M/s Hotel Sathi (Santiniketan), North 24 Parganas v. Income Tax Officer-Ward-51(2), Kolkata, Kolkata

ITA 2615/KOL/2013 | 2009-2010
Pronouncement Date: 28-11-2014

Appeal Details

RSA Number 261523514 RSA 2013
Assessee PAN AAFFH4467F
Bench Kolkata
Appeal Number ITA 2615/KOL/2013
Duration Of Justice 1 year(s) 9 day(s)
Appellant M/s Hotel Sathi (Santiniketan), North 24 Parganas
Respondent Income Tax Officer-Ward-51(2), Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 28-11-2014
Assessment Year 2009-2010
Appeal Filed On 18-11-2013
Judgment Text
SM C IN THE INCOME TAX APPELLATE TRIBUNAL SM C BENCH: KOLKATA ( ) BEFORE ) [BEFORE SHRI MAHAVIR SINGH JM] / I.T.A NO. 26 1 5 /KOL/20 1 3 / ASSESSMENT YEAR : 20 0 9 - 1 0 M/S. HOTEL SATHI (SANTINIKETAN) VS. INCOME - TAX OFFICER WD - 51 ( 2 ) KOLKATA (PAN:AAFFH4467F) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 2 6 . 11 .201 4 DATE OF PRONOUNCEMENT: 28. 1 1 .201 4 FOR THE APPELLANT : SHRI GOURI PRASAD SEN ADVOCATE FOR THE RESPONDENT : SHRI K. K. TRIPATHI JCIT SR. DR / ORDER THIS APPEAL BY ASSESSEE IS ARI SING OUT OF ORDER OF CIT(A) - X XXII KOLKATA IN APPEAL NO. 130 / X XXI I / 11 - 12/51(2)/KOL DATED 1 3 . 08 .201 3 . ASSESSMENT WAS FRAMED BY ITO WARD - 51 ( 2 ) KOLKATA U/S. 14 3(3) OF THE INCOME - TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 9 - 1 0 VIDE HIS ORDER DATED 30 .12.20 11 . 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE OR DER OF CIT(A) CONFIRMING THE ADDITION MADE BY AO BY MAKING DISALLOWANCE OF SALARY PAID TO PARTNERS IN TERM OF THE PROVISIONS OF SECTION 40(B)(V) OF THE ACT. 3. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH RUNS A HOTEL AT SANTINIKETAN BIRBHUM WEST BENGAL. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT MADE DISALLOWANCE OF PARTNERS REMUNERATION AMOUNTING TO RS.1 16 000/ - FOR THE REASON THAT AS PER THE DEED OF PARTNERSHIP DATED 01.04.2008 THE PARTNERSHIP FIRM COMPRISES OF TWO PARTNERS VIZ. SHRI SWAGATA TALUKDAR AND SHRI PRABIR KUMAR TALUKDAR AND AS PER PARA 11 OF THIS DEED THE REMUNERATION TO PARTNERS WILL BE PROVIDED AS UNDER: 1) REMUNERATION TO PARTNERS THE WORKING PARTNER SHALL GET MINIMUM SALARY OF RS.500/ - PER MONTH FOR THE SERVICES RENDERED EITHER BY MONTHLY PAYMENT OR AT A LUMP SUM ON YEARLY BASIS BUT SUBJECT TO THE PROVISIONS OF INCOME TAX ACT 1 961. 2 ITA NO. 2615 /K/2013 HOTEL SATHI (SANTINIKETAN) AY 200 9 - 1 0 ACCORDING TO AO THE PARTNERS SALARY AS QUANTIFIED VIDE THIS PARTNERSHIP DEED @ RS 500/ - PER MONTH IS TO BE ALLOWED AND ACCORDINGLY HE ALLOWED SALARY TO THE EXTENT OF RS.6 000/ - PER ANNUM. OUT OF THE CLAIM OF SALARY OF RS.1 22 000/ - PAID TO ONE PARTNER NAMELY SHRI SWAGATA TALUKDAR THE AO ALLOWED ONLY RS.6000/ - AND BALANCE RS.1 16 000/ - WAS DISALLOWED. ACCORDING TO AO THE MANNER OF QUANTIFYING THE ADMISSIBILITY OF REMUNERATION TO THE PARTNERS HAS BEEN LAID DOWN IN CIRCULAR NO. 739 DATED 25.03 .1996. THE PARTNERSHIP DEED HAS AUTHORIZED THE REMUNERATION TO PARTNER @ RS.500/ - PER MONTH AND RS.6 000/ - PER ANNUM. IN VIEW OF THIS THE AO DISALLOWED EXCESS AMOUNT OF PARTNERS REMUNERATIO N TO THE EXTENT OF RS.1 16 000/ - . AGGRIEVED ASSESSEE PREFERR ED APPEAL BEFORE CIT(A) WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. I FIND THAT FACTS ARE UNDISPUTED AND REMUNERATION TO PARTNERS IS AUTHORIZED BY CLAUSE 11 OF PARTNERSHIP DEED DATED 01.04.2008 @ RS. 500/ - PER MONTH. I ALSO FIND THAT THE CIT(A) HAS RELIED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF SOOD BRIJ & ASSOCIATES VS. CIT (2011) 203 TAXMAN 188 (DEL.) WHEREIN THE RATIO LAID DOWN IS THAT AS PER CLAUSE (III) AND OTHER CLAUSES IN S ECTION 40(B) OF THE ACT SPECIFICALLY USES THE EXPRESSION IN ACCORDANCE WITH THE TERMS OF PARTNERSHIP DEED . HON BLE DELHI HIGH COURT HAS HELD AS UNDER: 5. CLAUSE (III) AND OTHER CLAUSES IN SECTION 40(B) SPECIFICALLY USE THE EXPRESSION IN ACCORDANCE WIT H THE TERMS OF THE PARTNERSHIP DEED . THIS CLEARLY INDICATES AND MANIFESTS THE LEGISLATIVE MANDATE THAT THE QUANTUM OF REMUNERATION OR THE MANNER OF COMPUTING THE QUANTUM OF REMUNERATION SHOULD BE STIPULATED IN THE PARTNERSHIP DEED. THE EXPRESSION IN AC CORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED READ WITH CLAUSE (III) OF SECTION 40(B) REQUIRES AND MANDATES THAT THE QUANTUM OF REMUNERATION OR THE MANNER OF COMPUTATION OF QUANTUM OF REMUNERATION SHOULD BE STATED IN THE PARTNERSHIP DEED AND SHOULD NOT BE LEFT UNDETERMINED UNDECIDED OR TO BE DETERMINED OR DECIDED ON A FUTURE DATE. FURTHER THE CIT(A) HAS RELIED ON THE DECISION OF HON BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF DURGA DASS DEVKI NANDAN VS. ITO (2012) 342 ITR 17 (HP) WHEREIN VIDE PARA 8 HON BLE HIGH COURT HAS UPHELD THE VALIDITY OF CBDT CIRCULAR NO. 739 DATED 25.03.1996 BUT NOTED THAT THE PROVISIONS OF SECTION 40(B)(V) OF THE ACT DOES NOT LAID DOWN ANY CONDITION FOR FIXING THE REMUNERATION OR THE METHOD OF REMUNERATION IN THE PART NERSHIP DEED. HON BLE HIGH COURT VIDE PARA 8 OF ITS ORDER HAS HELD AS UNDER: 8. IT HAS BEEN URGED BY SHRI VINAY KUTHIALA LEARNED COUNSEL FOR THE RESPONDENT THAT AS PER THE CBDT CIRCULAR THE PARTNERSHIP DEED SHOULD SPECIFY THE AMOUNT OF REMUNERATION O R SHOULD GIVE A SPECIFIC METHOD OF QUANTIFYING SUCH REMUNERATION OTHERWISE DEDUCTION CANNOT BE ALLOWED. WE ARE UNABLE TO ACCEPT SUCH CONTENTION. THE CIRCULAR HAS TO BE READ ALONG WITH SECTION 40(B)(V) AND HAS TO BE MADE SUBJECT TO SECTION 40(B)(V). THI S SECTION DOES NOT LAY DOWN ANY CONDITION OF FIXING THE REMUNERATION OR THE METHOD OF REMUNERATION IN THE PARTNERSHIP DEED. ALL THAT THE SECTION PROVIDES IS THAT IN CASE THE PAYMENT OF REMUNERATION MADE TO ANY WORKING PARTNER IS IN ACCORDANCE WITH THE TER MS OF THE PARTNERSHIP DEED AND DOES NOT EXCEED 3 ITA NO. 2615 /K/2013 HOTEL SATHI (SANTINIKETAN) AY 200 9 - 1 0 THE AGGREGATE AMOUNT AS LAID DOWN IN THE SUBSEQUENT PORTION OF THE SECTION THE DEDUCTION IS PERMISSIBLE. THEREFORE IF IN THE PARTNERSHIP DEED IT WAS CLEARLY MENTIONED THAT THE PARTNERS WOULD GET REMUNERATION CALCULATED AS PER THE PROVISIONS OF THE INCOME - TAX ACT WHICH MEANS THAT THIS WOULD NOT EXCEED THE MAXIMUM AMOUNT PROVIDED UNDER THE ACT. BUT IN THE PRESENT CASE BEFORE ME THE DEED OF PARTNERSHIP PROVIDES FOR PAYMENT OF REMUNERATION @ RS.500/ - PER MONTH. ONCE THE SALARY IS QUANTIFIED IN THE PARTNERSHIP DEED AND I.E. WITHIN THE PARAMETERS OF THE PROVISIONS OF SECTION 40(B)(V) OF THE ACT THE PARTIES HAS TO GO BY THE CONDITION OF PARTNERSHIP DEED. ACCORDINGLY I AM OF THE VIEW THAT THE AUTHORITIES BELOW HA VE RIGHTLY DISALLOWED THE EXCESS SALARY PAID AND I CONFIRM THE SAME. APPEAL OF ASSESSEE IS DISMISSED. 5 . IN THE RESULT APPEAL OF ASSESSEE IS DISMISSED. 6 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 8 . 1 1 . 2 0 1 4 S D / - (MAHAVIR SINGH) JUDICIAL MEMBER DATED : 2 8 T H NOVEMBER 201 4 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT M/S. HOTEL SATHI (SANTINIKETAN) R. N. AVENUE SODEPUR N. 24 PARGANAS KOLKATA - 700 110 2 / RESPONDENT ITO WARD - 51 ( 2 ) KOLKATA . 3 . ( )/ THE CIT(A) KOLKATA 4. 5. / CIT KOLKATA / DR KOLKATA BENCHES KOLKATA / TRUE COPY / BY ORDER /ASSTT. REGISTRAR .