The Commissioner of Income Tax, vs. M/S Shalimar Wines,

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ITTA/615/2006HC TelanganaHBHC01020005200607 December 2010Bench: V.V.S.RAO,RAMESH RANGANATHAN2 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal held that the assessee was entitled to claim deductions for salary and interest paid to partners. This decision followed a previous judgment by a Division Bench of the same court.

What were the facts?

The assessee obtained a license to carry on retail liquor business and formed partnership firms to conduct this trade. The assessee claimed deductions for salary and interest paid to partners in their income tax returns.

What were the issues?

Whether salary and interest paid to partners in a firm engaged in liquor business are deductible expenses for income tax purposes.

Which sections of the Income-tax Act were involved?

Section 260A

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THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN

ITTA Nos.615 of 2006; 7 and 23 of 2007

Dated:07.12.2010

Between:

The Commissioner of Income Tax, Vijayawada.

…Petitioner and

M/s.Shalimar Wines.

…Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN

ITTA Nos.615 of 2006; 7 and 23 of 2007 COMMON ORDER: (per Hon’ble Sri Justice V.V.S.Rao)

In all these cases the assessee was granted a licence under the Andhra Pradesh Indian Liquor and Foreign Liquor Rules, 1970 and the Andhra Pradesh Excise Act, 1968. The licence enabled the assessee to carry on trade in retail liquor business. The assessee commenced their respective business by forming a partnership firm with others. Such firms were constituted either before or after obtaining the licence. In the income tax returns, for the relevant year, the assessee claimed deduction in respect of the salary and interest paid to the partners. The assessing officer, following the judgment of the Supreme Court in Biharilal Jaiswal v Commissioner of Income Tax[1], disallowed the deduction. The assessee was, however, successful before the Income Tax Appellate Tribunal. The Revenue has now come forward with these appeals under Section 260A of the Income Tax Act, 1961. Though the notices are served on the respondents, none appears and nobody entered appearance for them. The question whether the assessee was entitled to claim deduction of salary, and interest paid to the partners, in the returns was considered by a Division Bench of this Court in The Commissioner of Income Tax v M/s.Swarna Bar & Restaurant[2]. There is no dispute that the conclusion therein squarely covers the lis in these cases. Following the same, these

appeals also have to be allowed. Accordingly the appeals filed by the Revenue are allowed, and the impugned orders of the Income Tax Appellate Tribunal are set aside. No costs.

_______________ (V.V.S.RAO, J)

_____________________________ (RAMESH RANGANATHAN, J)

07.12.2010 vs [1] (1996) 217 ITR 746 [2] ITTA Nos.613 of 2006 and batch, dated 09.9.2010

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