2007 (7) TMI 303 - HC - Income Tax

Liability of partners u/s 40b(v) decision of the tribunal - held that - those so-called reasoning which the Tribunal claims to have recorded in detail in their earlier order must be made available to us for examination as an appellate court for their sustaining or setting them aside. The only proper place for mentioning such reasoning is in the impugned order itself in verbatim in one paragraph. It can be, as observed supra, either by way of their reproduction in the impugned order in extenso and in verbatim or it can be by mentioning their substance. In either case, mentioning of reasoning in the impugned order is mandatory. Since the orders of the Tribunal are not published in legal journals, the High Court is not able to trace them for reading from any legal journal else we would not have even taken pains to follow that also. It is also unfortunate that even the Revenue has made no effort to file copy of the so called orders passed by the Tribunal in the case of this very assessee in I. T. A. No. 436/Ind/99 in this appeal for our perusal matter remanded

Summary

Issues:
1. Lack of reasoning in the Tribunal's decision.
2. Interpretation of circular for working out liability of partners under section 40(b)(v) of the Income-tax Act.

Issue 1: Lack of reasoning in the Tribunal's decision:
The High Court addressed the lack of reasoning in the Tribunal's decision. The Tribunal dismissed the Revenue's appeal without providing detailed reasons for their decision. The High Court emphasized the importance of having the Tribunal's reasoning available for review in the appellate process. The Court highlighted that the Tribunal's orders are not published in legal journals, making it challenging for the High Court to access them. The High Court expressed disappointment that the Revenue did not provide the orders passed by the Tribunal for examination. The High Court considered two options: either obtaining the reasoning from the parties or setting aside the unreasoned decision and remanding the case to the Tribunal for a fresh decision. The High Court chose the latter option to ensure a more appropriate resolution and prevent similar issues in the future.

Issue 2: Interpretation of circular for working out liability of partners under section 40(b)(v) of the Income-tax Act:
The High Court analyzed the interpretation of a circular issued by the Central Board of Direct Taxes regarding the liability of partners under section 40(b)(v) of the Income-tax Act. The Tribunal referred to the circular, which specified conditions for allowing deductions for remuneration to a working partner. The Tribunal considered the partnership deed provisions and the profit-sharing ratio in the case. The Tribunal upheld the Commissioner of Income-tax (Appeals) decision based on the circular's guidelines and the partnership agreement. The High Court directed the Tribunal to reexamine the appeal, emphasizing the importance of considering the latest judicial pronouncements, presenting relevant facts, legal submissions, and a clear conclusion in the revised decision. The High Court set a timeline for the Tribunal to review the case and instructed the parties to present their arguments accordingly.

This detailed analysis of the judgment from the Madhya Pradesh High Court highlights the issues raised, the court's considerations, and the directives provided for the reexamination of the appeal.