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TMI Blog2019 (10) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... ingh and Pawan Kumar even when the same were duly offered to tax in the return of income by those persons and the amounts were paid in lieu of services rendered by them. 4. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the disallowance of 1 / 5th of the total claimed expenses of Rs. 6,04,300/- i.e. Rs. 1,20,860/- in relation to vehicles of the appellant firm by holding them to be of personal nature. 5. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the disallowance of Rs. 1,00,000/- out of total claimed expenses of Rs. 6,13,924/- on estimated basis related to various office expenses by holding them to be partially unvouched. 6. That on law, facts and circumstances of the case, the worthy CIT(A) has erred in confirming the disallowance of Rs. 19,683/- u/s 36(1)(iii) on account of advance of Rs. 1,64,030/- by applying notional interest rate of 12% p.a. 7. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 3. Ground Nos. 1 & 7 are general in nature and Ground No. 4 to 6 were not pressed so these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added back to the income of the assessee in view of the following facts:- (i) Limits of salary to the working partners have been specified in the partnership deed that salary of 5,000/- per month will be given to three partners. Hence, excess salary claimed is to disallowed. (ii) The assessee has willfully failed to produce the legible copy of partnership deed and furnished only after receiving final opportunity-from this office. (iii) The assessee produced a copy of addendum only after receiving the final show cause notice that why excess salary be not disallowed in view of the provisions of the partnership deed. From these facts, it is evident that the so called addendum has been prepared after thought. (iv) The said addendum has been claimed to made on 01.04.2011 whereas document on which the same has been written is purchased on 01.12.2002, This shows that this is after thought exercise. (v) The assessee failed to produce the original addendum in this office for verification. (vi) During the assessment proceedings, the assessee was again 8s again requested to furnish the legible copy of partnership deed but the assessee never stated that an addendum is also made. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to Rs. 12,000/- pm w.e.f. 01.04.2011 itself. And hence for the year in question credit of partner's salary of Rs. 12,000/- pm to the 3 partners each was duly according to the addendum partnership deed. 2) It is submitted that the salary to partners expense of Rs. 4,32,000/- is genuinely claimed expense as the same is supported by legal documents i.e. partnership deed and addendum to partnership deed. Further, it is submitted that both of the documents are valid documents signed and attested by all the partners of the appellant firm, by witnesses and by notary public. Further, both of these documents are present on record with the appellant and duly filed during the assessment proceedings by the appellant. It is a settled law that when the expense is supported by documents and documents are submitted during the assessment proceedings by the assessee, no disallowance of the expense can be made by the Assessing Officer. 3) It is very important to note that Partnership deed duly includes the clause at point No. 10 that "the partners shall be at liberty to increase or decrease the remuneration and interest payable to them from time to time in the interest of the partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding their official to Ld. AO. When, no proceedings were attended in between, how could there be filed any document. Further, in starting of the assessment proceedings, the counsel provided the Xerox copy of the partnership deed of the appellant firm, but the same got photocopied on lighter ink mode and was not properly legible. It is not like a willful failure to produce the partnership deed. But later when Ld. AO asked for the clear Xerox copy of the partnership deed, then counsel again provided the same with better photocopy which was more legible. Hence, no negative inference should be made by the Ld. AO. 6) As regards the allegation of not providing of copy of addendum till final show cause, it is submitted that the appellant duly provided the copy of partnership deed along with all documents to Ld. AO at the start of the assessment proceedings. It is only when, the Ld. AO asked the clarification about the quantum of salary paid to partner of the appellant firm, the appellant submitted the copy of addendum of partnership deed to the Ld. AO. When, the Ld. AO asked about the copy of addendum deed, the appellant immediately provided the same to Ld. AO. In this case, no negative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dum copy was also submitted as and when asked for by the Ld. AO. What is the point of making negative inference in these facts? In the very first submission regarding salary expense, the appellant submitted that the salary paid @ Rs. 12,000/- pm is authorized by the partnership documents. When the salary of Rs. 12,000/- pm is duly authorized by the addendum to partners of the appellant firm and copy of the addendum was filed with the Ld. AO, then how can the same be treated as unauthorized amount of salary paid? Partnership deed as well as addendum to partnership deed both is legal and valid documents signed and prepared by all the 3 partners of the appellant firm and that too in presence of witnesses and these documents are duly signed and attested by the Notary public. Copy of both these documents was placed before the Ld. AO during the assessment proceedings are produced herewith too. It is submitted that partnership deed as well as addendum has the clause of salary to partners showing the quantum of salary to avoid any ambiguity. Further, salary paid of Rs. 4,32,000/- (Rs. 1,44,000/- to 3 partners each) is fully allowable because:- * The salary paid to partners and debited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings. The assessing officer has denied take cognizance of the act in an addendum partnership deed, stating that the document was purchased on 01.12.2002. In my considered opinion the difference of addendum of partnership deed ,as stated by the assessee and as found on the addendum partnership deed has not been explained by the assessee, therefore document cannot be relied upon. Accordingly the disallowance of Rs. 2,52,000/- on account of disallowance of salary paid to the partners is sustained. This ground of appeal is dismissed. 8. Now the assessee is in appeal. 9. Ld. Counsel for the Assessee reiterated the submissions made before the authorities below and further submitted that as per Clause 10 of the partnership deed dt. 01/12/2002 the salary may be increased or decreased from time to time in the interest of partnership business and that vide addendum deed dt. 01/04/2011 the salary was increased to Rs. 12,000/- each of the partners per month with effect from 01/04/2011. It was also stated that in the subsequent years the increased salary had been accepted and no disallowance was made. Therefore the disallowance made by the A.O. and sustained by the Ld. CIT(A) for yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. (c) Whether tax has been deducted on retainership given to them as the assessee claimed that amount has been given to these persons for technical and professional services and tax is to deducted in view of provisions of section 194C of the I.T. Act 1961. 13.1 In response the assessee submitted that the tax had not been deducted on retainership fee as the services were covered under section 192B and not under section 194C of the Act. The A.O. asked the assessee to produce the persons to whom retainership fee was paid. In response the assessee submitted that during the festive season the assessee used to appoint persons on display, outfits, in front of customer and the retainership was as good as salary. The A.O. was of the view that the assessee diverted its income in the hands of two persons for the following reasons: (a) The assessee has failed to produce the persons to whom it has claimed that retainership at Rs. 3,00,000/- has been paid in spite of repeated opportunities allowed to it. (b) In its preliminary reply, the assessee contended that amount of Rs. 3,00,000/- was paid to the two persons for rendering professional and technical services by the two persons. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of the business when there is huge rush of the customers at the appellant's showroom and the sales people already working within are not sufficient in number to handle the rush. So the appellant sometimes hires such sales people. It is very much clear that the amount paid to the sales people is neither a fee for technical services nor a professional fee. Further, it is important to note that the qualification of these 2 persons is only graduation and the services of graduates are not covered in the Technical/professional services. Hence, when no technical/professional fee has been paid by the appellant firm to these 2 persons and the amount paid is only salary, no TDS provisions of section 194J of the Act were applicable. b) As regards ambiguity whether TDS provisions were attracted or not arisen only because the appellant debited the salary expenses of Rs. 3,00,000/- paid in respect of sales boys services of these 2 persons to retainership expenses. As already stated retainership is as good as salary. Because remuneration paid to sales force of the appellant firm is nothing but salary. The only reason to charge the salary of these 2 persons under the head of Retainership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that there is no contract between the appellant firm and the persons in question for the provisions of services. Hence, where there is no contract oral or written, there does not arise any question of deduction of tax at source u/s 194C of the Act. Keeping in mind the above facts, submissions and legal position, the ground of the appellant firm may please be allowed. 15. Ld. CIT(A) after considering the submissions of the assessee observed that the assessee had not been able to explain satisfactory nature and non applicability of the TDS provisions and that the assessee had failed to furnish any work relation or agreement with those parties to whom retainership fees claimed to have been paid. 16. Now the assessee is in appeal. 17. Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the genuineness of the explanation had not be doubted and that the assessee hired the sales man from the market to whom retainership fee was paid but there was no contractual obligation and that the payment was like salary to which provisions of Section 40(a)(ia) were not applicable. It was further submitted that the persons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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