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TMI Blog2016 (6) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... t claimed but would still be deemed to be allowed for tax purposes. CIT(A) correctly deleted the addition - Decided in favour of assessee Disallowance of remuneration to the partners - Held that:- The remuneration has to be worked out based on certain percentage of the book profit which will be determined at the end of the year. It is also provided that the total amount of the remuneration so worked out is to be shared equally amongst all the three partners and in case of loss, no salary would be allowable to the partners. The CBDT circular similarly provides that where either the quantum or the manner of quantification of remuneration to the partners has been specified in the partnership, the same shall be allowable under section 40(b)(v) of the Act and not otherwise. In the instant case, given that the salary has been made a function of annual book profit which can be determined only at the end of the year, the exact quantum of remuneration has not been specified. At the same time, the partnership deed clearly provides for the manner of quantification of remuneration. It is not a case simpliciter that the partners have left the doors open to claim the remuneration as per sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowances of the provision of entry tax liability under section 43B of ₹ 40,03,853. 2.1 The facts in brief are that the assessee has made a provision of entry tax for ₹ 40,03,853 as on March 31, 2010, and the assessee was asked to furnish proof of payment by the Assessing Officer. The assessee submitted that in view of the ongoing litigation before the Supreme Court, as a matter of precaution, it has created a liability being the provision for entry tax on one hand and at the same time to nullify the effect of such a provision, it has also passed another entry on the assets side as advance against entry tax . However, the assessee never charged/collected any entry tax from the customers nor the same was claimed at any moment of time as an expenditure in the profit and loss account. If at a later point of time the court would upheld the validity of the entry tax, the liability will be debited to the profit and loss account. The Assessing Officer, however, referred to the provisions of section 43B and also to the ledger accounts of the provision for entry tax and of advance against entry tax for the assessment years 2008-09, 2009-10 and 2010-11. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer that the assessee though collected entry tax from the customers yet did not deposit the same. It only appears to misconception on the part of the Assessing Officer as regards the accounting treatment. The admitted facts available on record and apparent from the audited balance-sheet for this year as also in the earlier years are that on the liabilities side there is an account being the provision for entry tax and at the same time, on the assets side also there is an account named advance against entry tax of equal amount, which has been reproduced by the Assessing Officer at pages 4-6 at the assessment order. Thus, it is evidently clear that these are mere accounting entries, neither there was any collection from the customers nor has the assessee charged any expenditure to the profit and loss account, therefore, the provisions of section 43B could not have been invoked even remotely. There apart (alternatively) the correct amount of provision for entry tax this year was ₹ 20,56,504 only whereas the Assessing Officer made the disallowance of ₹ 40,03,853 for the reason that he has also considered the opening balance of ₹ 19,47,349. The consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the statute stipulates a mandatory allowance of depreciation even if not claimed, there is no such statutory provisions in respect of the claim of statutory liability which even though not claimed but would still be deemed to be allowed for tax purposes. We have also gone through the order of CIT v. Assam Roller Flour Mills [1997] 226 ITR 876 (Raj) and CIT v. Padmavati Raje Cotton Mills Ltd. [1993] 203 ITR 375 (Cal) which does not advance the case of the Revenue. In light of the above, there is no need to interfere with the finding of the learned Commissioner of Income-tax (Appeals) which is hereby confirmed. Hence, ground No. 1 of the Revenue's appeal is dismissed. 3. Regarding ground No. 2, the Revenue has challenged the deletion of the disallowance of remuneration to the partners of ₹ 43,33,245. 3.1 Briefly the facts are that the Assessing Officer noted that the assessee claimed deduction of ₹ 43,33,245 on account of remuneration to the partners. When asked as to why the assessee did not specify remuneration to the partners as per the copy of partnership deed, the assessee referred to clauses 6-9 of the partnership deed executed on December 9, 2012 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fulfilled in the present case. In view of these facts, the last paragraph of CBDT Circular No. 739, dated March 25, 1996, has also been wrongly applied by the Assessing Officer. It was further submitted that the partnership deed was executed on December 9, 2002, and the firm came into existence with effect from December 9, 2002, i.e., from the assessment year 2003-04 and since then, the assessee has been claiming remuneration based on this very partnership deed. In the past as and when such claim was made, was duly allowed by the Assessing Officer. Here also there appears no special reason as to why the Assessing Officer should have taken a contrary view or read the partnership deed, the way he does this year. In support, he relied upon the following case law : CIT v. Anil Hardware Store [2010] 323 ITR 368 (HP). Durga Dass Devki Nandan v. ITO [2012] 342 ITR 17 (HP). Asst. CIT v. Suman Construction [2009] 20 DTR (A. T.) 450 Ld. Mohd. Nizamuddin v. Asst. CIT [2014] 39 CCH 439 (Jaipur- Trib). CIT v. Supreme Builders [2008] 303 ITR 1 (P H). 3.3 The learned Departmental representative is heard who has relied on the order of the Assessing Officer. 3 ..... 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