2018 (8) TMI 2082 - AT - Income Tax

Disallowance being the amount paid by the assessee-firm to Resident partner as reimbursement towards running and maintenance of motor car, maintenance of consultation room at his residence and entertainment expenses for clients at the consultation room - assessee is a partnership firm of advocates practising at the Hon ble Supreme Court of India - AO opined that the partnership firm can legitimately claim deduction on account of interest and salary to partners subject to the limits u/s 40(b) of the Act and, hence, such expenses incurred were not deductible - HELD THAT - Similar disallowance of Rs.6 lac was made by the Assessing Officer in the assessment for the immediately preceding assessment year, namely, 2010-11, which stood affirmed in the first appeal. The matter came up for consideration before the Tribunal. Vide order dated 08.03.2016, the Tribunal, 2016 (3) TMI 814 - ITAT DELHI has restored the matter to the file of Assessing Officer for deciding it afresh after giving certain directions. Since the facts and circumstances of the instant year are mutatis mutandis similar to those of the immediately preceding year, respectfully following the precedent, we set aside the impugned order to this extent and remit the matter to the file of the Assessing Officer for deciding this issue afresh in the hue of the observations made by the Tribunal for the preceding year. Assessee appeal is allowed for statistical purposes.

Summary

Issues involved:
- Disallowance of expenses paid to a resident partner by a partnership firm for running and maintenance of a motor car, maintenance of consultation room, and entertainment expenses for clients.

Analysis:
The judgment pertains to an appeal filed by a partnership firm of advocates practicing at the Hon'ble Supreme Court of India against the disallowance of Rs.6 lac paid to a resident partner for various expenses. The firm claimed deduction for the amount paid to the partner, but the Assessing Officer disallowed it, stating that such expenses were not deductible under section 40(b) of the Act. The first appeal affirmed this disallowance. The Tribunal noted that a similar disallowance was made in the previous assessment year, which was also affirmed in the first appeal. In a previous case, the Tribunal had remitted the matter to the Assessing Officer for fresh consideration. Given the similarity of facts and circumstances in the current year to the preceding year, the Tribunal set aside the order and remitted the matter to the Assessing Officer for a fresh decision in line with the directions given in the previous year's case.

The Tribunal's decision was based on the principle of following precedent and ensuring consistency in treatment of similar cases. By setting aside the order and remitting the matter to the Assessing Officer, the Tribunal allowed the appeal for statistical purposes. The judgment emphasizes the importance of considering past decisions and directions given by the Tribunal in similar cases to ensure fair and consistent application of tax laws. The decision highlights the need for thorough examination of expenses claimed as deductions by partnership firms to determine their eligibility under relevant provisions of the Income Tax Act.