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TMI Blog2007 (3) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The contention of the assessee was that though the said amounts were paid beyond the due date prescribed under the relevant Act, but have been paid well within the due date for filing the return of income. The contention of the assessee was rejected by the Assessing Officer. 3. The assessee challenged the said addition before the CIT (Appeals) and the CIT (Appeals) deleted the addition. 4. We have heard the parties. The ld. Chartered Accountant for the assessee submitted that an identical issue has come for the consideration of this Tribunal in the case of Keltron Component Complex Ltd. being ITA No. 381 (Coch.)/2003 vide order dated 20-6-2005. He further submitted that the same issue was also considered by the Special Bench of the ITAT in the case of Kwality Milk Foods Ltd. v. Asstt. CIT [2006] 100 ITD 199 (Chennai) (SB). The ld. DR was fair enough to submit that this issue is covered in favour of the assessee by the decision of this Tribunal as referred to by the ld. CA as well as by the Special Bench of Tribunal in the case of Kwality Milk Foods Ltd. (supra). 5. We find that an identical issue had come for the consideration before the Special Bench of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation on the car on the reason of personal use. It was noticed by the Assessing Officer that the assessee has disallowed 1/4th of the car expenses on account of personal use, but at the same time, full depreciation was claimed on the car. The Assessing Officer was of the opinion that as the assessee has admitted the personal use of the car, disallowance was called for and he made the disallowance of 1/4th of the depreciation claimed and made the corresponding addition to the income of the assessee. 7. The assessee challenged the said addition before the CIT (Appeals) and the CIT (Appeals) deleted the addition made by the Assessing Officer. Now, the revenue has challenged the decision of the CIT (Appeals) before us. 8. We have heard the parties. The short controversy before us is in respect of the disallowance of depreciation for the reason of personal use of the car. Admittedly, as per the facts on record, the assessee itself has made the disallowance in respect of the expenses on the car on the reason of personal use. As per the provisions of section 38(2) if assets like building, plant or furniture is not exclusively used by the assessee for the purpose of business, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. We consider it necessary to reproduce here the reasons given by the Assessing Officer for making the addition for the alleged low gross profit declared by the assessee which are as under :- "The assessee's business is the biggest textile shop in Thodupuzha. On a total turnover of Rs. 4,25,32,550, the gross profit shown is only Rs. 54,18,875, which works out to only 12.75 per cent. The average GP rate for textile business is 15 per cent as per the returns of income filed by other textile dealers. In the immediately preceding year, the assessee itself has shown a GP of 13.55 per cent. By letter dated 9-9-2003 it was requested to explain whether there is any specific reason for the fall in GP rate. The assessee's reply states that there is increase in turnover by more than 10 per cent during the year. It is only by selling at reduced rates that sales could be increased. The assessee is dealing in various textile items including ready made garments, umbrella, mosquito nets, etc. For ready made items the profit margin is normally around 30 per cent. The assessee is not maintaining stock register. The stock inventory as on the last day of the accounting year produced is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer and confirmed by the CIT (Appeals). The assessee is a partnership firm which was constituted by the deed of partnership dated 18-12-1992. The Assessing Officer examined the deed of partnership more particularly clauses 6 and 7 and was of the opinion that the quantum of salary to be paid to the partners is not specifically provided in partnership deed. The assessee produced the copy of resolution alleged to be passed by the partners at 4 PM on 31-3-2001 as per which the salary payable to each partner was shown to be restricted to Rs. 48,000. The Assessing Officer relied on the CBDT Circular No. 739 dated 25-3-1996. The Assessing Officer was of the opinion that no deduction under section 40(b)( v) of the Act is admissible in respect of remuneration or salary paid to the working partner unless the partnership deed either specified the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration. The Assessing Officer made the disallowance of Rs. 1,44,000 claimed by the assessee towards the salary to the working partners. 14. The assessee challenged the said disallowance before the CIT (Appeals) but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Partnership Act, the partnership is created by the contract between the parties and parties are at liberty to determine the terms of their contact. The Income-tax Act does not provide how the partnership should determine the terms in respect of determining the quantum of salary or remuneration agreed to be payable to the working partner but by way of provision of section 40(b)( v) for allowing the expenditure relating to the salary or remuneration certain mandatory conditions are laid down by the Act, but in those conditions, there is no condition that as far as the quantification of remuneration and salary is concerned, it should be in a particular manner. Once the deed of partnership authorises the payment of remuneration or salary to the working partner and the remuneration or salary provided or paid as per the terms of deed of partnership there is no bar for allowing the same. 17. The ld. CA further argued that the Assessing Officer has placed reliance on the Circular No. 739 dated 25-3-1996 and came to the erroneous conclusion that the said Circular is only applicable for the assessment years 1993-94 to 1996-97. He, therefore, submitted that the beneficial circulars are to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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