TMI Blog2010 (8) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in confirming the order of the JCIT with reference to the addition made to your appellant's income on account of sundry creditors as on 31st March, 2003. 2. The CIT (A) erred in confirming the addition of ₹ 32,85,000 made by the JCIT on account of the income diverted to the retired partners under the partnership deed. 3. The CIT (A) erred in rejecting your appellants ground where a direction for granting credit for tax of ₹ 8,83,383/- deducted at source was sought by your appellants as and when the certificates are made available. 4. The CIT (A) erred in not adjudicating on the ground raised by your appellant on levy of interest under section 234C(1) of the I.T.Act. 5. Apropos Ground No.1, facts are that the Assessing Officer noted that the assessee was following cash system of accounting and yet it was showing certain amounts as its liabilities. He observed that in cash system of accounting, these expenses could be allowed only in the year of payment. The assessee pointed out that these items are typically in the nature of adjustments to the revenue accounts on the basis of timing or give and take. In the alternate, it was submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2001- 02. 6. Ld Counsel for the assessee submitted that this issue is covered in assessee's own case for the assessment year 2001-02 and also by various orders of the Tribunal which are as under: i) Order dated 11.12.2008 in M.A. No.397/M/2008(arising out of ITA No.7175/M/2004) for the assessment year 2001-02. ii) Order dated 29.4.2009 in ITA No.7157/M/2004 for the assessment year 2001-02. iii) Order dated 20.12.2007 of ITAT in assessee's own case in ITA No.7157/M/2004 for A.Y. 2000-2001 6.1 Ld Counsel filed a detailed statement of sundry creditors which is reproduced hereunder:- Sr.No. Particulars Amount Remarks 1. Unpaid cheques 45,000 The amount represents rent paid in respect of disputed tenancy which is returned by landlord subsequently paid on 24.6.03 2. Unpaid cheques a. Registrar-High Court- 250,000 b. Devyoli Haldar 6,995 c. Ruchika Kahar 17,101 d. Ashish Garg 15,757 e. Abhishek Verma 15,613 f. Poonam Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (42,960) 8. Travel advance 40,157 34,833 9. Stale cheques 111,900 575,610 10. Travel suspense 68,677 56,794 11. Profession tax payable 2,375 1,950 12. Unclaimed balances 51,059 355,882 Total 1,025,290 1,646,455 6.2 Ld D.R. submitted that there could not be any liabilities in cash system of accounting. 7. We have considered the rival submissions and perused the record of the case. As far as ld D.R's submissions are concerned, it would suffice to observe that the assessee is regularly following this system of accounting which has been accepted by the department in part. As far as item Nos.1,4,5and 12 are considered, ld Counsel has filed a detailed chart giving the position of payments made in subsequent years, reproduced in para 6 above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title on the fees collected by the Firm together with a charge thereon. The assessee had, inter alia, pointed out that the retired partners had an overriding title on 1% of gross fees collected by the firm subject to certain limitations as per partnership deed dated 1.4.1998. The retired partners individually had offered this amount to tax in their returns and paid tax accordingly. Thereafter, again the AO issued notice which was duly replied by the assessee, in which, the assessee relied on the following decisions:- i) CIT v. Natvarlal V. Desai, 262 ITR 64 (Guj) ii) CIT v. Mulla and Mulla and Craigie, Blunt and Caroe, 190 ITR 198 (Bom) iii) CIT v. Nariman L. Bharucha and Sons, 130 ITR 863 (Bom). The AO did not accept the assessee's contention and added a sum of ₹ 32,85,000/- paid to ex-partners of the firm as their income relying on the decision of the Hon'ble Mumbai High Court in the case of CIT v. V.G. Bhuta, 203 ITR 249(Bom). 9. The CIT (A) confirmed the addition and did not accept the assessee's contention that the issue is covered by the decision of the ITAT in the case of C.C.Chokshi and Co. in ITA No.492-495/M/2003. 10. Ld cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an five years shall have an overriding title on 4% of the gross fees collected by the Firm from the date of his death for payment to them over a period of five years as consideration for uncollected bills rendered for fees and unbilled work as at the date of the death. Provided that in the year of death and in the year in which the fifth is completed the amount shall be the proportion of the amount that would be payable on the aforesaid basis for a full year. Provided further that the amount payable to his widow or heirs, executors and administrators for any one year shall not exceed 10% of the amount the deceased partner would have received as computed in accordance with the proviso to sub-clause (6)(A) of Clause 24 hereof except that in the year of death and the year in which the last payment is to be made the maximum amount shall be the proportion of the broken period to the maximum for a full year. Such payment shall be a charge on the assets and income of the Firm. (ii) The present sub-clause(c) of clause 25 shall be deleted and be substituted by the following: (i) Mrs Betty Cole, the widow of Fredrick Arthur Cole, one of the parties of the First Part, shall receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) shall be deleted and be substituted by the following: (i) If, at the date of his death, he was an active partner, there shall be payable until the expiration of 10 years only from the date of his death to his widow, or, if he leaves no widow surviving him, or if the widow does not survive for 10 years, to his heirs, executors and administrators, the same amounts from the divisible profits of the firm aforesaid which he would have received under subclause(3) of clause 26 hereof as if on the date of his death he was a retired partner, and if the widow of such partner shall survive the expiration of such period of the years aforesaid there shall be paid to his widow the same amounts as she received in the period aforesaid. (ii) At the death of an active partner to whom no amounts are payable pursuant to sub-clause(3) of clause 26 hereof, the following sums would be payable to his widow or heirs, executors and administrators and for the periods stated. If at the time of his death he has been a partner for the following periods: 1) Upto five years - ₹ 50,000 p.a. for a period of five years; or 2) In excess of five years but upto 10 years, ₹ 50,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the addition of Rs..7,41,262/- made on account of difference between the book value and actual value of amount lying in EEFC account of the assessee as on 31.3.2003. 17. Facts in brief are that the AO noticed that the assessee had stated the following in Note 3 of the accounts:- The firm has an Exchange Earners' Foreign Currency (EEFC) Account, the balance of which in the current account stood at $ 283,168.84 as at 31st March, 2003. The rupee valuation of this balance in the books is ₹ 12,672,436. This balance, if restated at the prevailing rate on 31st March, 2003, would have amounted to ₹ 12,413,698/-. In view of the cash basis of accounting adopted the difference arising due to changes in rate of exchange after realization of the bills has not been considered, except at the time of utilization of funds from the EEFC account. After considering the assessee's modus-operandi, the AO concluded that the assessee had not offered ₹ 7,41,262/- being difference arising due to change in the rate of exchange after realization of the bills, as its income in conformity with AS-11 issued by the Institute of Chartered Accountants of India. He, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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