9911796707
TMI Blog2015 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimately the calculation of the claim of deduction u/s.10B should be made on the basis of the case laws as discussed in the case, therefore, there was no ultimate gain to the Revenue Department. Such an order of the AO cannot be termed as prejudicial to the interest of the Revenue. While granting the deduction u/s.10B it was not a situation that an incorrect application of law was applied by the AO. We therefore conclude that the revisionary order passed u/s.263 of the learned Commissioner was not sustainable in the eyes of law; hence quashed. - Decided in favour of assessee. - IT(ss)A Nos.227, 228, 229, 230 & 231/Ahd/2014 - - - Dated:- 25-3-2015 - Shri Mukul Kr. Shrawat And Shri Anil Chaturvedi JJ. For the Appellant : Shri O.P. Vaishnav For the Respondent : Shri S.N. Soparkar, A.R. ORDER Per: Mukul Kumar Shrawat, JUDICIAL MEMBER These are five Appeals emanating from a consolidated order of learned Commissioner Central-II, Ahmedabad dated 27.03.2014 pertaining to the Assessment Years 2004-05 to 2008-09. The Appellant has raised the main ground as under: 1. In law and in the facts and circumstances of the appellant's case, the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se assessment orders were erroneous in nature. A show cause notice was issued and the relevant portion is reproduced below: On verification of your assessment records for A.Y. 2004-05 to 2008-09, it is seen that the assessment orders dtd. 30/12/2011 passed by DCIT, Central Circle-1, Baroda, u/s 153A r.w.s. 143(3) of the I.T. Act, determining the total income as under, appear to be erroneous in so far as it is prejudicial to the interest of the Revenue for the reasons mentioned in the subsequent paragraphs:- A.Y. Assessed income 2004-05 ₹ 12,69,102 2005-06 ₹ 24,91,033 2006-07 ₹ 53,54,839 , 2007-08 ₹ 95,24,372 2008-09 Rs.2,34,84,433 While computing the total income for the above A.Ys., you have not provided for the interest and remuneration to the partners though authorized in the partnership deed. By not providing remuneration and interest to partners, you had earned more profits than the reasonable profit and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that this firm has NEVER in the past paid any interest or remuneration to its partners in any of the assessment years since its inception with effect from 1.4.1995 till assessment year 2008-09. Your Honour must kindly therefore, appreciate that the impugned Notice seeks to raise an issue which has absolutely no foundation oh facts. Be that as it may considering the fact that this firm did not pay any interest or remuneration to its partners in any of the five assessment year in question just as it did not pay any interest or remuneration in any of the earlier assessment years beginning with the first assessment year 1996-97 because its Partnership Deed as amended by the Supplementary Deed dated 24.4.1995 did not authorise any such payment to partners, there can be no question for alleging that by not making such payments to the partners, this firm had showed larger total income exempt u/s. 10B than what it would have been had payment of interest and remuneration been made to the partners. 3.1 The Assessee has also contested that there was no jurisdiction for the proposed addition because the provisions of Section 153A were applicable in this case as well. The Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0B of the I.T. Act. It has been pointed out by the assessee that the computation of interest and remuneration to the partners is not correct. The Assessing Officer is directed to verify this claim of assessee and make disallowance regarding interest and remuneration on the basis of correct figures. 5. From the side of the Assessee, learned AR, Mr. S.N. Soparkar appeared and vehemently pleaded that the Assessee was entitled for the deduction u/s.10B for the years under consideration. The calculation of deduction was duly checked and rechecked by the Chartered Accountant and after examining the facts of this case the claim was made. He has mentioned that a partnership deed was executed on 8th of April, 1995 and just 16 days after a supplementary deed was executed on 24th of April, 1995. Relevant Deeds are placed before us according to which vide clause-A it was mutually agreed that interest on capital balance of the partners would not attract interest. Likewise in respect of remuneration to partners clause B was introduced and decided that no partner would take the remuneration. Learned A.R. has also filed before us during the course of hearing the deed of partnership executed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the tax in the hands of the partners. Since, the AO has not examined basic facts about the clauses of the partnership hence it was rightly considered as an erroneous order, moreover the Assessee has evaded the tax hence in the interest of the Revenue Department was prejudiced. He has pleaded to affirm the action taken u/s.263 of IT Act. 7. We have heard both the sides at some length. We have carefully perused the records available before us. As far as the Assessment orders in question are concerned we have noted that the AO has deliberated upon the admissibility of the provisions of Section 10B of IT Act vis-avis the business activity of the Assessee as per paragraph 5 of assessment order for A.Y. 2004-05. The AO has recorded a fact that it was found that the Assessee was claiming deduction in respect of sales of goods manufactured by it within the meaning of Section 10B of IT Act. The impugned orders of the AO were not cryptic in nature because the detailed discussion was made about the manufacturing activity of the Assessee as well as the articles manufactured. Thereafter the claim of deduction u/s.10B was also modified by the AO. 7.1 There was no denial of this fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be an erroneous order because the calculation of the deduction u/s.10B was not a wrong calculation. We are convinced by one of the argument of learned A.R., Mr. Soparkar that even if the AO has passed an order unknowingly or unwittingly; but that order was otherwise a correct order in the eyes of law; then even if one of the inquiry has not been made then such an order especially when there is no loss of tax to the Revenue Department cannot be held as an erroneous order. We have given this opinion on the basis of few case laws as cited supra wherein the Hon ble Courts have held that the remuneration or interest etc. cannot be forced upon the registered firm. 7.3 In the case of M/s. Thermal Systems and Engineers (supra) a view was expressed by ITAT Tribunal that when the Assessee has not paid any interest to the partners and had not claimed any deduction, the question of allowing the same does not arise because the firm had not incurred any expenditure. Likewise in the case of M/s. Industrial Work Wear Vapi (supra), it was held that the expenditure of remuneration and interest could not be thrust upon the Assessee. The question before the Respected Co-ordinate Bench was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
