RAMAKANT JAGNANI, MUMBAI v. ITO 24(3)(4), MUMBAI

ITA 1818/MUM/2010 | 2006-2007
Pronouncement Date: 15-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 181819914 RSA 2010
Assessee PAN GNANI3194A
Bench Mumbai
Appeal Number ITA 1818/MUM/2010
Duration Of Justice 4 month(s) 7 day(s)
Appellant RAMAKANT JAGNANI, MUMBAI
Respondent ITO 24(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 15-07-2010
Date Of Final Hearing 15-07-2010
Next Hearing Date 15-07-2010
Assessment Year 2006-2007
Appeal Filed On 08-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI A.L. GEHLOT ACCOUNTANT MEMBER ITA NO. 1818/M/2010 ASSESSMENT YEAR: 2006-07 SHRI RAMAKANT JAGNANI APPELLANT 101/B ASTER TOWER VASANT VALLEY FILM CITY ROAD GOREGAON (EAST) MUMBAI - 63 VS. INCOME TAX OFFICER RESPONDENT 24(3)(4) MUMBAI. APPELLANT BY : MR. M. SUBRAMANIAN RESPONDENT BY : MR. S.K. SINGH O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDERS OF CIT(A)-34 MUMBAI PASSED ON 31.12.2009 F OR THE ASSESSMENT YEAR 2006-07. 2. 1 ST GROUND IS IN RESPECT OF DISALLOWANCE OF RS. 91 000 /- ON ACCOUNT OF SALARY U/S 40A(2)(B) OF THE ACT. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD PAID SALARY OF RS. 84 000/- AND BONUS OF RS. 7 000/- TO HIS FATHER MR. RADHAKRISHNA N JAGNANI. THE AO DISALLOWED THE ENTIRE AMOUNT OF RS. 91 000/- U/S 40A(2)(B) ON THE GROUND THAT FATHER OF THE ASSESSEE HAS NOT R ENDERED ANY SERVICES. THE CIT(A) CONFIRMED THE SAID ADDITION. 4. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS A PROPRIETOR OF M/S VIJAYA ENTERPRISES ENGAGED IN THE BUSINESS OF TRADING IN S PUN YARN AND ACT AS CONSIGNMENT AGENT. EARLIER THIS BUSINESS WAS CARRIED IN THE PARTNERSHIP FIRM UNDER THE NAME AND STYLE OF M/S VI JAYA ENTERPRISES. THE ASSESSEE SUBMITTED THAT THE PARTNE RSHIP FIRM WAS ITA NO. 1818/M/10 SHRI RAMAKANT JAGNANI 2 ALSO PAID SALARY OF RS. 84 000/- IN AY 2005-06 AND THE SAME WAS NOTED BY THE AUDITOR IN FORM 3CD TO THE PERSON SPEC IFIED IN SECTION 40A(2)(B) OF THE ACT. IN AY 2007-08 THE SALARY OF RS. 77 000/- WAS PAID TO HIS FATHER FOR 11 MONTHS. ON PERUSAL OF REC ORD I FIND THAT THE ASSESSEES FATHER HELD POST OF SENIOR ADVISOR A ND LOOKING AFTER MAJOR CUSTOMS AND BANKING MATTERS. THE ASSESSEE WAS RUNNING FAMILY BUSINESS AND HIS FATHER WAS WORKING FOR THE BUSINESS. THE SALARY PAID IN EARLIER AND SUBSEQUENT YEARS HAS BEE N ALLOWED. UNDER THE CIRCUMSTANCES I DO NOT FIND ANY REASON F OR DISALLOWING THE SALARY AMOUNT OF RS. 84 000/-. HOWEVER BONUS O F RS. 7 000/- WAS PAID IN THE YEAR UNDER CONSIDERATION FOR WHICH THE ASSESSEE DID NOT SUPPORT ANY REASON FOR GIVING BONUS OR FILE D ANY EVIDENCE FOR RS. 7 000/-. THEREFORE THE DISALLOWANCE TO THE EXTENT OF RS. 7 000/- IS CONFIRMED AND THE ASSESSEE GETS A RELIEF OF RS. 84 000/-. 5. 2 ND GROUND IS IN RESPECT OF DISALLOWANCE OF INTEREST O F RS. 1 91 849/- U/S 40A(IA) OF THE ACT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS NOT DEDUCTED THE TAX AT SOURCE ON INTEREST PAYMENT TO M/S MS. URMILA JAGNANI OF RS. 8 0 970/- MS. SHAKUNTALA JAGNAI OF RS. 70 600/- AND M/S RADHAKIS HAN JAGNANI (HUF) OF RS. 40 279/-. THE AO WAS OF THE VIEW THAT M/S VIJAYA ENTERPRISES WAS THE PARTNERSHIP FIRM WHERE THE ASSE SSEE WAS PARTNER AND DURING THE YEAR THE ASSESSEE HAS TAKEN OVER THE BUSINESS OF M/S VIJAYA ENTERPRISES AND DOING THE SA ME BUSINESS WITHOUT ANY CHANGE EXCEPT OWNERSHIP. THEREFORE THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON INTEREST U/S 194A OF THE ACT. ACCORDINGLY THE AO DISALLOWED THE SAID INTEREST PA YMENT OF RS. 1 91 849/-. THE CIT(A) CONFIRMED THE ADDITION. 7. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE LEARNED AR POINTED OUT THAT AS PER THE PROVISO TO SECTION 194A THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE. THE SAID SECTION 194A AND ITS PROVISO READS AS UNDER:- ITA NO. 1818/M/10 SHRI RAMAKANT JAGNANI 3 194A(1): ANY PERSON NOT BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYME NT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTH ER MODE WHICHEVER IS EARLIER DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE: PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FA MILY WHOSE TOTAL SALES GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANC IAL YEAR IN WHICH SUCH INTEREST IS CREDITED OR PAID SHALL BE L IABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. 8. I FIND FORCE IN THE SUBMISSION OF THE LEARNED AR THAT THE ASSESSEE HAS TAKEN OVER THE BUSINESS OF M/S VIJAYA ENTERPRISES IN THE YEAR UNDER CONSIDERATION THEREFORE THE ASSESS EE WAS NOT SUBJECTED TO TAX AUDIT U/S 44AB DURING THE F.Y. 200 4-05 RELEVANT TO AY 2005-06. THEREFORE SECTION 194A IS NOT APPLI CABLE AS THE ASSESSEE IS AN INDIVIDUAL AND THE PROPRIETOR OF M /S VIJAYA ENTERPRISES. SINCE THE ASSESSEE IS NOT LIABLE TO DE DUCT TAX AT SOURCE IN ACCORDANCE WITH THE PROVISO TO SECTION 194A I A M OF THE CONSIDERED VIEW THAT PROVISIONS OF SECTION 40A(AI) ALSO NOT APPLICABLE. THEREFORE I DELETE THE ADDITION. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.07.2010. SD/- (A.L. GEHLOT) ACCOUNTANT MEMB ER DATED: 15 TH JULY 2010. ITA NO. 1818/M/10 SHRI RAMAKANT JAGNANI 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE SMC BEN CH I.T.A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV S.NO. DESCRIPTION DATE INTALS 1. DRAFT DICTATED ON 15.07.2010 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 15.07.2010 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER