ANAND PRASAD,NEW DELHI vs. ACIT, CIRCLE- 63(1), NEW DELHI

PDF · subscribers
ITA 7053/DEL/2017Status: DisposedITAT Delhi28 October 2020AY 2014-155 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that remuneration received by a partner from a firm is taxable as business income. Expenses incurred wholly and exclusively for the purpose of earning this remuneration are allowable business expenditures.

What were the facts?

The assessee, an advocate and partner in a law firm, claimed expenses against remuneration received from the firm. The Assessing Officer (AO) disallowed a portion of these expenses, and the CIT(A) confirmed the disallowance.

What were the issues?

Whether expenses incurred by a partner against remuneration received from a firm are allowable as business expenditure. Whether partner's remuneration is to be considered business income.

Which sections of the Income-tax Act were involved?

Section 28(v),Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI

Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI

For Appellant: Shri Vipul Kashyap, Sr. DR
For Respondent: Shri Pradeep Dinodia, CA, Shri RK Kapoor, CA, Shri Vipul Kashyap, Sr. DR
Hearing: 14/10/2020Pronounced: 28/10/2020

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of ld CIT(A)-20, New Delhi dated 25.09.2017 for the Assessment Year 2014-15, challenging the confirmation of disallowance of expenses of Rs. 871316/- claimed by the assessee against remuneration received from partnership firm. The ld CIT(A) has also held that partners remuneration cannot be considered as business income. 2. The assessee has raised the following grounds of appeal:- “1. That the ld CIT(A) has erred in law and on the facts and circumstances of the case in confirming the disallowances of expenses of Rs. 871316/- claimed by the assessee against remuneration received from Partnership firm.

2. That the ld CIT(A) has erred in law in holding that the Partner’s remuneration cannot be considered as business income.”

3. Brief facts of the case shows that the assessee is an individual and advocate by profession. He received income from house property, business and profession, capital gain and income from other sources. He Page | 1 filed his return of income for AY 2014-15 on 29.11.2014 declaring income of Rs. 3,67,82,630/-. The case of the assessee was selected for scrutiny firstly as limited scrutiny and subsequently converted to complete scrutiny. The assessee has claimed the expenditure of Rs. 2257453/- against remuneration received from a law firm as a partner. The ld AO disallowed this expenses. The major expenditure is with respect to the car wherein, the ld AO held that the car is used for office. He further held that there is no segregation of personal and official use. He therefore, held that there is no nexus of expenses incurred with the remuneration received from the firm. Therefore, total expenditure is not allowable u/s 37(1) of the Act. However, as the assessee offered disallowance of Rs. 1386137/- on account of personal nature and disallowance u/s 14A, the ld AO made the net disallowance of Rs. 871316/-. Thus, assessee was assessed at Rs. 32553950/- as per order u/s 143(3) of the Act dated 09.12.2016.

4.

The assessee filed an appeal before the ld CIT(A) who confirmed the action of the ld AO. Therefore, assessee is aggrieved and has preferred an appeal before us.

5.

The ld AR submitted that the issue is squarely covered in his favour by the decision of the coordinate bench in case of Anil Gupta Vs. ITO in ITA No. 5654/Del/2013. He further stated that assessee’s remuneration is chargeable to tax as business income u/s 28(v) of the Act. He further submitted the details of the various expenditure incurred by the assessee. He therefore, submitted that these expenditure are incurred by the assessee wholly and exclusively for the purpose of the business of the assessee. Therefore, same should be allowed.

6.

The ld DR vehemently supported the orders of the ld CIT(A).

7.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that the assessee is an individual who is a partner in a law firm namely Trilegal and received a remuneration of Rs. 3,22,60,925/- which is offered for taxation u/s 28(v) of the Act. The assessee also received share of profit from the above firm of Rs. 31624561/- which is claimed as exempt u/s 10(2A) of the Act. The Page | 2

More judgments on Section 28(v)

All 74 judgments and leading authorities on Section 28(v) →

Recent GST High Court judgments

Search GST case law →