ATUL KUMAR GUPTA,DELHI vs. ITO, WARD- 43(1), DELHI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 30.03.2025, for Assessment Year 2018-19.

Shri Anil Sharma, appearing on behalf of the assessee submitted that the assessee is a Chartered Accountant by profession and is a partner in M/s. A P R A & Associates LLP, Chartered Accountants. During the period relevant to assessment year under appeal, the assessee received remuneration of Rs.24,00,000/- from the aforesaid partnership firm. The assessee claimed expenditure of Rs.6,76,456/- on account of travelling expenses, telephone (AY 2018-19) expenses, depreciation, repair and maintenance, fuel expenses, driver salary, etc. and offered balance salary of Rs.11,62,424/- to tax. The Assessing Officer (AO) disallowed assessee claim of expenditure holding that professional expenditure is not allowable from the remuneration received by the partner. Aggrieved by the assessment order dated 03.03.2021, the assessee carried the issue in appeal before the CIT(A) but remained unsuccessful. Hence, the present appeal. 2.1. The ld. AR of the assessee submitted that the authorities below have erred in not considering the fact that the salary received by a partner of a firm is in the nature of business income. He referred to provisions of section 28(v) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’), to contend that any interest salary, bonus, commission or remuneration by whatever name called received by partner from such firm is in the nature of business income. In support of his contention, he placed reliance on the decision of Hon’ble Supreme Court of India in the case of CIT vs. Ramnik Lal Kothari, 74 ITR 57. He further placed reliance on the decision of the Tribunal in the case of Anil Gupta vs. ITO in for AY 2010-11 decided on 31.01.2014 and the decision of Tribunal in the case of Aman Tandon vs. ACIT in for AY 2011-12 decided on 13.12.2019. The ld. AR also referred to the computation of income at page no. 228 to show that the salary received by the assessee from partnership firm has been offered to tax under the head Income from Business and Profession.

Per contra, Ms. Sudha Gupta representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.

Section 28(v) of the Act, allows any interest salary, bonus, remuneration by whatever name called received by a partner from the partnership firm to be treated as business income. Consequently, any expenditure incurred by the partner exclusively and solely for the purpose of earning such business income is an allowable expenditure u/s. 32 and 37 of the Act. The assessee has been claiming such expenditure from salary received from the partnership firm in the past. The Rule of consistency demands that if the expenditure in the nature of depreciation on motor car, etc. has been allowed to the assessee in the past, the same should be allowable in the subsequent assessment year as well. Thus, in light of the facts and provision of section 28(v) of the Act, I have no hesitation in holding that the expenditure incurred by the assessee wholly and exclusively for the purpose of business and profession is a allowable expenditure.