PR. COMMISSIONER OF INCOME TAX V. ALIDHRA TAXSPIN ENGINEERS & 1

TAX APPEAL NO. 265 of 2017

AI Insights

The case revolves around a dispute concerning the deduction claimed under Section 80IB of the Income Tax Act by Alidhra Taxspin Engineers, a partnership firm. The Assessing Officer initially disallowed a portion of this deduction, arguing that the absence of provisions for interest and remuneration to partners in the partnership agreement led to an inflated profit claim, thus reducing taxable income. The CIT(A) upheld this disallowance, but the Income Tax Appellate Tribunal reversed it, leading to the revenue's appeal to the Gujarat High Court. The High Court upheld the tribunal's decision, agreeing that the partnership agreement's terms did not mandatorily require interest or remuneration to partners, and thus, the firm's profit declaration was not improperly inflated.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 361533 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 02-05-2017
• Appeal Filed By: Department
• Assessment Year: 2010-2011
• Other Referred Cases: Smt. Mala Tandon
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Deduction; Disallowance; Income Tax; Partnership firm; Section 80IB
• Section: 80IB

Judgement Text

"O/TAXAP/265/2017 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 265 of 2017 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== PR. COMMISSIONER OF INCOME TAX....Appellant(s) Versus ALIDHRA TAXSPIN ENGINEERS & 1....Opponent(s) ====================================== Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA Date : 02/05/2017 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 4 Page 1 of HC-NIC Created On Tue May 30 14:04:18 IST 2017 4 www.lexpertsonline.com O/TAXAP/265/2017 JUDGMENT [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad “B” Bench (hereinafter referred to as “the learned tribunal”) dated 03/05/206 in ITA No.198/Ahd/2016 for the Assessment Year 2010-11 by which the learned tribunal has partly allowed the said Appeal preferred by the assessee and has deleted the disallowance made by the Assessing Officer disallowing the deduction made under Section 80IB of the Income Tax Act, revenue has preferred the present Appeal with the following proposed questions of law; (A) “Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in not appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s 80IB of the Act and thus, devoiding the revenue from due amount of tax?” (B) “Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT was justified in not appreciating that the Section 80IB (10) enables AO to re-compute the profit of undertaking claiming deduction u/s 80IB i.e. the partnership firm as in the present case and not the case of partner’s admissibility towards interest/ remuneration as held in the case of Smt. Mala Tandon?” [2.0] We have heard Shri Sudhir Mehta, learned advocate Page 2 of 4 Page 2 of HC-NIC Created On Tue May 30 14:04:18 IST 2017 4 www.lexpertsonline.com O/TAXAP/265/2017 JUDGMENT appearing on behalf of the appellant – revenue. [3.0] The respondent – assessee, a partnership firm consisting of four partners, filed the return of income for the Assessment Year 2010-11. The respondent – assessee firm declared a total income of Rs.25,06,56,700/- after claiming deduction of Rs.6,48,19,921/-. The case was selected for scrutiny. At the end of the scrutiny assessment, the Assessing Officer passed an order assessing the total income at Rs.25,10,76,76,110/- after disallowance out of the deduction claimed under Section 80IB of the Income Tax Act to the tune of Rs.6,44,00,404/-. It appears that the Assessing Officer made the disallowance of the deduction claimed under Section 80IB of the Income Tax Act on the ground that in the partnership agreement there was no provision of interest and the remuneration to be paid to the partners, and therefore, it resulted into the claim of higher profit under Section 80IB of the Income Tax Act. On Appeal preferred by the assessee the learned CIT(A) confirmed the disallowance made by the Assessing Officer with respect to the deduction claimed under Section 80IB of the Income Tax Act. On further Appeal by the assessee, the learned tribunal by the impugned judgment and order partly allowed the said Appeal and deleted the disallowance made by the Assessing Officer out of the deduction claimed under Section 80IB of the Income Tax Act to the tune of Rs.6,44,00,504/-. Being aggrieved and dissatisfied with the impugned judgment and order passed by the learned tribunal, revenue has preferred the present Tax Appeal with the aforestated proposed questions of law. Page 3 of 4 Page 3 of HC-NIC Created On Tue May 30 14:04:18 IST 2017 4 www.lexpertsonline.com O/TAXAP/265/2017 JUDGMENT [4.0] We have heard Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue. On interpretation of the partnership agreement and considering the wish of the partners reflected in the partnership deed, not to pay /charge interest on the partners capital and the remuneration, the learned tribunal has rightly deleted the disallowance made by the Assessing Officer with respect to the deduction claimed under Section 80IB of the Income Tax Act. As rightly observed by the learned tribunal, mere incorporation of interest on the partners’ capital and remuneration does not signify that the same are mandatory in nature. We concur with the view taken by the learned tribunal. We see no reason to interfere with the impugned judgment and order passed by the learned tribunal. No substantial questions of law arise in the present Tax Appeal. The present Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R. SHAH, J.) (B.N. KARIA, J.) Siji Page 4 of 4 Page 4 of HC-NIC Created On Tue May 30 14:04:18 IST 2017 4 www.lexpertsonline.com "