MESSRS. A.K. SHAW,HOOGHLY vs. ITO, WARD - 23(2), HOOGHLY, HOOGHLY

PDF · subscribers
ITA 144/KOL/2018Status: DisposedITAT Kolkata27 June 2018AY 2014-153 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 the AO erred in disallowing the managers' remuneration by confusing it with payments to managing directors. The CIT(A) also failed to pass a speaking order and Section 40A(2) was not applicable as no comparative instances were provided.

What were the facts?

The assessee, a partnership firm engaged in wine business, claimed Rs. 3,96,000/- as managers' remuneration. The AO disallowed this expenditure, which was upheld by the CIT(A).

What were the issues?

Whether the disallowance of managers' remuneration paid to partners was justified and if Section 40A(2) was correctly applied.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 40A(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Shri J.Sudhakar Reddy, AM]

Hearing: 02.06.2018Pronounced: 27.06.2018

This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-6, Kolkata [ in short the ld CITA] dated 22.12.2017 against the order passed by the I.T.O, Ward-23(2), Hooghly [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 28.06.2016 for the Assessment Year 2014-15.

2.

The assessee is a partnership firm engaged in the business of wine merchants. It has two partners. The issue before me is the disallowance of expenditure claimed of Rs. 3,96,000/- under the head ‘Managers Remuneration’ paid to Mr. Hiranmoy Gon and Ms. Sudipta Gon.

Messrs. A.K. Shaw A.Yr.2014-15 3. On a careful consideration of the facts and circumstances of the case, a perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows.

4.

After hearing rival contention I find that the premises on which the AO disallowed the claim of the assessee is erroneous. The assessee is a partnership firm. The AO confused the payment of salary to manager, with that of payment of salary to a managing director or managing personnel. The fact remains that the assessee’s turnover has increased from 1.8 crores for the financial year 2009-10 to 4.14 crores for the financial year 2012-13. The Ld. CIT(A) has not passed a speaking order. Section 40A(2) does not come into play as no comparative instance have been cited by the AO to come to a conclusion that the expenditure is excessive or unreasonable, having regard to the fair market value of such services.

5.

Thus, the ground of the assessee is allowed and the AO is directed to grant deduction of managers remuneration as claimed by the assessee.

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 27.06.2018

More judgments on Section 40A(2)

All 542 judgments and leading authorities on Section 40A(2) →

Recent GST High Court judgments

Search GST case law →