M/S. ROCK ENTERPRISES,,PUNE vs. INCOME-TAX OFFICER, WARD - 7(1),, PUNE

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal by the assessee arises out of the order passed by the CIT(A)-5, Pune on 10-11-2017 in relation to the assessment year 2013-14.

2 ITA No.455/PUN/2018 M/s. Rock Enterprises

order are that the assessee firm earned interest income. The

assessee was called upon to submit proof regarding the actual

work done by the partners for claiming remuneration. The AO

recorded that the assessee failed to produce such evidence.

The ld. AR was asked to explain as to why remuneration to

partners amounting to Rs.8 lakhs should not be disallowed, to

which he agreed for the addition. This led to the making of an

addition of Rs.8 lakhs in the assessment order. The ld. CIT(A)

upheld the AO’s action. The assessee is aggrieved by the

sustenance of addition.

material on record. It is manifest from the assessee’s return of

income, a copy of which has been placed on record, that total

income of Rs.18,06,480/- was declared. A copy of the

computation of total income, placed in the paper book, depicts

that such income was offered under the head `Profits and gains

of business or profession’. The assessee’s Profit and loss

account has been placed on record which shows opening and

closing stock of work in progress at Rs.17,15,268/-. Interest

3 ITA No.455/PUN/2018 M/s. Rock Enterprises

income has been credited to the Profit and loss account and

deduction has been claimed towards certain expenses, such as,

Salaries and wages, Account writing charges, Bank interest,

Professional fees, Depreciation and Salary to partners. This

shows that even though there was no direct business activity

carried on by the assessee, but it was only a case of temporary

lull in as much as the assessee kept the business intact by

paying salaries and wages apart from incurring other expenses

which have been narrated above. The fact that the assessee

agreed for addition of salary to partners has been assailed by

the ld. AR to have been forcibly extracted by the AO. When

the firm is continuing its business, incurring other expenses, it

cannot be presumed that the business is being run without the

involvement of working partners. It is further relevant to note

that the salary paid to partners was offered for taxation in their

individual returns and the same has been charged to tax. In

that view of the matter, it becomes overt that remuneration

was paid to partners for facilitating the working of the firm.

Such an amount, being within the ceiling prescribed u/s. 40(b)

of the Act, in my considered opinion, cannot be disallowed. I,

4 ITA No.455/PUN/2018 M/s. Rock Enterprises

therefore, overturn the impugned order on this score and orer to delete the addition.

Order pronounced in the Open Court on 04th December, 2018. Sd/- (R.S.SYAL) उपा�य� उपा�य�/ VICE PRESIDENT उपा�य� उपा�य�

पुणे Pune; �दनांक Dated : 04th December, 2018 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत / Copy of the Order is forwarded अ�ेिषत आदेश आदेश आदेश to : 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-5, Pune 4. आयकर आयु� / The Pr. CIT-4, Pune 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / DR ‘SMC’, ITAT, Pune; 6. गाड� फाईल / Guard file. // True copy // आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

ITA No.455/PUN/2018 M/s. Rock Enterprises

Date 1. Draft dictated on 04-12-18 Sr.PS 2. Draft placed before author 04-12-18 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *