SWASTIKA AUTOMOBILES,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

fu/kZkfjrh dh vksj ls @Assessee by :None jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 16/09/2019 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/09/2019 vkns'k@ ORDER

PER VIJAY PAL RAO, JM

2 M/s. Swastik Automobiles vs ITO, Ward- 2(2), Jaipur 2. Under the facts and circumstances of the case and in law the ld. CIT(A) has erred in not dropping the penalty proceedings u/s 271(1)(c) of the Income Tax Act.’’ 2.1 None appeared on behalf of the assessee when this appeal was called for hearing. Therefore, the appeal of the assessee is heard and disposed off ex-parte.

2.2 I have heard the ld. DR and carefully perused the impugned orders. The only issue raised by the assessee in the appeal is regarding claim of remuneration paid to the partners of Rs. 6.50 lacs which was restricted to Rs. 4,26,484/- by the AO by invoking the provisions of Section 40(b)(v) of the Act and thus made addition of Rs. 2,23,516/-.

2.2.1 The assessee challenged the said action of the AO before the ld. CIT(A) and contended that partnership deed executed on 16-06-2009 provides the payment of remuneration to the partners and the provisions of Section 40(b)(v) at the time of execution of partnership deed are applicable and not the amended provisions of Section 40(b)(v). The only objection of the assessee against the disallowance made by the AO is that unamended provisions of Section 40(b) of the Act are applicable in the case of the assessee and not the amended provisions. The ld. CIT(A) has considered this contention of the assessee and decided the issue in para 3.1.2 as under:-

‘’3.1.2.Determination: (i) The brief facts of the case are that the appellant is a partnership firm and for the year under consideration, it has claimed a sum of Rs. 6.50 acs on account of remuneration to partners which was restricted to Rs. 4,26,484/- by the AO in view of the partnership deed executed by the appellant firm on 16-06- 2009. (ii) During the appellate proceedings, it was submiteed by the appellant that it has claimed partner’s remuneration in view of the provisions of section 40(b) of the Act as applicable for the relevant assessment year and the AO was not justified in restricting the partner remuneration to Rs. 4,26,484/-. (iii) I have duly considered the submissions of the appellant, assessment order and the material on record. It is noted that in the partnership deed dated 16-06-2009, the appellant has reproduced the provisions of section 40(b) of the Act. For the year under consideration, it has claimed partner’s remuneration in view of the amended provisions of section 40(b) of the Act without making corresponding amendment in its partnership deed. Therefore, the remuneration to the partners is to be allowed as per the terms stated in the partnership deed dated 16-06-2009. I do not find any infirmity in the findings recorded by the AO in the assessment order as the remuneration to the partners is to be allowed in view of the partnership deed. Thus, it is held that the AO was justified in making disallowance of Rs. 2,23,516/- out of remuneration claimed by the appellant and hence the same is hereby sustained.’’ It is pertinent to note that the provisions of section 40(b) are restrictive in nature and provides the claim of remuneration to partners as allowable deduction if partnership deed provides so and subject to outer limits provided in section 40(b)(v) of the Act. Though the partnership deed was executed in the year 2009, however, the provisions of Section 40(b) of the Act are applicable as existed for the Assessment Year under consideration. There is a revision of the amount of remuneration to be paid to the partners as per amended provisions and therefore, when amendment was already carried out in the said provisions and applicable for 4 M/s. Swastik Automobiles vs ITO, Ward- 2(2), Jaipur the Assessment Year under consideration then the claim of the assessee is not acceptable as its contrary to the existing provisions of section 40(b) of the Act.

Accordingly, the Tribunal does not find any error or illegality in the impugned order of the ld. CIT(A). Hence, the appeal of the assessee is dismissed. 3. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 19/09/2019.