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2013 (3) TMI 466 - AT - Income TaxDisallowance of proportionate salary to the partners - CIT(A) deleted the addition - as per AO though the assessee had paid FBT yet the disallowance made on the said ground was valid and that the action of the CIT(A) is not valid - Held that:- The appellant has five units in which two units are located in exempted area. The disallowance of the salary by AO allocable to exempt units worked out on the basis of turnover is not acceptable as there was no material to conclude that part of salary paid to partners pertains to exempt units and as such the disallowance is based on surmises and conjectures. AD has no power to allocate expenses arbitrarily as held in the case of DCIT Vs Delhi Press Samachar Patra (P) Ltd. (2006 (3) TMI 218 - ITAT DELHI-E). Further, in the case of the appellant itself for the AY 2005-06 the disallowance of salary paid to partners was deleted. Without prejudice to the above, the partners to whom the salary of Rs. 24.00 lacs was paid, are assessed to tax and paying tax at 30% and as such there is no loss to revenue - in favour of assessee. Addition proportionately with regard to various expenses - Held that:- CIT(A) disallowed above addition with an observation that the AO has failed to note that the FBT was paid on the major part of the expenses has been paid by the assessee and for the remaining expenses, the AO could not make any claim for disallowance. The CIT(A) further observed that in a case of a firm having a turnover of more than Rs.166 crores and returning an income of Rs.1.42 crores, the issue of making ad hoc disallowance of some expenses without bringing any adverse material on record is not tenable - in favour of assessee.
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