2022 (6) TMI 943 - AT - Income Tax

Disallowance in respect of partner s remuneration and interest on partner s capital - HELD THAT - We find that the sole reason for disallowance of the partner s remuneration as well as interest on partner s capital is on account of non furnishing of the partnership deed, during the course of assessment proceedings, at the same time, it is the matter of record that the assessee has duly filed the copy of the partnership deed, with the return of income for A.Y. 2006 07 and which is available as part of the assessment records with the Assessing Officer. Given the statement of the ld. AR at the Bar that there has been no change in the constitution or contents of the partnership deed and taking into account, the entirety of facts and circumstances of the case, we hereby direct the deletion of partner s remuneration as well as interest on the partner s capital account. - Appeal of assessee allowed.

Summary

Issues: Appeal against disallowance of partner's remuneration and interest on partner's capital due to non-furnishing of partnership deed.

Analysis:

1. Delay in filing appeal: The appeal was filed with a delay of 55 days. The Tribunal considered the affidavit filed by the assessee and condoned the delay, admitting the appeal for adjudication.

2. Disallowance of partner's remuneration and interest: The grounds for disallowance were the non-furnishing of the partnership deed during assessment proceedings. The assessee argued that the partnership deed was filed along with the return of income for the relevant assessment year and was available in the assessment records. The firm's constitution and partnership deed remained unchanged since its formation, as evidenced by the partnership deed submitted. The Tribunal noted that the disallowance was solely due to the non-furnishing of the partnership deed, which was actually on record. Considering this, the Tribunal directed the deletion of the disallowance of partner's remuneration and interest on the partner's capital account.

3. Arguments of the parties: The assessee's representative contended that the disallowance was unjustified as the partnership deed had been filed and remained unchanged. On the other hand, the Revenue relied on the lower authorities' orders.

4. Decision: After hearing both parties and examining the records, the Tribunal found that the disallowance was unfounded since the partnership deed was indeed filed and unchanged. Therefore, the appeal was allowed, and the disallowance of partner's remuneration and interest on the partner's capital was deleted.

5. Conclusion: The Tribunal pronounced the order in favor of the assessee, allowing the appeal against the disallowance of partner's remuneration and interest on partner's capital due to the non-furnishing of the partnership deed during assessment proceedings.

This detailed analysis covers the issues raised in the appeal and provides a comprehensive understanding of the Tribunal's decision regarding the disallowance of partner's remuneration and interest on partner's capital.