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Income Tax - Case Laws
Showing 161 to 180 of 662 Records
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2012 (12) TMI 984
Set off of interest income from share application money against public issue expenses - Tribunal allowed claim - Held that:- Tribunal had in the impugned judgment allowed the benefit of set off of interest income from share application money as followed the decision of this Court in Panama Petrochem Ltd. case [2011 (7) TMI 1110 - GUJARAT HIGH COURT] wherein held the assessee was statutorily required to keep share application money in the separate account till the allotment of shares was completed. Interest earned on such separately kept amount was adjusted towards expenditure for raising share capital. We are therefore, of the opinion that interest earned was inextricably linked with requirement of company to raise share capital and was thus adjustable towards the expenditures involved for the share issue - Decided against revenue
Disallowance u/s.35D - Tribunal remanded the issue for fresh consideration - Held that:- Revenue rightly pointed out that the Tribunal remanded the issue for fresh consideration erroneously relying on a remand order passed in Mandvi Mercantile Co Op Bank Ltd. case [2005 (12) TMI 554 - GUJARAT HIGH COURT] for the assessment year 2001-02. She pointed out that such issue had reached the Tribunal after a round of remand and full consideration by the Assessing Officer and CIT(Appeals). The Tribunal was, therefore, required to examine the issue on merits and give its decision. Such issue, therefore, shall have to be placed back before the Tribunal for consideration on merits.
Disallowance of deduction u/s 80IA on account of Exchange rate fluctuation, Excise credit, Kasar/vatav and Excess provision written back of bonus - Held that:- Tribunal has granted certain benefits as claimed by the assessee for deduction under section 80IA of the Act without full discussion. Tribunal has not given any specific verdict on some of the issues raised at the hands of the assessee in rectification application. We are sure, the Tribunal will consider the same and take steps on such application irrespective of the order in this appeal.
Disallowance out of shares and debentures issue expenses - Held that:- Tribunal has remanded the issue once gain relying on a remand in the case of this very assessee for another year. Here also, the issue had been discussed and decided by the Assessing Officer and the CIT(Appeals) on merits. The Tribunal, therefore, would have to judge issue on merits rather than remanding the issue all over again.
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2012 (12) TMI 981
Penalty u/s 271(1) (c) - Income revised in revised return filed after survey - Held that:- We are however of the opinion that in the impugned judgment of CIT v. Manu Engg. Works [1978 (9) TMI 18 - GUJARAT High Court ] , the Tribunal has committed no legal error. It was not a case where the assessee had discovered some inadvertent omission or an unintended wrong statement which had crept up in the return filed. It was found that the assessee was even at the time of filing of return aware of the falsity of the statement and incorrectness of particulars of income.
We are of the opinion that the Tribunal committed no error in confirming the penalty imposed by the Assessing Officer and confirmed by the CIT(appeals). Even if the assessee had made any further declarations in the revised return, we cannot lose sight of the fact that such return was filed only after the survey was carried out by the Revenue and further that such revised return was rejected as non-est.
It is not necessary for us to go into this aspect any further since we find that the Assessing Officer had come to a definite finding that the penalty was required to be imposed since the assessee had concealed the particulars of income. We therefore, need not disturb the Tribunal's ultimate conclusion merely for the fact that the Tribunal rejected the assessee's contention may be on some erroneous premise when we find that such contention even other-wise was not required to be accepted in law. - Decided against the assessee.
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2012 (12) TMI 978
Disallowance under section 40A(2)(b) - labour charges paid by the assessee to its vendor at Deesa - Held that:- Neither the assessee has provided any comparable rates to the revenue authorities nor the revenue authorities have made any attempt either by asking the assessee to provide for the comparable nor they suo moto collected any data from the market. What the revenue authorities have done is that they have relied on the internal comparable only to arrive at a figure of estimated charges per carat. In fact, the AO should have collected independent data or have asked the assessee to provide comparable periodic rates prevailing in the market at Deesa to set the bench mark. This exercise has not been done by the AO or by the CIT(A), which according to us, the revenue authorities should have done to arrive at some definite estimate.
In these circumstances, we are of the opinion that in the interest of justice to both the sides, the AO must make enquiries and examine the comparable rates from the third parties at Deesa and then benchmark the average job work rate for the financial year in question and compute the job work charges.We, therefore, set aside the order of the CIT(A) on the issue of addition of ₹ 43,97,624/- with the above direction to the AO, who shall afford adequate and reasonable opportunity to the assessee to present its case. - Decided in favour of assessee for statistical purposes.
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2012 (12) TMI 966
Reopening of assessment - accommodation entries - Held that:- The assessee has discharged his onus by filing complete details ie. purchase of shares, share certificate, Demat account, confirmation from Buniyad Chemicals Limited of whose shares were purchased. Consideration was paid through account payee cheque, therefore, there is no material against the assessee from which it can be said that the transaction entered by the assessee was not genuine. It is further noticed that in case of Kataria Ketan Ishwarlal (2010 (4) TMI 1029 - ITAT MUMBAI), the additions were made on the basis of statement of Shri Mukesh Chokshi. The Tribunal by noting that Mr. Chokshi has issued a general statement and it cannot be applied in each and every case, there was no direct evidence against that assessee. Accordingly, the amount of addition made in that case was deleted by the Tribunal. Here facts are similar. Neither the statement of Mukesh Chokshi was provided to the assessee nor there was any cross examination of Mukesh Chokshi, whereas contrary to that the assessee has filed all the details required for providing for purchase of shares were genuine. It is not a case of the department, whatever the consideration was paid by the assessee through cheque for purchasing of shares have come back to the assessee under the garb of bogus purchases as there is no evidence against the assessee. Keeping in mind all these facts and circumstances of the case, thus hold that the addition made and sustained on account of purchase of shares only on the basis of statement of Mukesh Chokshi, was not justified - Decided in favour of assessee.
Unaccounted gift - unexplained credit - Held that:- admit the additional evidence as they go to the root of the case. The additional evidences are in shape of gift given to the assessee by one Ms Fareeda Manasswala. Copy of her passport and confirmation letter are filed as additional evidences. They were not filed before the AO or before the CIT(A). Therefore, to meet the end of justice, I set aside this issue to the file of the Assessing Officer to consider these evidences and then pass a fresh order after affording opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes..
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2012 (12) TMI 904
Refund adjusted against demand – Adjustment of refund without prior notice or intimation - Demand stayed by order of High Court – Violation of Stay order – Later on Revenue, in respect of a later period, sought to adjust the amounts due to the writ petitioner, by way of refund - Held that:- When an order of stay of recovery in simplistic and absolute terms is passed, it would be improper and inappropriate on the part of the Revenue to recover the demand by way of adjustment. Revenue’s contention is insubstantial & over-reach and circumvent the stay order. Therefore, the impugned adjustment sought to be made by it, was contrary to the Court’s order.
Violation of provision of Section 245 - Procedure to set off amounts due to an assessee from the demands pending against him – Held that:- Section 245 is clear in its mandate regarding the requirement of prior intimation in writing to the assessee whose refunds are being adjusted against amounts payable to the Revenue; the assessee has to be given notice, and heard. The revenue clearly did not follow the provision, and give any notice or hearing before making adjustments.
Appeal decides in favour of assessee
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2012 (12) TMI 903
Validity of order u/s 263 - Block assessment - Chapter XIVB - Whether revision u/s 263 is possible for block assessment order when the same has been passed with previous approval of Commissioner.
Held that:- Following the decision in case of Smt. Annapoornamma Chandrashekar (2011 (10) TMI 475 - KARNATAKA HIGH COURT) that the act of approval is not for a mere passing of an order u/s 158BC, but an approval which takes note of the subject matter of assessment and there is application of mind before granting the approval.
When approval is given it means the approving authority has full knowledge about the contents of what is approved and confirmed authoritatively the order of the lower authority
Therefore, on the approval given by the Commissioner, the order to be passed u/s 158BC and the Commissioner cannot exercise jurisdiction u/s 263 to revise the order of assessment passed under Chapter XIV B. Appeal decides in favour of assessee
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2012 (12) TMI 902
Disallowance u/s 40A(3) - Assessee engaged in the business of jewellery – Cash purchase of jewellery – Exchange of old jewellery with new Jewellery - Rule 6DD - Held that:- The assessee used to account the purchase of old Jewellery/diamond from the customer as cash purchase for control purpose though actual cash outflow is not made, these are only day book entries. Therefore, such transactions could not be considered as violative of Section 40A(3), just for a reason that contra entries appeared in the cash book. In favour of assessee
Violation of Rule 46A – Held that:- As the A.O. has nowhere mentioned that assessee had failed to produce any records or books called for. Just because assessee could point out to CIT (Appeals), by producing the same cash book as produced before the A.O., that there were no cash purchases whatsoever effected by it from its customers, will not be a reason to say that there was any violation of Rule 46A.
Bogus Purchase – Held that:- In the nature of trade of the assessee, it may not always be possible to get the address of all its customers. Even if customers give their address, there is no means available to the assessee to ensure that such addresses were right. Assessee, in the nature of its trade, cannot insist for an identification process akin to Know Your Customer (KYC) rules applied by banks. Just for the reason that purchases effected from certain parties did not carry full address, in our opinion, a disallowance ought not have been made. In favour of assessee
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2012 (12) TMI 901
Validity of notice u/s 148 - Gift - Re-assessment u/s 147 - Without a reasonable cause - Merely on the directions of another officer – Jurisdiction of officer - ACIT issued notice on the basis of some information received from the ADIT (Inv) about bogus gift
Held that:- If the assessee fails to urge the question of territorial jurisdiction, he cannot call it into question later. The reason is apparently founded on public policy, not to allow questions of territorial jurisdiction to be urged and destabilize entire proceedings, once they proceed on merits
There was nothing on the record for the AO to assume that the information about the gifts in question being bogus, was believable, or reasonably credible to warrant reopening of assessment. The entire reassessment proceedings’ initiation was premised on a vague suspicion. “Reasons to believe” as emphasized by the court are reasonable inferences based on objective information, verified in a prima facie manner. In favour of assessee
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2012 (12) TMI 900
Capital gain - Nature of land - Sale of agricultural land – Exemption u/s 54B - Whether self-cultivated land will only be treated as agricultural land – Agricultural operation was carried out by brother of assessee on the said land – Held that:- There is no requirement in any Act more especially the I.T. Act that only the self-cultivated land will be treated as agricultural land. The Tehsildar is the concerned revenue Officer who on the basis information/report of revenue Patwari issues a certificate. Since the brother of the assessee was doing agricultural operation, therefore, any income derived out of it will be treated as agricultural income. Even if less income has been shown, the assessee cannot be denied the character of agricultural income.
Whether Tehsildar is a competent authority to issue a certificate regarding distance of land from the municipal limit – Land sold was beyond 8 kms from the municipal limit – Held that:- Following the decision in case of Shri Lal Singh (2009 (11) TMI 63 - PUNJAB AND HARYANA HIGH COURT) that Tehsildar is the most competent revenue Officer to certify the proof of agricultural operation, distance of land from a particular place, rate of land, etc.
Land was sold to developer – Held that:- Just because after the sale, the purchaser was going to put the land to non-agricultural use, it does not mean that on the date of sale the land has ceased to be agricultural land. If in the revenue record, the particular land is recorded as agricultural land and till the date of sale, it is exploited as agricultural land and the owner of the land has not taken any step to indicate his intention to exploit the land for non-agricultural purposes then such land to be regarded as agricultural land
Therefore said land was agricultural land. In favour of assessee
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2012 (12) TMI 899
Validity of notice u/s 148 - Assessee engage in manufacture and sale of Tea - Re-opening of assessment u/s 147 - Escaped assessment – Change of opinion – Reason to believe - AO argued that payment made by assessee was in fact the commission paid against sale and there was no TDS deducted therefore, expenditure was required to be disallowed u/s 40(a)(ia) and hence, this income has escaped the assessment
Held that:- At the time of original assessment, in reply to the specific query raised, specific reply had been furnished with regard to the amount of discount paid by way of trade incentive slab scheme and the query also was whether on the amount paid, tax was deducted at source or not. Having furnished all the requisite details, if the AO chose not to deem it fit to reflect its consideration in the assessment order originally passed after scrutiny, on the very same grounds and materials when it seeks to reopen the assessment on the ground of escapement of income it is required of the respondent to point out as to how this is not a mere change of opinion and what are the cogent and relevant materials available with it to form an opinion that the said expenditure was required to be disallowed u/s 40(a)(ia), for not having deducted TDS. In favour of assessee
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2012 (12) TMI 898
Addition on account of excess interest expense – Interest on Fixed deposit – Assessee is a financial enterprise – Interest paid in excess of the limit under Kerala Money Lenders Act - Explanation to Section 37 – Expenditure prohibited by law or constitutes an offence
Assessee contended that even where the income was found to be illegal, it was held that loss could be claimed as a deduction. If the income is tainted and he is forced to pay the tax, he poses the question as to how it could be held that the amount which is paid in excess of the legal limit under the Money Lenders Act should not be allowed to be deducted from the income
Held that:- Even though the purpose for which the amount was expended may not lead to the commission of an offence, the expenditure by way of payment of interest in excess of the limit imposed under the Kerala Money Lenders Act is prohibited. The grant of interest at the rate an excess of 14% is prohibited. The amount of deduction claimed by the appellant represents money paid as interest in excess of 14%. Therefore, the expenditure is in the teeth of the explanation to Section 37 which is the legal provision applicable. In favour of revenue
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2012 (12) TMI 897
Whether accrued interest on cash basis and payment of interest is allowable on mercantile basis is valid in law. - Whether interest expenditure is allowable on cash basis even though the assessee is following mercantile system of accounting is valid in law. – For same assessment year
Assessee switch over from the cash system to the mercantile system of accounting - the receipts and expenditure for the year were maintained under mercantile system of accounting - In respect of interest paid on loans and advances, cash system of accounting was maintained
Held that:- Following the decision in case of Carborandum Universal Limited (1983 (8) TMI 39 - MADRAS HIGH COURT) held that switching over from cash system of accounting to mercantile system was on account of statutory compulsion, we have no hesitation in agreeing with the assessee's contention that the interregnum period in the process of switching over would certainly have a mixed system, where there is a cash system of accounting in respect of certain expenditure while the receipts and other expenditure would be maintained under mercantile system of accounting. The revenue has not disputed the fact that the assessee had to follow the mercantile system and during the transition period alone the hybrid system had arisen. In favour of assesse
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2012 (12) TMI 896
Cost of replacement of machinery - Revenue or capital in nature - Assessee is engaged in manufacture of yarn in Textile mill - Held that:- Following the decision in case of SARAVANA SPINNING MILLS P. LTD.(2007 (8) TMI 16 - SUPREME COURT OF INDIA) that contention of revenue was correct and set aside assessee claim. In favour of revenue
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2012 (12) TMI 895
Validity of notice u/s 148 – Reason to believe - Deduction on account of royalty - Adverse comment in the Audit report in relation to the royalty amount for the assessment year - Held that:- As the “reasons to believe” are a mere recital of events, including the previous order of assessment, which permitted the deduction, the order of the TPO, the assessment order of the subsequent year which made disallowance for royalty. The notice does not anywhere indicate what was the new material which came to light, that threw into focus the fact that the assesse’s behavior in not disclosing material particulars, attracted the provision u/s 148.
Following the decision in case of Eastern Newspaper Society (1979 (8) TMI 1 - SUPREME COURT) that the opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax officer
Assessing Officer can re-open an assessment under Section 147 of the Act, only if there is 'tangible material' to show that income has escaped assessment. The Assessing Officer shall not be allowed to arbitrarily re-open assessment.
The mere fact that a transfer pricing order had led to a partially adverse order, or that in the subsequent year, the amount claimed was disallowed, does not constitute a valid basis for issuance of the notice. On the contrary, the materials on record disclose a detailed inquiry into the nature and character of the royalty, which had been dealt with by the AO in the first instance. Therefore, that the impugned notice, to the extent it was based on the report and opinion of the audit report, is indefensible. In favour of assessee
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2012 (12) TMI 894
Penalty u/s 271D & 271E - acceptance and repayment of loan or deposit in excess of Rs. 20,000/- in cash from/to any other person - violation of the provisions of Section 269SS and Section 269T - ITAT deleted the levy - Held that:- Order of the Tribunal stating that since the business of the assessee itself is to collect and repay deposits, there can be no violation of the provisions of Section 269SS and Section 269T is not the only reason given by the Tribunal for approving the orders of the CIT(Appeals) cancelling the penalties.
Facts taken into consideration by the Tribunal in accepting the assessee's explanation that there existed reasonable cause in mobilizing these deposits in rural and semi-urban areas within the meaning of Section 273B. The Tribunal has in substance relied on its earlier order in the case of M/s Sahara India Financial Corporation Ltd., (a group company) () that the finding of the Tribunal that there was reasonable cause for the default within the meaning of 273B is a question of fact which cannot be disturbed by the High Court as there was no material or evidence brought before the Court to show that the finding was perverse or was of such nature that no reasonable person, duly instructed on the facts and the legal position, would have reached.
In the present case also the revenue has not been able to bring on record any material to show that the finding of the Tribunal as to the existence of reasonable cause is perverse - also as decided in CIT v. Parma Nand [2002 (11) TMI 13 - DELHI HIGH COURT] and CIT v. ITOCHU Corpn. [2004 (5) TMI 53 - DELHI HIGH COURT] that whether or not there was reasonable cause for the default is a question of fact which does not give rise to a substantial question of law unless the finding is perverse or irrational. Thus having regard to the finding of fact entered by the Tribunal that there was reasonable cause for the defaults, no substantial question of law arising for consideration - in favour of assessee.
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2012 (12) TMI 893
Unexplained investment – Search and seizure u/s 132(1) - Addition on account of diamond jewelry - Found at the residence and from the bank locker – Assessee claimed most of the items were gifted / purchased from drawings
Held that:- As the assessee had given the explanation with regard to all the another jewelleries found at the time of search along with the evidences and details as were available. Assessee has filed details of cheque payments for the purchase of jewellery and the bank statement along with the summary of purchases made through jewelers, date, cheque number and amount, right from the assessment year 2002-03 up to the date of search.
There was no occasion for the CIT(A) to go into such a theoretical concepts laid down by various High Courts / Supreme Court, he should have confined himself to the findings given by the AO and the contentions of the assessee about the evidence and explanation furnished in support of jewellery found.
Gifted jewelleries cannot be treated as unexplained as the same is duly supported by such corroborative evidence like gift certificate issued by the mother of daughter-in-law and photographs of marriages shown before the investigation unit. Issue decides in favour of assessee
Addition on account of art work and painting - Unexplained investment – Search and seizure u/s 132(1) - Valuation of art work and painting - AO noted that some of the art works could not be explained properly by the assessee with regard to the source of acquisition – Held that:- There could be possibility that the assessee may have acquired certain painting at a very low cost either from a flea market or from abroad or by way of gift from friend or relative for which such a high valuation cannot be taken. Issue of unexplained investment in art works / painting is restored to the file of the AO for denovo adjudication. Issue remand back to AO
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2012 (12) TMI 892
Non deduction of TDS on lorry hire charges - disallowance u/s 40a(ia) - assessee contented that he has already made payments and remaining outstanding as on 31 st March, 2006 - Held that:- As decided in Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] section 40(a)(ia) is applicable only to expenditure which is payable as on 31st March of every year and cannot be invoked to disallow the amounts which are already been paid during the previous year, without deducting tax at source - confirm the disallowance to the extent of Rs. 5,65,175/- the amount outstanding as on 31.03.2006 and direct the AO to delete the balance amount of Rs.61,66,953/- as already paid - partly in favour of assessee.
Transportation hire charges - TDS u/s. 194C - Held that:- Since the facts regarding assessee having contract with the transporters or truck owners is not examined by the lower authorities, this issue is restored back to the file of the AO. to decide the issue whether there exists any contract or not so as to attract TDS u/s. 194C on hire charges for carrying on the job - in favour of assessee by way of remand.
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2012 (12) TMI 891
Depreciation in the case of succession - One unit of assessee was transferred to the subsidiary company with all assets and liabilities at the book value on 1.11.1996 - Assessee claim depreciation on the opening WDV of the depreciable assets comprised in unit proportionately between Holding & Subsidiary company - Succession to business otherwise than on death u/s 170 -
AO u/s 43(6)(c)(B) held that machineries of unit were sold and hence there could be no WDV to allow depreciation - The assets of unit were transferred to the subsidiary company at the WDV as on 31.10.1996 - As the assets were sold during the accounting period, the sale value had to be reduced from the WDV and only the balance depreciation could be allowed
Held that:- Contrary to the view of the Tribunal, we find that Section 170 of the Income Tax Act deals with succession to business, otherwise than on death. On a reading of Section 43(6)(c), Explanation 2 to the Section and Section 170 along with the fourth proviso to Section 32(1), we have no hesitation in agreeing with the assessee's case that when the assessee transferred its B Unit to the 100% subsidiary company, it was entitled to claim depreciation apportioned in terms of what is provided for under the fourth proviso to Section 32(1) of the Income Tax Act. The view of the Tribunal that the assessee was not entitled to any depreciation on the ground that there was only a sale, as both units continued to exist, cannot be sustained.
As the fourth proviso to Sec. 32(1), that the entire unit is taken as one before succession and the aggregate deduction is calculated at the prescribed rates as if the succession had not taken place and such deduction, thereafter, is to be apportioned between the predecessor and the successor company in the ratio of number of days, for which the assets were used by them. Therefore, assessee is entitled to the claim of depreciation as provided for in the fourth proviso to Section 32(1)
Appeal remand back to AO in favour of assessee
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2012 (12) TMI 876
Registration u/s. 12A - CIT(A)rejected the application on non submission of documentary evidence regarding its activities - ITAT allowed the claim - Held that:- It can be seen that under Section 12AA the Commissioner has to satisfy himself about the objectives of the trust and the genuineness of its activities. For such purpose, he has the power to call for such documents or information from the trust as he think are necessary. However, this does not mean that if the activities of the trust have not commenced, the Commissioner has authority to reject its application for registration on the ground that the Trust failed to convince him about the genuineness of the activities. That is what unfortunately the Commissioner did in the present case.
The Commissioner in the present case did not dispute about the charitable activities as indicated in the object clause of the assessee & in case where the assessee trust did not start charitable activity at the time of granting registration, the same can be verified from the object clause. In that view no error in the Tribunal’s impugned order reversing the order of the Commissioner who merely on the ground that the activities of the Trust had not commenced persuaded to reject the application for registration - in favour of assessee.
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2012 (12) TMI 875
Remuneration to partners - Allowance of sec 40(b)(v) only on the basis of declaration made in the partnership deed declaring them as working partner OR firm to prove that these partners are actively engaged in conducting the affairs of the business - Held that:- Section 40(b)(v) prescribed limit of remuneration which can be allowed to its partner as deduction while computing the business income. It is not in dispute that the remuneration paid to the working partners was within the provision of clause (v) of subsection (b) of Section 40 as all the three partners are working partners in the assessee opp.party firm and the AO has himself allowed the remuneration of Rs.4,00,000/- per annum to each of the partner.
The Parliament in its wisdom had fixed a limit on allowing the remuneration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) cannot be taken. The AO is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of the partnership deed provide for payment of remuneration to the working partners and whether the remuneration provided is within the limits prescribed under Section 40(b)(v) or not. If all the aforementioned conditions are fulfilled then he cannot disallow any part of the remuneration on the ground that it is excessive. Since in the present case, all the conditions required has been fulfilled the question of disallowance does not arise.
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