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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. These appeals are filed by the assessee against different orders of Additional / JCIT (A) – 2, Pune [hereinafter in short “Ld. CIT(A)] vide respective DIN &Order No. as stated below: - , 262 & 263/VIZ/2024 Ongole Galaxy ITA No. & A.Y. DIN & Order No. Dated ITBA/APL/S/250/2024-25/1065079174(1) 22.05.2024 (A.Y. 2018-19)
ITBA/APL/S/250/2024-25/1065079566(1) 22.05.2024 (A.Y. 2019-20) ITBA/APL/S/250/2024-25/1065079859(1) 22.05.2024 (A.Y. 2020-21)
Since the grounds raised by the assessee for all the three appeals are identical in nature, these appeals are being clubbed and a consolidated order being passed. We now take up the appeal in A.Y.2018-19 as a lead appeal.
Brief facts of the case are that, assessee being a partnership firm filed its return of income for the A.Y. 2018-19 on 31.10.2018 admitting a total income of Rs. 94,33,589/-. The return of income was summarily processed under section 143(1) of Income Tax Act, 1961 (in short ‘Act’) by the Centralized Processing Center [in short “CPC”] vide intimation order dated 29.06.2019. The CPC has made aggregate adjustment of Rs. 1,51,88,521/- on account of disallowance of remuneration paid to partners under section 40(b) of the Act for Rs. 1,50,00,000/- and further an amount of Rs. 1,88,521/- on account of depreciation claimed.
Being aggrieved by the additions made by the CPC, assessee filed an appeal before the Ld. CIT(A). Appeal proceedings was transferred in terms of CBDT Notification No. 33/2023/F.NO. 370142/10/2023-TPL dated 29.05.2023
Page No. 2 , 262 & 263/VIZ/2024 Ongole Galaxy in accordance with the newly e-Appeals Schemes, 2023 introduced in the Act. Thereafter, the Ld. CIT(A) issued and served notice of hearing on 16.10.2023, 21.03.2024, 03.05.2024 & 07.05.2024. In response, assessee-firm submitted and uploaded its responses through e-proceedings from time to time. Assessee contended before the Ld. CIT(A) that the remuneration of Rs. 1,50,00,000/- has been debited to Profit & Loss Account as per the terms of partnership deed which is a permissible expenditure under the Act. Further, it was also submitted by the assessee-firm that the partners have declared remuneration in their respective return of income filed for the year under consideration. The Ld.CIT(A) issued a notice dated 07.05.2024 calling for documentary evidences in support of the assessee’s contention on or before 14.05.2024. Since assessee did not comply with the notice, Ld. CIT(A) proceeded to adjudicate the appeal based on the material available on record and Ld. CIT(A) in the result dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following grounds of appeal: -
1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the adjustment of Rs.1,50,00,000 made by the CPC towards disallowance of remuneration to partners.
3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the claim of the appellant is in accordance with the provisions of S.40(b) of the Act and hence no disallowance is warranted.
4. Any other grounds may be urged at the time of hearing.”
Page No. 3 , 262 & 263/VIZ/2024 Ongole Galaxy 6. Ground Nos. 1 & 4 are general in nature and needs no adjudication.
Ground Nos. 2 & 3 relates to the disallowance of remuneration to the partners. In this regard, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that, assessee has voluntarily disclosed in the computation while filing the return of income for the firm, the remuneration debited to Profit & Loss Account and the remuneration allowable under section 40(b) of the Act. It is available in Paper Book at Page No. 2. Further, he also demonstrated that while filing the return of income in ITR-5 assessee has inadvertently omitted to fill the details of remuneration in Column – “E" of the Form. However, Ld.AR submitted that as per Item No. 8 of “other information” in the return of income assessee has voluntarily disallowed a sum of Rs. 10,37,866/- as it is not a permissible deduction as per provisions of section 40(b) of the Act. The Ld.AR also once again reiterated and submitted that remuneration of Rs. 1,50,00,000/- was already been debited to the Profit & Loss Account of the assessee. Further Ld.AR also submitted that as per Item 21(c) of Form – 3CD assessee has voluntarily admitted the inadmissible expenditure on account of remuneration under section 40(b) of the Act which is available in Page No. 21 of the paper book. He therefore pleaded that a mere technical error in not providing the information of remuneration in the return of income in Column-E of “Partner’s or Member’s or Trust Information” could not be a ground for the purpose of disallowances under section 40(b) of the Act.
Page No. 4 , 262 & 263/VIZ/2024 Ongole Galaxy 8. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] fully relied on the orders of revenue Authorities.
We have heard both the sides and perused the material available on record and also orders of the lower authorities. It is an undisputed fact that the assessee has debited an amount of Rs. 1,50,00,000/- as remuneration to partners in the Profit & Loss Account. Further, it is also an undisputed fact that assessee has computed the remuneration, deductible as per provisions of section 40(b) of the Act and has disallowed a sum of Rs. 10,37,866/- while computing the total income of the assessee-firm. These details are also duly filed up in the respective columns of the return of income filed by the assessee, except in Column-E of “Partner’s or Member’s or Trust Information”. In support of the argument by the Ld.AR, Ld.AR also submitted the return of income and computation statements of the various partners wherein the remuneration from the partnership firm has been disclosed while filing their respective return of income. These facts prove that assessee has duly complied with the provisions of section 40(b) of the Act and there is no revenue leakage to the department. Further, we are also of the considered view that a mere technical error by not filling up the Column-E of “Partner’s or Member’s or Trust Information” could not be a reason for disallowance of remuneration in the hands of the assessee- firm. It is also observed that assessee on his own volition has disallowed a sum ofRs.10,37,866/- which is inadmissible under the provisions of section 40(b) of Page No. 5 , 262 & 263/VIZ/2024 Ongole Galaxy the Act. Considering the above facts and circumstances, we hereby direct the Assessing Officer to allow the remuneration claimed by the assessee under section 40(b) of the Act. Accordingly, Ground Nos. 2 & 3 raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
(A.Y. 2019-20) ITA No. 263/VIZ/2024(A.Y. 2020-21)
Coming to appeals relating to A.Y. 2019-20 & A.Y. 2020-21, since facts in this case are mutatis mutandis, therefore the decision taken in assessee’s case for the A.Y.2018-19 are applicable to these assessment years also. Accordingly, appeals filed by the assessee are allowed.
To sum-up, appeals filed by the assessee are allowed.
Order pronounced in the open court on 17th October, 2024.