MEENAKSHI TRADERS,CHENNAI V. ITO NCW 22(1), CHENNAI

ITA 1957/CHNY/2025

AI Insights

The case involves Meenakshi Traders appealing against the orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2017-18. The primary issues in the appeal were the disallowance of interest paid to partners and remuneration paid to partners, which were initially allowed by the Assessing Officer but later disallowed under a rectification order. The Tribunal examined the circumstances under which these payments were made and the relevant provisions of the Income Tax Act, ultimately deciding in favor of the appellant, Meenakshi Traders.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773441 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 10-07-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDHYA RANI KURE
• Assessee Lawyers: T.V. MUTHU ABHIRAMANI
• Keywords: Condonation of delay; Rectification of order
• Section: 143(3); 154; 40(b)

Judgement Text

"आयकर अपीलीय अिधकरण, ’ए’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी रȉेश नंदन सहाय, लेखा सद˟ क े समƗ Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member आयकर अपील सं./I.T.A. No.1957/Chny/2025 िनधाŊरण वषŊ/Assessment Year: 2017-18 Meenakshi Traders, 6, Second Main Road, New Colony, Chrompet, Chennai 600 044. [PAN:ABDFM9151E] Vs. The Income Tax Officer, Non Corporate Ward 22(1) Tambaram. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Ms.T.V. Muthu Abhiramani, Advocate ŮȑथŎ की ओर से/Respondent by : Ms. Sandhya Rani Kure, JCIT सुनवाई की तारीख/ Date of hearing : 17.09.2025 घोषणा की तारीख /Date of Pronouncement : 23.09.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 12.03.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2017-18. 2. We find that this appeal is filed with a delay of 40 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, Printed from counselvise.com I.T.A. No.1957/Chny/25 2 we find the reasons stated by the assessee are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication. 3. Ground Nos. 1 to 4 filed by the assessee are general in nature and requires no adjudication. 4. Ground Nos. 5 to 8 raised by the assessee in challenging the action of the ld. CIT(A) in confirming the disallowance of a sum of ₹.1,83,248/- on account of interest paid to the partners in the facts and circumstances of the case. 5. At the outset, we note that the Assessing Officer allowed a sum of ₹.1,83,248/- paid on account of interest to partners in the original assessment proceedings under section 143(3) of the Act. Thereafter, the Assessing Officer disallowed the same under rectification order passed under section 154 of the Act. On perusal of the rectification order, we note that the Assessing officer restricted the interest only for 5 months. The ld. CIT(A) confirmed the same. 6. The ld. AR Ms. T.V. Muthu Abirami, Advocate drew our attention to paper book and argued that the said sum on account of interest paid Printed from counselvise.com I.T.A. No.1957/Chny/25 3 to the partners are allowable though the partnership firm came into existence from 26.10.2016. The ld. AR submits that the restriction of payment of interest is not justified as the provision of Income Tax Act does not say so. 7. The ld. DR Ms. Sandhya Rani Kure, JCIT supported the order passed by the ld. CIT(A). 8. On perusal of the ledger account of the partners in the books of account regarding payment of interest, we note that the assessee paid interest on capital to the respective partners as on 31.03.2017 as interest is to be paid on the last day of the financial year. The Assessing officer made such disallowance taking into account the fact that the operation of the business was started from 26.10.2016 and restricted the interest for 5 months is not justified as rightly pointed out by the ld. AR. Therefore, the disallowance made by the Assessing officer and confirmed by the ld. CIT(A) towards payment of interests to the partners are deleted. Thus, the grounds raised by the assessee are allowed. 9. Ground Nos. 9 to 10 raised by the assessee in challenging the action of the ld. CIT(A) in confirming the disallowance of a sum of Printed from counselvise.com I.T.A. No.1957/Chny/25 4 ₹.4,45,000/- on account of remuneration paid to the partners, the ld. AR submits that the payment of remuneration to partners are not justified as provision of section 40(b) of the Act does not say so. 10. We find the computation of total income placed at page 29 of the paper book and as per book profit, the allowable remuneration to partners is at ₹.11,20,009/-, but, however, the assessee restricted its claim to ₹.6,95,000/-. We find the details of remunerations to partners at page 33 of the paper book and the total remuneration paid supports the claim of the assessee at ₹.6,95,000/-, but, however, it is observed that the maximum remuneration allowable on account of payment of remuneration to partners is ₹.7,62,005/-, even then the assessee restricted the remuneration to ₹.6,95,000/-. We find force in the argument of the ld. AR that there is no restriction of payment of remuneration to partners under section 40(b) of the Act. Therefore, the disallowance made by the Assessing Officer, which was confirmed by the ld. CIT(A), in our opinion is not justified and the addition made thereon is deleted. Thus, the grounds raised by the assessee are allowed. Printed from counselvise.com I.T.A. No.1957/Chny/25 5 11. In view of our decision on merits, the additional grounds filed by the assessee becomes infructuous. 12. In the result, the appeal filed by the assessee is allowed. Order pronounced on 23rd September, 2025 at Chennai. Sd/- Sd/- (RATNESH NANDAN SAHAY) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 23.09.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. Printed from counselvise.com "