2021 (10) TMI 866 - AT - Income Tax

Reopening of assessment u/s 147 - assessee has claimed deduction under section 80IB without allowing interest on capital and remuneration to the partners - disallowing the partner s remuneration and interest on capital which is in contravention to the covenants laid down in the partnership deed - HELD THAT - The partners decided not to give any remuneration. On the interest to partner s capital, the assessee stated that it is privilege of the partners to change or amend the clause as agreed under the deed of partnership.Clause- 21 of the partnership deed provides such amendment. The assessee stated that the partnership was revised on 01.04.2008 i.e. much prior to the selection of return for scrutiny - AO disregarded the contention of the assessee and disallowed the part remuneration under section 80IB of the Act to the extent of ₹ 2,73,90,313/- thereby disallowed ₹ 2,04,07,333/-. CIT(A) allowed the relief to the assessee by following decision of Tribunal in the case of Alidhara Taxspin Engineers 2017 (5) TMI 1684 - GUJARAT HIGH COURT wherein it was held that mere incorporation of interest on the partners capital and remuneration does not signify that the same are mandatory in nature. The similar view taken by Hon'ble jurisdictional High Court in the case of M/s Sanidhya 2020 (2) TMI 588 - GUJARAT HIGH COURT by following its earlier order in Alidhara Taxspin Engineers 2017 (5) TMI 1684 - GUJARAT HIGH COURT . Therefore, we do not find any reason to interfere with the order of Ld. CIT(A), which we confirm. Assessing Officer re-opened the case of assessee for AY 2010-11 under section 147 of the Act on 05.03.2015 by recording reasons that assessee s claim deduction under section 80IB(10) without allowing capital and remuneration to its partners. However, same Assessing Officer allowed similar relief in assessment order passed under section 143(3) of the Act on 13.03.2015 in subsequent assessment year i.e. AY 2012-13. Therefore, the same officer has took two contrary view in respect of the same assessee on the similar issue, which is not permissible under the provisions of the income tax Act. The revenue authorities are requires to adhere the principles of consistency while considering the similar issues, when there is no variations in the facts in earlier or subsequent year. Thus, the assessee also succeeded on the secondary submissions of his ld counsel - Decided against revenue.

Summary

Issues:
- Disallowance of deduction u/s 80IB by disallowing partner's remuneration and interest on capital
- Acceptance of revised partnership deed by CIT(A) for allowing full deduction under section 80IB
- Discrepancy in Assessing Officer's treatment of similar issues in different assessment years

Analysis:
1. The appeal by Revenue challenged the CIT(A)'s order allowing deduction u/s 80IB by disallowing partner's remuneration and interest on capital. The original partnership deed indicated provisions for remuneration and interest, but a supplementary deed was executed later. The Assessing Officer disallowed part of the claim, citing non-submission of the supplementary deed during the original assessment. The CIT(A) allowed full deduction under section 80IB after considering the original partnership deed and the submission of the assessee.

2. The CIT(A) relied on CBDT circular and previous tribunal decisions to support the allowance of deduction without compelling the appellant to charge interest or remuneration to partners. The Revenue contended that the supplementary partnership deed was reconstituted solely to claim excess deduction under section 80IB, while the assessee argued that the supplementary deed was executed with the consent of the majority of partners.

3. The Tribunal found that the Assessing Officer re-opened the case based on the deduction claimed without allowing interest and remuneration to partners. However, in a subsequent assessment year, the same officer allowed a similar relief to the assessee. This inconsistency in treatment of the same issue for the same assessee was deemed impermissible under the income tax provisions. The Tribunal upheld the CIT(A)'s decision and dismissed the appeal by the Revenue.

4. The Tribunal emphasized the importance of consistency in revenue authorities' treatment of similar issues across different assessment years when facts remain unchanged. The conflicting views taken by the Assessing Officer in different years regarding the same issue were deemed unacceptable. Consequently, the Tribunal confirmed the CIT(A)'s order allowing the deduction under section 80IB and dismissed the Revenue's appeal.