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TMI Blog2014 (11) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... rm - This allocation has to be made on the proportionate basis i.e. the expenditure on running and maintenance of motor car, depreciation etc. is to be allocated in proportion of share of profit from the firms and the remuneration received from the firms – thus, the AO is directed to allow the proportionate deduction in respect of running and maintenance of motor car and depreciation against the remuneration received from the firm – Decided partly in favour of assessee. Unexplained cash deposits - Whether the authorities below are justified in making and sustaining the addition for unexplained cash deposits out of cash earlier withdrawn – Held that:- There was cash deposits in the bank account aggregating to ₹ 52,60,000/- which are clearly covered by earlier withdrawals of ₹ 54,65,000 - there is no reason to doubt the explanation of the assessee that the deposits were from the earlier withdrawals - The period of paring the money withdrawn ranging from 123 days to 8 days is also not so long to doubt the explanation of the assessee that the money was kept for the purchase of land for which dealing was going on but ultimately could not be materialized - There is a need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are that during the year the assessee a qualified Chartered Accountant was a partner in two firms. In this year, the year the assessee had income from profession as partner s remuneration and also had capital gains and taxable interest income. The AO disallowed the claimed business expenses of ₹ 11,59,309/- against taxable partner s remuneration on the basis that the expense and depreciation did not pertain to the assessee as an individual but to the partnership firm. It is pertinent to mention over here that the assessee had claimed the expenses in question incurred on the vehicle owned by him used for the business of the firm. The Ld. CIT(A) has upheld this action of the AO, which has been questioned again by the assessee before the Tribunal. 4. In support of the ground the Ld. AR reiterated the submission made on the issue before the authorities below. He submitted during the year the assesssee was a partner with a firm which provides professional services to its clients. The assessee was drawing a monthly remuneration of ₹ 2 lacs during the year. No vehicle was provided to him for attending to the firms work. There was an understanding with the firm that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that this very issue was examined in the case of assessee itself for the assessment years 2006-07 and 2007-08, in the assessment framed u/s 143 (3) of the Act, wherein no such disallowance was made. In support the Ld. AR referred page Nos. 22 to 29 of the paper book which are the copies of those assessment orders for the assessment year 2006-07 and 2007-08. The Ld. AR also placed reliance on the following decisions on the issue :- 1. CIT vs. Ramnik Lal Kothari 74 ITR 57 (SC) 2. CIT vs. S.B. Ghose, 124 ITR 674 (Cal) 3. Phiroze H. Kudianavala vs. CIT 113 ITR 873 (Bombay) 4. CIT vs. Atma Ram Modi 71 ITR 199 (Patna) 5. Ld. Sr. DR on the other hand tried to justify the orders of the authorities below. She submitted that no evidence to support the claim of the assesee that expenses in question were incurred on car used for the claimed business purposes was furnished to justify the claim. The assessee was also not maintaining log book to support its claim. She also referred contents of para No. 3 of the partnership deed and clause 10 thereof, a copy of which has been made available at page No. 85 to 93 of the paper book filed on behalf of the assessee. She submitted furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rry on any independent business, was entitled to deduct from his share of the profits from the firms amounts paid as salary and bonus to staff, expenses for maintenance and depreciation of motor cars and traveling expenses expended by him in earning the income from the firms. In the case of S.B. Ghose, Hon ble Calcutta High Court held as under:- Held, on the facts of the case, that the assessee, who was a partner in a firm, was entitled to the deduction of ₹ 700 under s. 38(1) of the I.T.Act, 1961, for use of a part of the dwelling house as expense incurred for the purpose of earning his share income from the firm. In the case of Phiroze H. Kudianavala, Hon'ble Bombay High Court held as under:- The assessee, an architect, was a partner in a firm of architects. It was found that the partners had agreed amongst themselves to incur expenditure the amounts of which were agreed to be borne by the partners themselves. Such expenditure could not be disallowed merely because it had not been brought to the accounts of the partnership or that it could not be properly regarded as profits of the firm. Whatever is expended to enhance the profits of the partnership must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration received from the firm and has not allocated any part of the expenditure against the share income from the firm. Obviously, it is done by the assessee because in the year under consideration, share income from the firm is exempt under Section 10(2A). That merely because in this year the share income is exempt, the ratio of the above decision of Hon ble Apex Court and other High Courts would not change. The ratio of the above decision of Hon ble Suprerme Court in the case of Ramniklal Kothari is that the partner of the firm is entitled to deduct from his share income the amount paid as salary and bonus to staff, expenses for maintenance and depreciation of motor cars etc. Since in the case under appeal before us the assessee has received remuneration in addition to the share of profit from the firms, the expenditure incurred by the assessee for running and maintenance of motor car is to be allocated between the share of profit from the firms and remuneration from the firm. This allocation has to be made on the proportionate basis i.e. the expenditure on running and maintenance of motor car, depreciation etc. is to be allocated in proportion of share of profit from the firms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further explained that the entries in annexure A are exclusive of house hold withdrawal and in support of this the assessee had enclosed statements in annexure B giving the details of house hold expenditure. The Ld. AR referred page Nos. 51 and 52 , 130 and 131, 135 and 136 and 41 and 42 of the paper book filed on behalf of the assessee. These are copies of affidavit of the assessee explaining deposits and withdrawals before the AO, remand report, house hold withdrawals etc. referred above. 9. Ld. AR submitted further that money in cash kept with assessee for a long time is not the concern of the AO. In support, he placed reliance on the following decisions :- 1. S. R. Venkata Ratnam. v. Commissioner of Income Tax (1981)127 ITR 807 (Karnataka) 127 ITR 807 2. Commissioner of Income-tax v. Kulwant Rai [2007] 291 ITR 36 (Del) 291 ITR 36 (Del) 10. Ld. DR on the other hand placed reliance on the orders of the authorities below. She submitted that there is no evidence on record to support the explanation of the assessee as for which deal and which land money was kept by the assessee at residence and ultimately re deposited in his bank account as the dealings could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits were from the earlier withdrawals . The period of paring the money withdrawn ranging from 123 days to 8 days is also not so long to doubt the explanation of the assessee that the money was kept for the purchase of land for which dealing was going on but ultimately could not be materialized. It is prerogative of the assessee to keep the money with him or in his saving bank account and when the source of deposit has been explained by way of withdrawal from his own bank account the said prerogative of the assessee cannot be questioned. There is however a need to verify the claim of the assessee that these withdrawals from the bank were kept intact and were not used for house hold expenditure as the entries accounted for in the cash book maintained in this regard furnished by the assessee were exclusive of house hold withdrawals. We thus set aside this aspect of the explanation for verification to the file of the AO and if the AO finds that house hold withdrawals were separately maintained by the assessee, he will accept the explanation of the assessee regarding the source of the deposits of ₹ 52,60,000/- and delete the addition in question. It is needless to mention over h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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