TMI Blog2021 (7) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. Once the claim of payment of remuneration to partners is within the celling prescribed under Section 40(b) of the I. T. Act, 1961 the Assessing Officer cannot question the reasonableness of the remuneration when the genuineness of the payment is not in disputed.This issue is decided in favour of the assessee against the revenue. Disallowance of office expenses @ 20% - AO noted that the assessee has produced only ledger account of the expenses but no voucher has been produced - CIT(A) has deleted the said adhoc disallowance as held that the same is not proper - HELD THAT:- There is no dispute that the expenditure has been incurred for the purposes of business. It is also clear that the assessee had filed all the details of the expenses under various heads. AO has not pointed out any specific defects in these details filed. The AO has failed to bring any material on record to demonstrate that these expenses have not been incurred and are not verifiable. No disallowance can be made on mere suspicion. This addition is deleted. Since the CIT(A) has deleted the disallowance made by Assessing Officer, therefore, ground does not arise from the impugned order of the CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Rides, 1962, hence, there was absolutely no justification to interfere in disallowance of the remuneration of the partners. 5. Because even the part disallowances of remuneration under the impugned head was not called for under any of the provisions of Income Tax Act. when the assessing officer himself recognized the status of the two lady partners (i) Smt. Meera Gupta and (ii) Smt. Sita Gupta as active partners of the appellant firm. 6. Because the authorities below were not justified in mis-interpreting the statement of the lady partners and draw an adverse inference regarding their statements as recorded by the AO. 7. Because the Ld. CIT(A) was not justified in confirming the disallowance to the extent of 20% (₹ 13,890/-) of total expenses claimed at ₹ 42,892/-. Whereas the appellant was never asked to produce any vouchers before the AO. 8. Because the disallowances are too high and excessive and deserves to be reduced suitably. 9. Because the order appealed against is contrary to facts, law and principles of natural justice. 3. Ground nos. 1 2 are regarding validity of assessment framed u/s 147 r.w. Section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit prescribed u/s 40(b) (v) of the I. T. Act the Assessing Officer is not justified in re-working the remuneration of the partners and making disallowance. Hence, the Ld. AR has submitted that the issue is covered by judgment of Hon'ble Jurisdictional High Court. 6. On the other hand, Ld. DR has submitted that in the statement of partners recorded by Assessing Officer, she admitted the receipt of remuneration @ of ₹ 5,000/- per month and not ₹ 10,000/- as claimed by assessee. Therefore, the Assessing Officer allowed the remuneration to the extent of actual amount received by partners of the assessee firm. He has relied upon the orders of the authorities below. 7. I have considered the rival submissions as well as relevant material on record. The assessee has claimed payment of remuneration to its partners namely Smt. Suneeta Gupta and Smt. Meera Gupta @ ₹ 10,000/- per month each. The said amount of remuneration @ ₹ 10,000/- per month is duly credited in the capital account of the partners and the Assessing Officer has not disputed this fact of the credit of remuneration amount of ₹ 1,20,000/- each in the capital account of these two partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the provisions of Section 40(b)(v). The remuneration paid by the assessee firm to its working partners for the year under consideration amounting to ₹ 3931165/- was within the ceiling prescribed in the provisions of Section 40(b) and it is not the case of the department that the said remuneration was in excess of such ceiling. The only contention raised by the learned DR before us has been that the remuneration paid by the asssssee firm to its working partners aggregating to ₹ 3931165/- was highly excessive and unreasonable having regard to all the facts of the case as highlighted by the AO and such excessive portion of the said remuneration worked out by the AO at ₹ 2731965/- was rightly disallowed by him invoking the provisions of Section 40A(2). In this regard, the learned counsel for :he assessee has cited before us the decision of Ahmedabad Bench of ITAT in the case of Chhajed Steel Corporation Vs. AClT-77 ITD 419 wherein it was held that the provisions of Section 40(b) and 40A(2) operate in different fields and the provisions of Section 40A have no application in the cases where Section 40(b) has been applied. It was held by the Tribunal that the AO thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. It is not in dispute that the remuneration paid 1o the working partners was within the provision of clause (v) of sub-section (b) of Section 40 of the Act. The Parliament in Us 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) of the Act cannot be taken. The assessing officer is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of tie 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. In tile present case, we find that the Tribunal has found all the three conditions are fulfilled and we do not find any illegally in the impugned order. Thus the appeal fails and is dismissed. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Because the appellant's ground that the authorities below could not travel beyond the reasons recorded was illegally and unjustifiably dismissed without considering the legal aspects as has been brought by the appellant in the course of hearing of Appeal. 3. Because the Id. CIT(A) unjustifiably disallowed part of the remuneration of the appellant's partner Smt. Meera Gupta and Smt. Sita Gupta without invoking the provisions of section 40(b) of the Income Tax Act, 1961 which specify the maximum permissible amount of partners remuneration. 4. In any case and without prejudice to above, the appellant maintains proper books of accounts as required under Rule 6 of the Income Tax Rules, 1962, hence, there was absolutely no justification to interfere in disallowance of the remuneration of the partners. 5. Because even the part disallowances of remuneration under the impugned head was not called for under any of the provisions of Income Tax Act when the assessing officer himself recognized the status of the two lady partners (i) Smt. Meera Gupta and (ii) Smt. Sita Gupta as active partners of the appellant firm. 5. Because the authorities below wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred wholly and exclusively for the purpose of the business assessee. Even otherwise, the assessee has not produced any supporting vouchers to prove that the expenditure was incurred for the purpose of the business of the assessee. The CIT(A) has considered this issue for the A.Y. 2012-13 as under.:- I have gone through the facts and the order of AO and submissions made by appellant. AO disallowed these advertisement expenses because there is no clause mentioned in the agreement made between Reliance Media Works Ltd. with regard to such nature of expenditure. The firm has no relation with that of running of film. No proof in support of his contention regarding that expenditure has been furnished during the course of assessment proceedings. Appellant has not been able to give any evidence in support of its contention, hence this addition made by AO is confirmed. 18. Thus, an identical addition was confirmed by the CIT(A) for and A.Y.2012-13 the assessee has not challenged the said decision for the A.Y.2012-13. Even otherwise, once the assessee has let out the theatre to Reliance Media Works Ltd then the claim of the assessee cannot be accepted being incurred wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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