2004 (10) TMI 297 - AT - Income Tax

Summary

Issues:
1. Liability of remuneration paid to working partners in their capacity as Karta of HUF.
2. Deletion of addition made by AO on account of shortage in diesel.

Analysis:

Issue 1: Liability of Remuneration to Working Partners as Karta of HUF
The case involved the liability of remuneration paid to working partners in their capacity as Karta of HUF. The assessee, a trading firm, executed a new partnership deed in 1992, introducing a clause for payment of salary to working partners. The AO disallowed the salary paid to partners of HUF as Karta of HUF, leading to additions in assessments. However, the CIT(A) allowed the claim of the assessee. The Tribunal referred to various decisions, including those of the same Bench, and held that remuneration paid to a working partner within the meaning of the relevant provision of the Income Tax Act is allowable. Consequently, the Tribunal dismissed the appeal of the Department on this issue.

Issue 2: Deletion of Addition on Account of Shortage in Diesel
The second issue revolved around the deletion of additions made by the AO for shortages in diesel. The assessee claimed shortages ranging from 0.40% to 0.60% in different years, which were considered negligible by the Tribunal. Citing previous decisions, the Tribunal emphasized that when shortages are less than 1%, they can be treated as negligible, and no additions should be made on that account. The Tribunal referred to specific cases where similar additions were deleted due to shortages being within permissible limits. The Departmental Representative also conceded on this issue, leading to the dismissal of the Department's appeal regarding the deletion of additions on account of shortages in diesel for all the years in question.

In conclusion, the Tribunal upheld the allowance of remuneration to working partners in their capacity as Karta of HUF and dismissed the appeal of the Department. Additionally, the Tribunal dismissed the appeal regarding the deletion of additions made by the AO on account of shortages in diesel, considering the shortages to be negligible.