GAGRAT & CO.,NEW DELHI vs. ACIT, NEW DELHI

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ITA 4537/DEL/2015Status: DisposedITAT Delhi01 August 2018AY 2011-124 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the bills/vouchers were in the partner's name, not the firm's. Following a similar decision for the preceding assessment year, the Tribunal set aside the impugned order and remitted the matter back to the Assessing Officer for fresh adjudication.

What were the facts?

The assessee, a partnership firm of advocates, claimed a deduction of Rs. 6 lac for expenses reimbursed to a resident partner, Shri U.A. Rana. These expenses included car maintenance, consultation room maintenance, and client entertainment.

What were the issues?

Whether expenses reimbursed to a partner, with bills in the partner's name, are deductible for a partnership firm. Whether the disallowance made by the AO and confirmed by the CIT(A) is justified.

Which sections of the Income-tax Act were involved?

Section 40(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : C : NEW DELHI

Before: SHRI R.S. SYAL & SHRI JOGINDER SINGH

For Appellant: Shri Vikas Madan, Advocate
For Respondent: Shri Arun Kumar Yadav, Sr. DR
Hearing: 01.08.2018Pronounced: 01.08.2018

Date of Hearing : 01.08.2018 Date of Pronouncement : 01.08.2018 ORDER PER R.S. SYAL, VP: This appeal filed by the assessee arises out of the order passed by the CIT (A) on 28.05.2015 in relation to the assessment year 2011-12.

2.

The only issue raised in this appeal is against the confirmation of disallowance of Rs.6 lac, being, the amount paid by the assessee-firm to Shri U.A. Rana (Resident partner) as reimbursement of Rs.4 lac per annum towards running and maintenance of motor car; Rs.1,20,000/- p.a. towards maintenance of consultation room at his residence; and Rs.80,000/- per annum towards entertainment expenses for clients at the consultation room.

3.

Briefly stated, the facts of the case are that the assessee is a partnership firm of advocates practising at the Hon’ble Supreme Court of India. It claimed deduction , inter alia, of Rs.6 lac, being, the amount paid to Shri U.A. Rana (Resident partner) towards expenses as enumerated above. On being called upon to justify the deduction, the assessee could produce bills/vouchers which were in the name of the partner and not the assessee firm. The Assessing Officer opined that the partnership firm can legitimately claim deduction on account of interest and salary to partners subject to the limits u/s 40(b) of the Act and, hence, such expenses incurred were not deductible. He, therefore, made disallowance of Rs.6 lac, which came to be affirmed in the first appeal.

4.

Having heard both the sides and perused the relevant material on record, it is observed that similar disallowance of Rs.6 lac was made by the Assessing Officer in the assessment for the immediately preceding assessment year, namely, 2010-11, which stood affirmed in the first appeal.

The matter came up for consideration before the Tribunal. Vide order dated 08.03.2016, the Tribunal, in has restored the matter to the file of Assessing Officer for deciding it afresh after giving certain directions. Since the facts and circumstances of the instant year are mutatis mutandis similar to those of the immediately preceding year, respectfully following the precedent, we set aside the impugned order to this extent and remit the matter to the file of the Assessing Officer for deciding this issue afresh in the hue of the observations made by the Tribunal for the preceding year.

5.

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

The order pronounced in the open court on 01.08.2018.

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