TMI Blog2023 (1) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ration received by partner under the head salary and considering the provisions of section 192 of the Act which talks about the salary given u/s. 15 of the Act, thus, we are inclined to confirm the findings of the ld. CIT(A) that there is no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm. Thus, we fail to find any infirmity in the findings of the ld. CIT(A). Ground no. 2 is dismissed. Disallowance towards various expenses claimed by the assessee - AO made the said disallowance since the assessee failed to file necessary evidence in the course of the hearing - CIT(A) deleted the said disallowance observing that a high-pitched assessment has been concluded by the ld. AO in the present non-adversial tax regime - HELD THAT:- We, however, on facts of the case observe that no proper documents to support such claim were filed by the assessee before the ld. AO and looking to quantum of expenses and lack of sufficient evidence filed before the lower authorities, we sustain disallowance of expenses at Rs. 15,00,000/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses, travel conveyance etc. disallowed expenses of Rs.3,62,37,711/- as being based on conjectures surmises. In doing so, the Ld. Commissioner of Income Tax(Appeals) failed to appreciate that fact that at the time of assessment proceedings the assessee could not produce any evidence/bills, vouchers for such huge expenses claimed. The Assessing Officer while accepting that such expenses are accordable while executing any contract works was not satisfactorily convinced by the assessee who failed to produce any material evidence to substantiate such large claims of expenses of about Rs.70.81 Cr. 2. That the Ld. Commissioner of Income Tax(Appeals) claims that the additions are high pitched in erroneous so much so that the Assessing Officer allowed 96% of such expenses and disallowed only Additions are high pitched in erroneous so much so that the Assessing Officer allowed 96% of such expenses and disallowed only 4% of such expenses as being unsubstantiated. 3. Brief facts of the case are that the assessee is a partnership firm, engaged in construction business. Income of Rs.1,21,98,600/- declared in e-return filed on 16-10-2017 for the AY 2017-18. Case selected for scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners would be the commission payable to the said working partners . Further the assessee appellant submitted a detailed calculation for the amount of commission payable to the working partners as computed hereunder: Particulars Amount (Rs.) Net Profit during the year 8,24,78,261.67 Less: Remuneration Interest Attributed to Partners 5,80,87,828.00 Net Profit after Partner s Remuneration 2,43,90,433.67 Commission to be Distributed between Continuing partners (50% of Net Profit after Partner s Remuneration) 1,21,95,216.00 It was further contended that the profit sharing ratio between the three working partners was 38:1:1. Accordingly, the commission payable to the said working partners out of the aggregate commission payable of Rs. 1,21,95,216/was computed as under: Name of Partner Profit Sharing Ratio Calculation Commission Sri Dasakhiat Lamare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such payment was not authorised by, or is not in accordance with, any earlier partnership deed, so, however, that the period of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or (iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of twelve per cent simple interest per annum; or (v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :- on the first Rs. 3,00,000 of the book-profit or in case of a loss Rs. 1,50,000 or at the rate of 90 percent of the book-profit, whichever is more; on the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the submissions of the Appellant also, the total remuneration! commission paid was Rs. 1,30,05,216/Rs. 8)0,000/plus Rs. ,21,95,216 ). Further, it is noted that the aggregate remuneration/ commission paid to the 'working partners' was as under: Name of the Working Partner Remuneration/Commission Sri Dasakhiat Lamare 1,18,55,456/Sri Evarist Poshna 5,74,880/Sri Banehkupar Soihkhlet 5,74,880/Total Remuneration/Commission 1,30,05,216/- In view of the above discussion, it is noted that an aggregate of Rs. 1,30,05,216/- was paid to 'working partner' of the Appellant Firm in the form of remuneration and commission which was undisputedly within the permissible limit under section 40(b)(v) of the Act and duly authorized by the partnership deed. It is further noted that out of the aggregate amount of Rs. 1,30,05,216/- (Rs. 8,10,000/- for salary and Rs. 1,21,95,216/- for commission) paid as remuneration/commission, an aggregate amount of Rs. 1,18,55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at salary, bonus, commission, remuneration etc by whatever name called due to or received by a partner of a firm from the firm shall not be for regarded as salary the purposes of this section. Accordingly, provisions of Section 192 related to salary would also not be applicable in cases where remuneration has been paid by partnership firm to its partners. In view of the above stated facts, the disallowance of Rs. 14,82,595/- made by the AO under section 40(a)(ia) of the Act is liable to be deleted. I further gets strength from ratio of judgement delivered by Hon'ble ITAT, Chandigarh in the case of Assam Tea House, Chandigarh Vs. Department of Income Tax [in ITA No. 759/Chd/2011] where it was held as under: In view of the proposition laid down by various courts including Hon 'ble Supreme Court that firm is only a unit of assessment and not a legal person, there cannot be a contract of service between a firm and any of its partners. In the facts of the present case, the commission was paid to the partners of the assessee firm as per the convenants in the partnership deed i.e. an agreement between the partnership firm and its partners, which are not two distinct p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration etc or whatever name called given or credited to a partner of a firm. Thus, we fail to find any infirmity in the findings of the ld. CIT(A). Ground no. 2 is dismissed. 15. Ground no. 3 is the disallowance of Rs. 3,62,37,711/- towards various expenses claimed by the assessee. 16. The ld. AO made the said disallowance since the assessee failed to file necessary evidence in the course of the hearing. The ld. AO also observed that it cannot be denied that major expenses were incurred in cash. In this regard at the same time full reliance cannot be placed without any documents i.e bills/vouchers etc. The ld. AO made the disallowance @ 3.5% of the material consumed for construction work, 3% of the expenses incurred labour charges, 3% of stores and spares expenses and 10% of other direct expenses and travel and conveyance. However, the ld. CIT(A) deleted the said disallowance observing that a high-pitched assessment has been concluded by the ld. AO in the present non-adversial tax regime . Neither any deficiency has been pointed out nor any specific defect has been brought o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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