2017 (10) TMI 1258 - AT - Income Tax

Non-deduction of tax in respect of the interest paid to financial institutions - Held that - During the course of hearing, Ld. Counsel for the assessee submitted that the financial institutions have disclosed this receipt in their return of income. This fact requires to be verified at the end of the AO. We therefore, set aside this issue to the file of the AO to verify whether recipient has paid tax on such receipt. In case, the recipient has paid taxes and disclosed receipts in their respective income tax return the AO would delete the disallowance. This ground of appeal is allowed for statistical purpose. Disallowance in respect of remuneration paid to partner Shri Rajiv Jain - Held that - Since the partnership deed allows expenditure of remuneration paid to the partners in the ratio as recorded in the partnership deed paying less to one partner and paying in excessive of the ratio so fixed, in our considered view would not help the assessee. The only explanation of the assessee is that the other partner has no objection to this effect. In our view, there is no ambiguity into the provisions, if any remuneration is paid in excess of the amount mentioned or the percentage mentioned in the partnership deed that is not allowable expenditure. Therefore, we do not see any infirmity into the order of the Ld. CIT(A), same is hereby affirmed. This ground of appeal is dismissed. Addition on account of interest income from M/s Yash Pharma - accrual of income - Held that - Since the assessee has been following mercantile system of accounting. Hence, the receipt is requires to be tax on accrual basis. Therefore, we do not see any infirmity finding into the order of the Ld. CIT(A), same is hereby affirmed. This Ground of assessee s appeal is dismissed.

Summary

Issues Involved:
1. Disallowance of interest payment to financial institutions for non-deduction of tax at source.
2. Disallowance of excessive remuneration paid to a partner.
3. Addition of interest income from M/s Yash Pharma.
4. Denial of sufficient opportunity to present additional documents.
5. General request to amend, alter, or delete grounds of appeal.

Issue 1: Disallowance of Interest Payment to Financial Institutions:
The Assessing Officer disallowed an expenditure of &8377; 3,18,253 for interest paid to financial institutions due to non-deduction of tax at source. The CIT(A) partly allowed the appeal but confirmed this disallowance. The ITAT set aside the issue to verify if the recipient institutions paid taxes, directing the AO to delete the disallowance if taxes were paid and disclosed. The appeal was allowed for statistical purposes.

Issue 2: Disallowance of Excessive Remuneration to Partner:
The AO disallowed &8377; 2,36,916 as excessive remuneration paid to a partner, which was contested by the assessee. The CIT(A) upheld the disallowance based on the partnership deed terms. The ITAT affirmed the CIT(A)'s decision, stating that any payment exceeding the partnership deed terms is not allowable, even if the other partner agrees. The appeal was dismissed.

Issue 3: Addition of Interest Income from M/s Yash Pharma:
The AO added &8377; 20,000 as interest income from M/s Yash Pharma, which was contested by the assessee. The CIT(A) sustained the addition as the income was accrued during the year, following the mercantile system of accounting. The ITAT upheld this decision, emphasizing the accrual basis of taxation. The appeal was dismissed.

Issue 4 & 5: Denial of Sufficient Opportunity and General Request:
The ITAT dismissed Grounds 4 and 5 as no arguments were presented. The appeal was partly allowed for statistical purposes.

This judgment addressed various issues including disallowance of interest payment, excessive remuneration to a partner, addition of interest income, and procedural matters. The ITAT provided detailed analysis for each issue, considering legal provisions, partnership deed terms, and accounting principles to reach decisions. The judgment emphasized adherence to partnership agreements, tax implications, and proper accounting methods in determining the tax liabilities of the assessee.