9911796707
TMI Blog2012 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in the present case is a firm of solicitors and advocates. The return of income for the year under consideration was filed by it on 23.10.2007 declaring total income of Rs. 2,62,86,364/-. During the course of assessment proceedings, it was noticed by the AO that the assessee has paid a sum of Rs. 12 lakhs to Mrs. Manek J Gagrat, the spouse of the deceased partner late Shri Jahangir R Gagrat and the same was claimed as business expenditure allowable u/s 37(1). While justifying the said claim, it was submitted on behalf of the assessee before the AO that the payment of Rs. 12 lakhs was made to Mrs. M.J. Gagrat as per clause 12.4 of the partnership deed dated 22.6.2006 relying on the decision of Hon'ble Bombay High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acceptable. He held that there was no documentary evidence furnished by the assessee to show that the amount of Rs. 12 lakhs paid to Mrs. Gagrat was an expenditure incurred during the course of profession. According to the AO, the said payment at the most was in the nature of gratuitous payment which could not be treated as business expenditure of the assessee by any stretch of imagination. Accordingly, the deduction claimed by the assessee on account of the said payment amounting to Rs. 12 lakhs was disallowed by the AO in the assessment completed u/s 143(3) by an order dated 20.11.2009. 3. Against the order passed by the AO u/s 143(3), on appeal was preferred by the assessee before the learned CIT (A) and submissions made before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially in the event of his retirement. He held that the payment of Rs. 12 lakhs made to Mrs. M.J. Gagrat, 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. He held that it was clearly a gratuitous payment made by the assessee firm which was not an allowable business expenditure u/s 37(1). Accordingly, the disallowance made by the AO on this issue was confirmed by the learned CIT (A). Aggrieved by the order of the learned CIT (A), the assessee has preferred this appeal before the Tribunal. 4. The learned counsel for the assessee submitted that as per the partnership d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the nature of diversion of income by overriding title, was allowable as deduction. 4. The learned DR on the other hand submitted that Shri J.R. Gagrat expired on 5.12.2006 and after his death, the partnership was reconstituted by the deed of partnership made on 1.7.2006. He invited our attention to the copy of the said partnership deed placed at page nos. 46-75 of the assessee's paper book and pointed out that as per clause 3.2, the name, logo and mark "GAGRATS" along with goodwill had become absolute and exclusive property of Mr. R.J. Gagrat. He submitted that as per clause 3.2 of the partnership deed, Mr. R.J. Gagrat had licensed the user of the name, logo and mark "GAGRAT" to the firm pursuant to a license agreement entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Gagrat and Mr. R.J. Gagrat as their absolute and exclusive property and thereafter to the survivor of them. Mr. J.R. Gagrat and Mr. R.J. Gagrat had agreed to license the user of name, logo and mark "GAGRATS" to the partnership firm as per the license agreement. Thereafter a supplemental deed of partnership was executed on 3.12.2005 on death of one of the partners Mr. Adil Saifuddin Kajiji wherein it was provided that in the event of death or retirement of Mr. J.R. Gagrat, the remaining partners desirous of continuing the profession in the name and style of the firm will pay a sum of Rs. 12 lakhs per annum to his widow or wife. As rightly submitted by the learned DR, if the name and style of the firm were the property belonging to Mr. J.R ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
