TMI Blog2019 (11) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... the income received from the firm does not arise. As relying on N. KHADERVALI SAHEB AND ANOTHER [ 2003 (2) TMI 63 - SUPREME COURT] it is clear that the partners are not separate from the partnership firms. Therefore the income of the partner from the firm is treated as business income. Income received by the assessee from the partnership firm i.e. remuneration from the firm, in this regard we note that such income is taxable in the hands of the partner. Now the question arises, whether the assessee has incurred an expense against the earning of such income. The assessee as partner in the firm is acting in the representative capacity meaning thereby whatever expenses are incurred by the partner in connection with the business of the firm, then the firm is entitled for the deduction of such expenses subject to the provisions of the Act. If the assessee has incurred any expense on behalf of the partnership firm then the right course of action is to claim the reimbursement from the partnership firm and such firm will claim the deduction under the relevant provisions of the Act on account of such reimbursement of expenses. As such the assessee cannot claim any expense against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax (Appeals)-10, Ahmedabad dated 27/02/2017 (in short Ld. CIT(A) ) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dt.29/01/2016 relevant to the Assessment Year 2013-2014. The assessee has raised the following grounds of appeal. 1. The learned Commissioner of Income Tax(Appeals) has erred in facts and law by considering expenditure incurred of ₹ 5,66,925/- for the purpose of earning business income from the seven partnership firms as considering such as totally personal expenditure and confirmed the addition of the aforesaid amount. The solitary issue raised by the assessee is that the Ld. CIT (A) erred in confirming the disallowance of the expenditure of ₹ 5,66,925/- claimed against the business income received from the partnership firms. 2. The facts in brief are that the assessee in the present case is an individual and is a partner in 7 partnership firms. The assessee from such partnership firms is earning income by way of share of profit, remuneration and interest on the capital invested by him in the firms. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tea Coffee 14,550.00 Telephone 13,793.00 Vakil Fee 5,000.0 0 Vehicle Maintainance Exp. 27,407.00 Grand 5,66,925.11 8.3.1 First of all, during the course of assessment proceedings, the appellant argued that the expenses have been incurred for keeping one management person and one peon. However, while going through the actual expenses debited in the personal accounts of the appellant, it is found that these expenses are not only for the salaries but are also for car expenses, accounting fees, electricity expenses, petrol expenses, rent expenses, tea-coffee expenses, telephone expenses, vakil fees which are all general expenditure of the appellant. The appellant has not given any reasons as to why these expenses should be allowed under the head 'Profit 85 Gains of business'. The onus is on the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding maintaining the books of account of the appellant in his personal capacity, which has nothing to do with the earning of business income as claimed by the appellant. This is also demonstrated by the fact that the salary of the appellant from the partnership firm is only ₹ 1,46,407/-. The judgement relied upon by the appellant of Hon'ble Gujarat High Court is also not applicable to the facts of the case. In that judgement, the appellant claimed expenses relating to motor car on the ground that the car was being used for the purpose of business. Accordingly, their Lordship have held that since the Tribunal has given a clear cut finding that the car was indeed used for the purpose of business and there is no finding of either the Assessing Officer or the appellate Commissioner or the Tribunal that the expenses have not been incurred for the purpose of business, the Gujarat High Court decided the issue in favour of the appellant. However, in this case, the appellant has not discharged the onus/burden cast on him by the statute and has not produced any evidences to show that these expenses have actually been incurred for the purpose of business. A perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity merely on becoming a partner in the partnership firm. A business is an organization where people work together to make and sell products or services. A business can earn a profit for the products and services it offers and it works on regular basis. 6.3 We also note that a partnership firm is a form of business in which a group of people, also known as partners, come together. They set up their firm and provide services and products through it. However, a partnership firm is not considered to be a separate legal entity. Partners share all the profit and losses amongst each other. Thus the business has been carried out by the partnership firm and the profit of the same has been determined in its hands for the purpose of the tax. Accordingly, we hold that the assessee on becoming a partner in the firm does not mean that he is carrying out any business activity. 6.4 We also feel to refer the definition of the business or profession as provided under section 2(13) and 2(36) of the Act which reads as under: (1) business 40 includes any trade 40, commerce or manufacture or any adventure 40 or concern in the nature of trade 40, commerce or manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee as partner in the firm is acting in the representative capacity meaning thereby whatever expenses are incurred by the partner in connection with the business of the firm, then the firm is entitled for the deduction of such expenses subject to the provisions of the Act. Thus in our considered view, if the assessee has incurred any expense on behalf of the partnership firm then the right course of action is to claim the reimbursement from the partnership firm and such firm will claim the deduction under the relevant provisions of the Act on account of such reimbursement of expenses. As such the assessee cannot claim any expense against the income from the firm, save as provided above. 7.1 We further note that the assessee has shown aggregate incomes from all the partnership firms as detailed under: Sl. No. Particulars Amount 1. Interest Income 13,50,197/- 2. Remuneration 1,46,407/- 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different view of the matter-and if there was no change it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12. 7.6 The principles of consistency can be applied where the facts remain the same. Thus it is transpired that the principles of consistency are based on the facts. For example if the salary has been paid to the staff for a particular amount in a year then in our considered view the same cannot be disturbed in the subsequent year until and unless the facts warrant otherwise. Thus in our considered view in such a situation, the principles of consistency will be applied. 7.7 However, in a case where there is a violation of the law in 1 year then the question arises whether, the same can be allowed to be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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