TMI Blog2023 (11) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and profit earned from the partnership firm and whatever the capital borrowed by the assessee was directly introduced in the partnership firm. By looking at the balance sheet, submitted before us, we observe that assessee has own capital and borrowings from family members which is equivalent to the property owned by the assessee. There is direct link with the loan creditors and the capital introduced in the partnership firm. Therefore, it establishes that the funds borrowed by the assessee is directly introduced in the partnership firm. Whether the assessee can claim the interest expenditure against the remuneration received from the firm? - As salary or remuneration received from the firm is no doubt compensation for the services rendered but it is considered as income from business otherwise as a return of share of profits to the partners of the firm. Therefore, the partner should be entitled to all the deductions which he was entitled while computing his share of profits in the firm including the deduction in respect of interest paid on monies borrowed for investment in the firm as capital u/s. 67(3) . As relying on Santosh Kumar Agrawal [ 2000 (7) TMI 971 - ITAT M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order. As per his advised I immediately requested him to prepare the appeal to be filed before The Income Tax Appellate Tribunal. 7. There is a delay in filing of an appeal by 47 days. There was no malafide intention nor was a deliberate act to delay the matter. The delay was due to inadvertent mistake in not verifying day to day email 8. The appellant has not in any way benefited by delaying the appeal. The appellant therefore request that the delay may be condoned and appeal may be admitted. Whatever stated above is true and correct to the best of my knowledge and belief. 3. In view of the above submissions, Ld. AR of the assessee prayed for condonation of delay. 4. Ld. DR objected for the condonation of delay and however, he has not filed any submissions against the affidavit as well as the facts described in the above affidavit. 5. Considered the submissions of both parties, we found that the reasons brought on record by the assessee are reasonable, for the sake of overall justice, the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. MST. Katiju and others, [1987] 167 ITR 471, held as under:- 3. The legislature has conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Act ). Subsequently, the case was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 8. Assessee has declared income under the head Income from Business capital gains and other sources . The assessee is a partner in M/s. Sri Jagannath Steel Co. and M/s. Gurunanak Metal Works. During the assessment proceedings, Assessing Officer observed that assessee has claimed interest of ₹. 31,55,304/- against the remuneration received of ₹. 15,00,000/- from partnership firm under the head income from business profession . The assessee was asked to substantiate the above said claim and why the interest should be allowed against the remuneration income and also prove the nexus for claiming interest against remuneration from the firm. 9. In response, assessee vide letter dated 25.11.2016 submitted as under: - Assessee had shown loss under the head Income from business of Rs. 21,960/-. The loss is the result of interest paid by the assessee on loans taken by him. The loans taken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r confirmed any loan given to the appellant before the assessing authority or the appellate authority. iv. There is no third-party verification/confirmation on record, except the mutual arrangement between appellant and the firm, namely M/s Sri Jagannath Steel. v. No audited accounts or audit report of the appellant or the firm have been filed or produced before the assessing authority or the appellate authority, for examination or verification vi. No bank accounts reflecting the transactions relating to loan taken, loan given and interest paid on such loan taken/given, of the appellant or the firm, have been produced before the assessing authority or the appellate authority, for examination and verification. 6. Considering the above discussed facts and circumstances in the case, the ground of appeal of the appellant are considered carefully but not found sustainable and are dismissed. Additional ground of appeal is also considered and not found sustainable in view of the facts as discussed above in para 5 of the order. In the conclusion, the appeal of the appellant is dismissed. 12. Aggrieved with the above order assessee is in appeal before us raising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan creditor during the current Assessment Year. In this regard he relied on the decision of the Coordinate Bench in the case of Santosh Kumar Agrawal v. ACIT in ITA. No. 2925 and 2926/Mum/1997 dated 13.07.2000 where the similar issue was decided in favour of assessee. Copy of the order is placed on record. 15. On the other hand, Ld. DR relied on the orders of the lower authorities, particularly Page No. 9 of the Appellate Order where the Ld.CIT(A) has questioned the genuineness of the loan taken by the assessee from the various creditors. 16. Considered the rival submissions and material placed on record, we observe that assessee has paid interest of ₹. 31,55,304/- to the various loan creditors and only source of income was remuneration from the partnership firm and it is observed that assessee has introduced capital in the partnership firms by the name M/s. Sri Jagannath Steel Co. and M/s. Gurunanak Metal Works. The main source of income is only from these firms and income from other sources. The assessee has also brought to our notice the funds received from loan creditors and also transferring the same amount to the partnership firm. Since the main source of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to a partner is only a mode of sharing the profits. The salary paid to a partner retains the same character of the income of the firm. These principles have been laid down by the Supreme Court in the case of CIT vs. R.M. Chidambaram Pillal Etc. 1977 CTR (SC) 71: (1977) 106 ITR 292 (SC). It has been held in this decision, that the salary of a partner is only an alias for the return by way of profits for the human capital-sweat, skill and toil--which the partner has brought in for the common benefit. The immediate reason for payment of salary may be the service contract, but the causa causans is the partnership. The Supreme Court held that when an arrangement is made by which a partner works and receives amounts as wages for services rendered, the agreement should in truth be recorded as a mode of adjusting the amount, that must be taken to have been contributed to the partnership's assets by a partner, who has made what is really a contribution in kind, instead of contribution in money. On this reasoning, the Supreme Court held that what has been paid as salary by the firm to a partner is really the share of profits paid to him. It would appear that the legislature has r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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