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TMI Blog2012 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, was not a case of diversion of income by overriding title and it was only case of giving benefit to one individual who was neither a partner of the firm nor in any way related to the professional work of the firm - it was clearly a gratuitous payment made by the assessee firm which was not an allowable business expenditure u/s 37(1) – In favor of revenue - ITA No.6068/M/2010 - - - Dated:- 25-1-2012 - SHRI P. M. JAGTAP AND SHRI V. DURGA RAO, JJ. Appellant By : Shri Vijay Mehta Respondent By : Shri A.K. Nayak ORDER Per P.M. Jagtap, A.M: This appeal filed by the assessee is directed against the order of learned CIT (A)-3, Mumbai dated 16.6.2010 and the solitary issue arising out of the same relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions of the partnership deed agreed by the partners and the same, therefore, was allowable as deduction. The AO did not find merit in the contentions raised on behalf of the assessee. He held that the facts involved in the case of the assessee were different from the facts involved in the case laws cited on behalf of the assessee inasmuch as the assessee had earned its income by rendering professional services to the clients which was actually reached the assessee without any interruption or hindrance. He held that it was, thus, not a case of diversion of income by overriding title as contended on behalf of the assessee. He also noted that the major share of profit of the assessee firm was going to Shri Rustam Jehangir Gagrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons given in para no. 2.2.3 of his impugned order that the genuineness of the said supplementary deed of partnership itself remained unestablished. He also noted that by the deed of partnership dated 11.4.2005 referred to in the supplementary partnership deed, the main logo and mark GAGRATS were assigned along with goodwill and all tangible and intangible rights to Mr. J.R. Gagrat and Mr. R.J. Gagrat jointly as their absolute and exclusive property. He noted that the payment for use of name, logo etc., of the partnership firm, however, was made to the wife of Mr. J.R. Gagrat as per supplementary partnership deed. He noted that the said payment to wife of Mr. J.R. Gagrat was provided in the supplemental partnership deed even in the event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge nos.39-44 of his paper book and pointed out that in the event of death or retirement of Mr. J.R. Gagrat, the remaining partners of the firm were permitted to continue the profession in the name and style of the firm on making payment of Rs. 12 lakhs per annum to his widow or wife. He contended that without the said payment of Rs. 12 lakhs made by the continuing partners, it was not possible to continue the profession in the name and style of the firm and the payment so made thus was an expenditure incurred for the purpose of profession which was allowable u/s 37(1). He contended that keeping in view the revenue of the partnership firm running into crores, the amount of Rs. 12 lakhs paid for use of name of the firm was quite fair and reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deduction on account of the impugned amount to Mrs. M.J. Gagrat, permitted such payment even in case of retirement of Shri J.R. Gagrat. He contended that how such payment could be allowed to the wife of Shri J.R. Gagrat in the event of his retirement from the partnership firm. He contended that the said payment, thus, was in the nature of gratuitous payment which cannot be allowed as deduction u/s 37(1) as rightly held by the authorities below. As regards the stand of the assessee relating to diversion of income by overriding title, the learned DR relied on the impugned order of the learned CIT (A) stating that the said stand of the order has been rejected by the learned CIT (A) by giving proper and convincing reasons. 5. We have consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 21.6.2006. There was thus no justifiable reason for the assessee firm to make payment of Rs. 12 lakhs per annum to Mrs. M.J. Gagrat for use of name and style GAGRATS and the said payment, in our opinion, cannot be considered as expenditure incurred by the assessee firm for the purpose of its business/profession. As rightly held by the authorities below, the said payment was in the nature of gratuitous payment made by the assessee firm which could not be allowed as deduction u/s 37(1). 6. As regards the alternative claim of the assessee that the impugned payment being diversion of income by overriding title should be allowed as deduction, we find that the learned CIT (A) has given cogent and convincing reasons to reject the same in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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