A.C.I.T.. CIR.-3, NAGPUR vs. M/S WELDWELL ELECTRODES, NAGPUR

Yearfs) Remuneration paid 2011-12 1,37,55,999/ 2 2012-13 1,67,16,629/ - Ont the facts and circumnstances Of the case; and in law, the CITIA) erred in holding that Mrs. Manjushree Soman is & working partner eligible for remuneration. On the facts and circumstances %f the case, and in law, the CITIA} was not right in being influenced by the charges made in the partnership deed in the FYear 2013-14, While contemporaneous evidence should relate to the years under appeal At the outset, Ld. Counsel for the assessee &8 well as Ld. DR agreed that 33 exactly identical issue was dealt by the Tribunal in earlier years in assessee's OWn case in ITA No,262, 263 & 265/ NAG/ 2015 in ACIT v5 Weldwell Electrodes vide order dated 24,11.2017 wherein Tribunal has deleted the addition vide para 7 to 9 a8 under:- 7 "We noted that the CIT(A) has deleted the addition made by the Assessing Officer in each of the assessment year by holding &s under "5.3 [have considered the facts 0f the case and submissions %f the appellant There is substantial merit (n the various submissions made The main arguments raised by the appellant in its submissions are aS under 1 The Action 0f the Id, AO is revenue neutral Pagc 2 OJr 18 ) ITA No 296 & 297 { NAG/2015 & 136/NAG/2017 2 Ont the basis of the statements recorded it cannot be concluded that Mrs. Soman in not actively involved in the business 3, Evidences were produced to establish that Mrs: Soman was involved in varied activities of the business %f the firm 4. The partners are jointly and severally liable for acts %f other partner and that the liabilily of each partner ls unlimited 5. Mrs. Soman is presently having 75% share in profit / loss and is the moint working partner 05 Mr Sudhir Soman has retired from partnership firm wef 01.10.2013 which would establish that she hs always been actively involved in the business: 5.4 There is merit in gach of the above issues raised- Taking up the first argument of the appeliant it has been correctly pointed out by the appellant that this entire exercise is Revenue neutral &8 both the individual partner @S well aS the firm are taxed at the same rate and the payment 0f reruneration to the partner cannot be therefore viewed as an attempt to conceal income to reduce tax liability: The expenses debited in the books % the firm would become income in the hands 0f the partner If the la. AO taxes the firm by disallowing the remuneration; he will also have to issue refund to Mrs Soman a8 would not be taxable in the partners hand 05 it is the 50me disallowed in firms case. Thus the net effect of this exercise is tax the department 4S both the firm and parlner fall in neutral for highest tax slab. 5.5 Various cose laws have commented upon the futility of undertaking such an exercise where increasing income in one hand und reducing the income in other hand with almost the samg tax ffect does not result in any net benefit to the Revenue In the case %f Mohd Nizamuddin VS; ACIT , On similar facts, the Honble Fhri. Jaipur ITAT Bench in ITA No.4]/ JP/ 2013 held as under "4,6 We have carefully considered the submission made by both the parties _ We do not agree with the contention of the Id; CIT (A} that the partners were not working partners, which finding is Wf[ recorded without any basis:_ 7t is noticed that although the firm constituted in 4. Y. 2004-05 and It is not disputed that the Wns assessee firm has been making this clairn right since AY. 2004-05 but all along the revenue has been uccepting such a claim even in the assessment made under scrutiny hence We do not find any justification to make & departure from the settled position in the past material change in the Jocts and the without bringing any ITA No 296 & 297 NAG/2015 & 136/NAC/2017 circumstonces %f the case in this year: In any case, the issue in hand is revenue is neutral in as much aS even assuming Q certain part 0f the claimed remuneration is disallowed in the hands of the fimrm, the same cannot be treated to be an income from business in the hands of the partners and & necessary safeguard has already been provided under the proviso below the Sec28v) against the double taxation of the same income hence; even if the disallowance so made is upheld, deduction to that extent has to be allowed in the hands of the partners] $. Thus, revenue shall not be put to any [o5S if the remuneration 1S claimed, is allowed in the hands of the assessee firm. We thus; find no justification in the disallowance 80 made and confirmed, for the detailed reasons stated herein above, hence; the disallowance pf-Rs: 20,47,Qo0/ made tf $ 40fb) Is hereby deleted Therefore, Ground no 2 raised by the assessee is allowed, 6. In the result; appeal of the assessee is partly allowed. 5.6 Thus the Hon'ble Jaipur Bench has held the Revenue shall not to be put to any loss if the remuneration claimed is allowed in the hands of the assessee firm a5 sane cannot be treated 4S income fromn business in the hands Qf the individual partner Simllarly in the Cuse Qf M/5 Om Terrace, SuratVs DCIT Surat ITA No. 0440/Ahd/2012, it was held by the Hon'ble ITAT Ahmedabad Bench 25 under- No disallowonce from partners' remuneration was therefore warranted. In any case; the whole exercise of disallowing partners' remuneration is tar neutral aS only the amount allowed 05 deduction is required to be taxed in the hands 0f the partners 5.7 Attention is also inuited to the decision of Honble Bombay High Caurt in the case %f Commissioner %f Income tax Vs Nagari Mills Co. Ltd 33 ITR 681 & Delhi High Court's judgment in the Cose of Commissioner of Income Tax Vs; Shri Ram Fistons and Rings Ltd. (220 CTR 404} wherein it was held that the department should not fritter away its energy in such matters which are tax neutral and that it is & pity that S0 much time and energy are spent to determine the year of taxability of the income, The said judgments have been extensivelyy followed in & large number of cases in which @ exercise undertaken by the department was fundamentally tax neutral In this context judgment of Honble Delhi High Court in the case 0f Cammissioner %f Income tax Vs Triveni Engineering & Industries (ITA No. 346 of 2009) is reproduced here under NAGRL ITA No. 296 & 297/NAC/2015 E 136/NAG 2017 187 12, We are reminded 0 the classic observations made by Justice Tendolker in the case Of the Commissioner of Income-tax; Vs. Nagri Milis Co. Ltd [33 ITR 681}, wnich reads &s under: "We have often wondered why the Income-tax authorities; in 0 matter such &S this where the deduction i5 obviously & permissible deduction under the Incog-tar Act raise disputes as to the year in which the deduction should be allowed The question aS to the year in which & deductiont is allowable may be material when the rate 0 tax chargeable 0n the assessee in two different years is different; but in the case 0f income %f & company, tax is attracted at a uniform rate; and whether the deduction in respect of bonus was granted in the assessment accounting year 1952, that is in the assessment year 1953-54, shpuld be 0 matter f no consequence to the Department; and one should have thought that the Department would not Fritter away its energies in fighting matters of this kind But obviously: Judging from the references thai come up to uS every now and then the Department appears to delight in raising points of this character which do not affect the taxability %f the assessee or the tax that the Department is likely to collect from him whether in one year 0r the other; "

The aforesnid observations of the Bombay High Court Were reiterated by this Court in the case of Commissioner of Income Tax Vs Shri Ram Fistons and Rings Ltd. [220 CTR 404}, as under: "Finallys We may only mention what has been articulated by the Bombay High Court inCommissioner 0f Incore Tax; Delhi, Ajmer, Rajastha and Madhya Pradesh vs. Nagri Mills Co. Ltd, [1958] 33 ITR 681 a5 follows: the reference that is before Us there is no doubt that the Assessee Omd incurred an expenditure. The only dispute is regarding the date Tpn which the liability liad crystallized It appears thal there Was no pU change In the rate of tat for the Assessment Year 1983-84 with which We are concerned, The question, therefore, is only with regard to the year Of deduction and it is & pity that all of US have to expand So much time and energy only to determine the year of toxability of the amount, 14. In such circumstances; we are Qf the view that insofar as present appeal is concered, substantial questions %f law that need to be Page [5 ITA No. 296 & 297/NAC/2015 & 136/N40{2017 I70 answered does nt arise: We, therefore, dismiss this appeal on this ground alone. 5.8 Thus from the above judgment it is seen that when the action of the department is tax neutral no purpose i5 served by: adding the amount int one case and giving corresponding relief in another case Here; however; tf-.s action of the LdAO is all the more objectionable in utew of the fact that while he has disallowed the claim of remuneration, he has not given corresponding relief in lhe case 0f individual partner by reducing her income to the extent of disallowance made in the case of the firm Jf the LdAQ was %f the view that the remuneration was not allowable in the case of the firmy corresponding relief in the case Of the partner should have been simultaneously initiated and the income %f the partner should have been reduced accordingly: Once having held that the remuneration was not allowable as expenditure in the case of the appellant firm, tne department cannot take the contradictory view in the hands 0f the recipient of remuneration and decide that no relief i8 required to be given in the hands of individual partner: The department cannot japprobate a5 Well 0S reprobate. The maxim qui approbalion reprobate (one who approbates cannot reprobate} is firmly embodied in English Common Law and often applied by Courts in this country: I is akin to the doctrine of benefits and burdens; which at its most bosic level provides that 4 person taking advantage under an instrument thut both grants & benefit and imposes & burden, cannot take the former without complying with the latter: 4 person cannot approbate and reprobate or accept and reject the same instrument He cannot; to use the words of Honyman; J in Smith % Baker (1878} LR 8 CP 350 at p 357 'at the same time blow hot and cold;, He cannot say at one time that the transaction is valld and thereby obtain some advantage t0 which he could only be entitled on the footing that it is valid, and at another time say it is void for the purpose of securing some further advantage The fact that the Ld.AO has disnllowed remuneration on one hand and has not given corresponding relief in the case Of the partner in her individual cgpacity and this itself shows that the Ld.AO is not Dery sure of the view taken by him: 5.9 Thus it is evident that since the appellant firm and the partner Dre both ubject to be taxed at the maximum rate; the payment of remuneration is in no way & scheme to conceal income or evade tax; Tnere is evidently no tax planning Or tax saving mechanism employed by the assessee or its partners: The department will tax the firm by disallowing the remuneration on one hand and on other hand department will have to issue refund to individual partner Page 6 ITA No 296 & 297 /NAG/2015 B 136/NAG 2017 (Mrs; Soman} &s the same would not be taxable tn partners hand as it is disallowed in fins case Thus the net effect of this exercise is tax neutral for department DS both the firm and partner fall In highest tax slab Hence On this ground itself; this addition 15 unwaranted and unjustified solely on ground of tax neutrality; 6. Coming to the second argument of the appellant; on perusal of the submission mare by the appellant before the LdAAO, the facts brought on record in the assessment order and on perusal of the two statements recorded %f Smt: Soman; it is seen that there i5 no material before the Ld.AO to co'me to the contclusion that Smt Soman is not a working partner or Ihat she is not actively engaged in the business activity of the appellant finm; Itt the two statements recorded during and after the Survey W/ $, 1334 about 30 questions were asked tp Smt. Soman and the LdAQ has based the entire disallowance on about 5-6 answers and has come to the conclusion that she is not actively involved in the business acttvities; In the process the LdAO nas totally ignored answers giuen to 24-25 questions from which it becomes evident that Smt, Soman is 4 partner who is actively involved in the business activity. 6,1 In tts submission, the appellant firm has given detailed explanation with regard to each %f the questions that the LdAO has focused upon The explanation of the appellant clearly establishes tnat the conclusion drawn by the LdAO to the said question are erroneous and misleading The appellant fin is 30 years old; well established and iS staffed with persons having designation of Manager; Ceneral Manager etc who are able to take care 0f day to day business activities and hence requirement %f the partners to be involved in the day to day activity does not arise: The role 0f the partner tould broadly be to decide policies, give strategic inputs and to monitor vorious aspects Qf business 6.2 The fact that Smt. Soman stated in an answer that she only occasionally goes to the firm premises or that she Is not associated Jwuith day to day working of the firm or that she has nobody reporting tq her; cannot lead t0 the conclusion that Bhe i5 not actively involved #the business activities %f the firm Modern business are complex Brttities that requires continue strategic thinking planning, fbrmulation of business policies and evnlued sentor level interventian Any partner who is even slightly invplved in such matters wculd be contributing immensely io the business activity of the firm Being Q partner; Smt. Soman in addition t0 policy formulation and strategic thinking along with the other partner; could in any case call for any employecto direct or to guide him her The fact that nobady reports toSmt Soman does not by itself 191 ITA No 296 & 297_ NAG/2015 8 136/NAG/2017 lead to conclusion that she is not actively involved in the business activities of the firm 05 she can call any employee and ensure compliance to the needs and requirements Of the organization 6.3 In the above context, it is also vital to see the answers given by Smt, Soman to various questions psked to her. In her statement recorded on 08-11-2012 Smt Soman gave details like Assessing Officer; PAN and details regarding the firm and also informed the LdAQ that she visits the premises when the other partner is absent and that 08 @ partner she is getting remuneration and profit from the firm She has further stated that she is 0 Postgraduate in English Literature and Music and is looking after the adminigtration and personal relation %f the firm and ensures friendly relation with the staff On being asked to give details 0f staff who are on pay roll of the fimm she gave names %f four staff members and their area %f specialization and on being asked where the books of accounts are maintained, she explained that the same are maintained in the company premises itself: Further; on being asked regarding the instances of sale ond purchase of property by the firm, she explained that a land had been purchased alongwith shed in plot No.57 about 3 years back and that an advance 0f Rs.1,5 crores has been "given in January 2012 f0 one M8 JD Builders for purchase pf one plot in Shivaji Nagar, Nagpur though the sale deed has not peen executed as yet. On being asked she further inforrned that she signed the Income Tax retums and documents regarding the purchase of land of the firm Thus 0nt perusal of statement recorded Qn 08-11-2012 it becomes evident that Smt; Soman is actively involved in business activity of the firm and is aware 0f the staff members; the nature of work they took after and is also well aware regarding baoks 0f accounts and sale purchase of immovable property by the appellant firm; 6.4 Also in the stntement recorded on 29-11-2012, she explained that she has no other business interest other than the appeliant firm and on being asked bank account details, she gave information about the Fratap Nagar, Bank of India Branch Onbeing asked regarding ownership % movable assets she stated that the finm owned Toyota Altis Qnd Hyundat 1-10 and on being asked t0 give details %f withdrawals during the RY, 2011-12, she explained that the withdrawal of Rs.1.5 crores was made from Bank %f India On being asked if she Was associated with decision making in the firm she replied in the affirmative. She further stated that she is involved in purchase %f land, machine; applying for bank loan etc though she does not remember the exact names Of the parties from whom the machines were ~purchased She further explained the sources of ITA No 296 & 297/NAG/2015 8 136/NAG/2017 193 funds, investments in various Mutual funds, Insurance policies etc are her salary: Herr again Sil Soman is very clearly able t0 establish the fact thnt she 15 actively inuolved in the business activities 0f the firmn and is aware %f all business related aspects a5 otherwise she would not be in & position to give such details 0S the bank account; movable assets, sources 0f her various investments; details %f withdrawals from bank account etc 6.5 In the face %f such clear assertions by Smt. Spman 0f her continued involvement in all facets of business activities, the conclusion of the LdAO that sne is actively involved in the business On the basis Qf 4-5 answers is mispiaced and incorrect, Evidently Smt Soman is able to establish thnt she is actively inuolved in every aspect pf business though she moy be visiting the premises occasionally: There is abundant judicial authority in this regard 6.6 The Honorable Gujarat High Court in the Case of CIT VS Natwarlal Tribhovandas reported in 87 ITR 703 answered in the affirmative the question as to whether expression "actively engaged in conduct of business" occuring in section 2(7}iit}b) does not necessarily signify active and continuous participation in actual transaction of day-to-day business %f firm and held that it is flexible enough to take in case 0" & partner who devotes time, attention and labour to some activity Or assignment calculated or designed to lead to preseruation, growth or advancement %f business of fim The relevant portian of the order is reproduced hereunder: 'Accordingly, before the business income of un assesses, who is 3 partner %f & firm, could be treated as earned income; the conditions which are reguired to be satisfied are that the assessee should be: (} actively, (ii} engaged in, (Hi} the conduct of the business of the firm, (iv} for the whole of the previous year: The submission was that the first three of the four conditions are expressly found in section 2(7lii} b) and the fourth condition i5 necessarily implied therein taving regard to the manner in which & partnership functions and accounts are made UP: Unless the @5ses5ee {s able to show, refore, that for the whole of the relevant previous year he WaS ntinuously and in an active manner occupied Or busy with the pork %f carrying on or transacting the business of the fin; the business income eared by him aS 4 partner would not qualify for the earnted income relief: Mr: Kaji, learned counsel for the assessee, contended on the other hnd that the words now under consideration require to be construed broadly having regard to the context in which they are Page 9 Wart Ita No_ 296 & 297/NAG/2015 E 136/NAC/2017 used He urged that it is not unknown that in & partnership there are parlance; are called 'sleeping partners' who, in popular oadrero are 'brought into the firm either because of their financial ties or the like: A sleeping partner, though contribution or family in the conduct of the business 0 the firm; would reelerthetees ge eorisidered adtavogheeenssoesygaged in {he eye % nevertheless be of mutual agency involved in law because of the principle therefore, partnership and his share in the Profits % the irhwoa the earned income relief in his hands The word "actively" qualify for which iS prefixed to the expression "engaged in the conduct % the view to ensuring that @ partner business is used precisely with a in the conduct of the business Qf tle firm only who participates does not get the benefit of the through the agency %f his co-partners "actively engaged in the earned incpme relief; The expression proceeded the argument; read in the conduct %f the business' a ihole; meant that the partner should personally Context and as manner in the business of the firm, that iS, participate in some necessary OT desirable for the undertake activity which is sand gaiify of hc business % the fir The expression; pceoediatioc Gnd grsesbeg 'nidonot signify that the pariner should according take active part in Zhe actual day-to-day transaction of the business It was also urged that participation in the conduct 0f the of the firm; busieesm heed not have continued for the thole %f the previousedor bnaireG: Meeis shoin that the concered partner his participatedhe ane conduct 0f the business %f the finm for & substantial part of the the business income eamed by him would qualify for previous year; the earned income relief: which out Qf the two rival constructions The question is a5 to should be preferred Leaving put of suggested at the Bar time being the question whether Or not the consideration for the conduct of the business must be for the whole %f engagenent in the no ascertain the plain the previous year, we shall first attempt: "actively engaged tn the grammatical meaning of the expression business The word "actively' ordinarily means In an conduct of the and diligently: It is active manner , that is, effectively, energetically signify direct participation in sometimes also used to interest Or passive role; Tne contradistinction t0 impersonal is & ter of various meanings depending expression "engaged in on the @mtextGir which it is used but ordinarily i is intended t Or employment; it involves the concept oigaclyinuity uoactioc apatieli a; @ploysical particoaeion; However, of continuity the term is often employed to denote & present obligation t devote time; atterition and efforts to a particular activity; although for the participation Or wholetime time being, there may not be any active The expression "the conduct %f the involuement in such activity; Page 10 [TA No 296 & 297/NAC/2015 & 136/NAG/2017 { 95 business" in Q nanower sense means actual direction; handling, management or regulation of business day-after-day: In a broader sense, however; it is also capable of connoting contribution to the business by carrying out some assignment Or undertaking; 5ome activity uncannected With the day-to-day management of the business; which might ultimately lead to the preservation and development of the business It would thus appear that on a plain meaning Qf the words comprised in the relevant phrase; both constructions_the narrower as well as the broader_-for which the parties have cantended @re possible: We would, in these circumstances, naturally prefer that construction which favour the Qssesse8- 6,7 The Honorable ITAT Delhi, in the case 0f Vivek Ispat Udyog us Income Tax Officer (2005} 95 TTJ Delhi 10g0 held as under:

On going through the obseruations 0f the learned CITQA} it i5 found that he has not treated Shri Pawun Kumar Pahadia as 0 working partner on the ground that he Was not & whole-time worker. This approach cannot be said to be justified, 4 partner may supervise and Control in 4 case of a fim at different place: If he deuotes time and remains engaged in the business %f the firm it cannot be said that he is not actively engaged in the business %f the fin It may be pointed out that the same CITIA) has upheld the action of the AO in allowing remuneration to Shri Sunit Kumar Navetia who too was residing at Calcutta and was supervising the affairs %f the fimm at Ghazabad. Jhe only reason for allowing remuneration to that partner is that the telephone number of Calcutta belonged to him So far 15 other partner; namely, Shri Pawan Kumar Pahadia in whose cose remuneration has been disallowed is concemned, in my view; the difference mode by the learned CITYA} cannot be appreciated. From the documents contained in the paper book, it i5 found thal he was making correspondence to the fimm and was also issuing instructions on telephone: Thus; it cannot be said that he was not conducting the affairs of the business Or not engaged in the conduct 0f the working of the firm: In Flla Mne cnse of CIT V: NatwarialTribhovandas (supra}; term "actively in the conduct of the business occurring in Section )ezaap6) of the Finance {No. 2) Act^ 1962, wos explained by the Hon'ble Cujarat High Court and it was observed that the expression iust be given lberal meaning: F was held that the said expression does not necessarily signify active 0r continuous participation in the actual transaction 0f the day-to-day business 0f the firm and it is flexible enough to take in the case of a partner who devotes time, atlention and supervise the work; Thus; @ partner to be & working partner for the purpose of Section 2{7 liilb} also, it can be said that Page 11 ITA No, 296 & 297[NAC/2015 & 136[NAC/2017 196 sufficient requirements of law for the said partner to whom the remuneration is paid is to supervise the work of the finn from different place and may be by devoting hours &nd not & whole day In my considered opinion, the claim 0f the assessee-firm Wos fully justified and the learned CITIA} was not justified in upholding the view %f the AO. The disallowance 0f remnuneration to the partner to the tune of Rs 39,100 and the addition % the same amount Js, therefore; deleted. The ground No 2 i5, therefore; allowed in favour of the assesses, 6.8 The Honornble ITAT Kolkata, in the case of S.B.Agencies; Kolkata US ACIT in ITA No. 680/ Kol/ 2012 decided a case on similar facts In the said case; the claim %f Rs; 2,20,00Q/ _ remuneration to one @f the partners had been restricted to Rs 36;000/ by the Id. AO and in appeal the leamed CommisSioner %f Income_ tax (Appeals} allqwed the same t0 the extent of Rs. 1.20 lakh The reason for making the disallowance was her statement which had been taken wherein, as per the Id AO, it was proved that Smt: Madhumita Paul did not krow of the operations of the assessee's business. In such facts it was held as under:

We have considered the rival submission; A perusal of the assessment order clearly shows that Smt, Madhumita Paul, hd been summoned uf 9. 131 of the Act and her statements have bgen recorded It is shown in the statements recorded that Smt, Madhumita Paul did do work pt the business premises Qf the assesses finm However; the AO had restricted the salary allowable to Smt Madhumita Paul at Rs_ 36,000/ ~ Jt is also noticed that the AO has mentioned that there were discrepancies in her statements recorded uf s, 131 0f the Act 4 perusal of the order of the learned Commissioner qf Income-taxfAppeals} clearly shows that the leared Commissioner %f Income-taxAppeals) has considered the objections of the AO; but looking into the gualification and age factor %f Srt Madhumita Paul restricted the disallowance to Rs 1 lakh Here it i8 noticed that the AO and the Id,CIT(A} has estimated the salory of Smt Madhumita Patl without any comparative case or without laying any foundation for such estimationt itself: In the circumstances; We are of the View that there is ho ground for restricting the salary paid to Smt, Madhumita Paul at Rs. 1.20 lakh 05 against the claim % Rs2.20 lakh In the circumstances, the AQ is directed t0 ITA, No. 680/ Kol 12-B-GM allot the assessee's claim of the salary paid to Smt Madhumitd Paul at Rs. 2.20 lakh p.a: In the circumstances, the appeal of the assessee is allowed 6.9 Similarly, the Honorable ITAT Kolkata, held that even & full time engineering student is actively involved in the business of the firm ff Page 12 Nagp 192 [TA No. 296 & 297/NAG/2015 & 136/NAG/2om7 he is looking after some ospect %f business: In the case of Kalipada Packaging Industries us. ITO (ITA. No,09/Kol 2013} it was held a5 under: "4, We have heard rival submissions and gone through facts and circumstances pf the case; We find that the assessee has contended that Shri Soumen Paul, the partner Was engaged in procurement of orders the firm despite the fact that he Was 4 student of for Engineering College, Jalpaiguri Simply on the statement 0f Shri Bhusan Chandra Paul; one of the retired partners and that also during the course of survey cannot be the sole basis for disallowing remuneration Co tne partner: Here, admittedly, the assessee fs engaged in the procurement Of orders and once he is engaged in the procurement %f orders, he cun safely be stated that he is working Accordingly; We delete the disallotance and appeal of partner: assessee is allowed: 5. In the result; the appeal of the assessee is allowed 6.10 Thus, the concept of being actively engaged in the conduct o the business hos to be given 0 broader and liberal meaning and does not necessarily signify uctive Or continuous participation in the actual transaction and conduct %f the day-to-day business of the firm and it is jlexible enough t take in the case of a partner who deuotes Sore time and attention to the work of the firm In the case of Mrs: Soman however, it is evident that her participation in the activity 0f the firm is more than Q partner who devotes only 'some' time and attention to the work %f the firm 7, This becomes evident from the third argument of the appellant RELt Were filed before the Id. AQ that evidence Mt;, Soman'$ Focuments in the affairs of the firmu The Id; AQ however iqive involvement Ymply brushed aside the sid documents without giver any cogent The Id AO has not takent efforts to establish that the reasons, documents produced before him are misleading or fraudulent: It is NX "5r also a fact that by Signing the documents she takes full personal responsibility of the correctness %f the contents of the documents: Some such documents produced during appellate proceedings are &s under: Page 13 [TA Mo 296 & 297 NAG/2015 Ez 136/NAG/2017 1J2 Sr, No, Nature of documents I Application for industrial plot to MIDC 2 Application for power supply to M.SEB. 3_ Possession receipts for purchase 0f Plot No A-6 &s 4-7 in MIDC Industrial Area, Naypur dt 14_ 03.201] Fapers regarding a gratuity scheme for the employees 5 Correspondence with State Bank of India, Hingna Industrial Estate Branch, Nagpur Application for Amendment in EM to District Endustries Centre Tipartite agreement with MIDC & SBI Minutes of Management Review Meeting with General Manager, Manager Marketing; Works Manager & Management Representative Deed of Assignment cum Sale dt. 22.03.2011 for purchase of plot No. D57 MDC, Hingna Road, Nagpur from Raj Wire Industries, Nagpur 10 Wages Register stnged by Mrs: Soran monthly 7.1 The appeliant had submitted above evidences to establish lhe fact that Mrs: Soman is actively involved in the business activity Of the firm and the same have been perused Perusal of the said documents clearly establishes the Jact that the appellant is involved in varied activities and has taken responsibilities %f various types and is completely involved in the business of the firm The documents produced includes applications made befare the Statutory Private Authorities like MIDC, MSEB, State Bank %f India etc The appellant has also produced copies of Wage Register, which is duly signed by Mrs Soman; Also ther documents like possession Page 14 No 296 & 297 NAC/2015 ITA & 136/NAG/2017 of review meeting; Deed of Receipt for purchase of plot; Minutes etc: have been filed Agsignment cum Sale for purchosek of plot active and continuous role % These Gocumen s creosiy ds Gafets thf Ortarizatioconwork" Special in almost all facets of Mrs, Soman review meeting mention may be made % Tinutes &r 'idc gariety aesebjecisnave Jeerein iohe presence %f hersaboveardocidneatietyraducer documents by the discussed; Thus, the above been Soman in clearly establish tne active involvement of Mrs appellant the finmn; that the partners in a firm Gre jointly and seieeally 8. It is ulso & fuct The liability of each partner {5 liable for acts of other partner; taken risk labilities @nd Both the partners haue unlimited there is accident; theft; fire; of business and if uncertainties both the death af worker in factory or & crimina caseh disabtlity Verally liable It is also 4 fact that fob Qll partners are jointly and ser is individually lable under iabour practical purposes _ Mrs; Saman Tar Laws like Excise Act; Mahorashtra Vat Act; laws like PF Act; Act etc and she is also liable for the Bank Lpan CST Act, and Factory it would be unfair if the the firmn~In that sense also taken by time given by each partner reneureration is measured only based o the business risks and day working of the firm 05 for day to aso have lo be taken into consideration for liabilities of each partner ta the partner. deciding the allcwability of reruneration appellant i5 also & valid argument It is 9 The last argument %f the in the partnership wef 1st stated that changes have been made 05 under Oct 2013 and the Tespective shares noware 7096 Mrs. Manjushree Sorrian Mr; Shantanu Soman (son) 1596 Mr: Shaunak Soman (son) 159 Sudhir Soman has since retired from 9.1 It is stoted that Mr; and that therefore the assesse partnershp fn w.ef 01,10.203 APPE by Mrs Manjushree Soman being currently Tun mainly firm is working portner having profit loss) as main fnaving 70% share in There is merit in the submission as this 90% share in remuneration: actively engaged in that Mrs: Soman Wds strongly indicates OJdh assessee fir from the very beginning- business #Pur above totality of facts of the case 10. Taking into consideration the on the issues concerned, the action of and the clear judicial position to the partner Id Kceooj disallowing ine cicin % s enelaeratibe tacoreeca the held t0 and in each of the years i5 Mrs. Soman respective years @re hereby consequently the additions made in disallowances made %f Rs.12,00,000/ - deleted Consequently the Page ] 15 197 ITA No_ 296 & 297 {NAC 2015 E 136/NAC/2017 CS Rs.32,81,326/ Rs.47,72,505/- 8 Rs.68,66,620/ - for ossessment years 2006-07, 2007-08, 2008-09 & 2009-10 respectively are hereby deleted. This ground of appeal is allowed I1_ In the result these four appeals are hereby partly allowed, 8. In Qur View; the CITIA} has while deleting the disallowance made by the Assessing Officet, has exhaustively and extensively dealt with whether Mrs Manjushree Soman can be regarded to be in whole time partner or not; He has also while holding in favour of the ossessee taken into account re-constituted partnership deed amended with effect from 01.10.2013. We do agree that the finding of the CITA) that whether partner is working Qr n8t, nol to be decided on the basis %f the time given by each partner in day to day working; but it has to be decided with Querall liabilities; responsibilities as well aS work undertaken by the partner. 9 In Our opinion, this is not 4 fit cose which warrant Qur interference: We; accordingly confimmed the order of the CITHA) by endorsing the finding given by the CITYA} MAGRL' 4 At the time of hearing; Ld Sr DR could not point out ay difference in facts ad hence, respectfully following the eerlier years decision of Tribunal (cited supra) , we confirm the order of Ld.CITIA} deleting the addition. 5_ In the result, all three appeals filed by the Revenue are dismissed , Order pronounced in the open court on 08th March; 2018. sdi S (GD.AGRAWAL) HON BLE PREBIDENT (MAHAVIR SINGH) JUDICIAL MEMBER Dated: 08th MARCH, 2018 "Amit Kumar* Page 16