A.ANNAMALAI,CHENNAI vs. ACIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -13, Chennai, dated 15.09.2016 and pertains to assessment year 2012-13.

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee is a partner in the partnership firm known as M/s Jeyam & Co. According to the Ld. counsel, the partnership firm M/s Jeyam & Co. received Carbon credit subsidy of ₹23,53,052/- for the assessment years 2009-10 and 2010-11. The same was, however, assessed as revenue receipt in the hands of the partnership firm. Again, according to the Ld. counsel, the same amount was assessed in the hands of the assessee as a partner on the ground that the same was credited in the capital account of the assessee. According to the Ld. counsel, what was received by the partnership firm is a capital subsidy and having assessed in the hands of the partnership firm as revenue receipt, the same cannot once again be assessed in the hands of the partners. Therefore, according to the Ld. counsel, the CIT(Appeals) is not correct in confirming the order of the Assessing Officer.

On the contrary, Shri Asish Tripathy, the Ld. Departmental Representative, submitted that the subsidy said to be received by the partnership firm was credited to partners’ capital account according to their shares in the firm. According to the Ld. D.R., the Assessing Officer found that a sum of ₹13,44,601/- was credited in the partner’s account on 01.04.2011 and another sum of ₹10,08,451/- was credited in the partner’s account on 31.03.2012. Since the amount as credited in the capital account of the assessee in the partnership firm account on the basis of the profit sharing ratio, according to the Ld. D.R., the Assessing Officer found that only the share of profit received from the partnership firm was exempted under Section 10(2A) of the Income-tax Act, 1961 (in short 'the Act') and not the entire amount credited in the partnership firm account. According to the Ld. D.R., what was credited in the capital account of the assessee is not the share of profit, therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, what was received by the assessee is a subsidy for the Carbon credit. It is also not in dispute that what was received as subsidy was assessed in the hands of the partnership firm M/s Jeyam & Co. The Assessing Officer found that a sum of ₹23,53,052/- was credited in the partner’s capital account of the partnership firm, therefore, she assessed the same as income of the assessee being partner of the partnership firm M/s Jeyam & Co. Now the assessee claims that having been assessed in the hands of the partnership firm in respect of subsidy, the same amount cannot be assessed in the hands of the individual partner. This Tribunal is of the considered opinion that when the amount received by the assessee was assessed as income of the partnership firm in which the assessee is a partner, the very same amount cannot be subject matter of taxation once again. The fact remains that the subsidy was received by the firm. It was credited in the account of the partnership firm. Therefore, it cannot be subject matter of taxation once again in the hands of the partner.