M/S PRADEEP TRADING COMPANY,KOLKATA vs. I.T.O.,WARD-44(2), KOLKATA

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ITA 875/KOL/2019Status: DisposedITAT Kolkata10 January 2020AY 2013-142 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that both the Assessing Officer and the CIT(A) had committed factual mistakes. It held that if the assessee had interest-free funds, the presumption should be that partner drawings were from these funds, citing relevant High Court judgments.

What were the facts?

The assessee appealed against the CIT(A)'s order confirming an addition of Rs. 5,26,540/- as interest received from a partner. The assessee argued that the addition was arbitrary and that capital withdrawal by a partner should not attract interest at 9%.

What were the issues?

Whether interest received from a partner on capital withdrawal is taxable when the assessee has interest-free funds. Whether the AO and CIT(A) erred in confirming the addition without considering the availability of interest-free funds.

Which sections of the Income-tax Act were involved?

Section 250,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy

order : January 10th, 2020 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 13, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 17/01/2019, for the Assessment Year 2013-14, on the following grounds:- “

1.

l. For that on the facts of the case, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal.

2. For that on the facts of the case, the Ld·. CIT(A) was wrong in dittoing the order of the A.O. and confirming the addition of Rs.5,26,540/- as interest received from partner which is completely arbitrary, unjustified and illegal.

3. For that on the facts of the case, the Ld. CIT(A) was wrong in not considering the fact that the partner may be capital withdrawn from Firm as per I.T. Rules, but the A.O. has vindictively added @9% of capital withdrawal i.e. Rs.5,26,540/- as interest, therefore, the order passed by the A.O. is completely arbitrary, unjustified and illegal.

4. For that on the facts of the case, the charging interest u/s. 234B & 234C which are mechanically wrong and illegal.

5. For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.”

2. After hearing rival submission, I find that both the Assessing Officer a well as the ld. CIT(A) have committed factual mistakes while making the disallowance that has to be seen is whether the assessee has interest free funds and if so the presumption should be that partners drawing are from these interest free funds as held by the Hon’ble Assessment Year: 2013-14 M/s. Pradeep Trading Company Bombay High Court in the case of Bombay High Court in the case of CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (Bombay) and in the case of and in the case of HDFC Bank Ltd. v. Deputy Commissioner of Income Bank Ltd. v. Deputy Commissioner of Income-tax - 2(3), Mumbai, [2016] 383 ITR 529 (Bombay) 2(3), Mumbai, [2016] 383 ITR 529 (Bombay). Hence, I set aside to the file of the Assessing Officer with a direction that he may consider all et aside to the file of the Assessing Officer with a direction that he may consider all et aside to the file of the Assessing Officer with a direction that he may consider all the interest free funds available with the assessee including trade creditors and the interest free funds available with the assessee including trade creditors and the interest free funds available with the assessee including trade creditors and thereafter dispose off the case, in accordance with law. thereafter dispose off the case, in accordance with law. the assessee is allowed for statistical purposes.

3.

In the result, appeal of In the result, appeal of the assessee is allowed for statistical purposes.

Kolkata, the Kolkata, the 10th day of January, 2020.

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