFICATION IN MAKING D I SALLOWANCE BY THE REVENUE TOWARDS THE SALARY GIVEN TO TH E PART NER OF THE FIRM TO THE TUNE OF RS.1 0 , 25 , 000 / - . WE , THEREFORE , DELETE THE SAME. 4 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 30 /01/2020 AT AHMEDABAD. - SD - - SD - ( AMARJIT SINGH ) ACCOUTANT MEMBER ( MS MADHUMITA ROY ) JUDICIAL MEMBER (TRUE COPY) AHMEDABAD; DATED 30 / 01/2020 MANISH