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TMI Blog2017 (6) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... m as investment in Nature View Restaurant. There is absolutely no case for making an addition in the case of the assessee firm in the instant case. Hence we have no hesitation in deleting the addition of ₹ 34,20,000/- made in the hands of the assessee. - Decided in favour of assessee. Disallowance of partners’ remuneration - addition u/s 40(b) - Held that:- It was held that the Circular No. 739 dated 25.3.1996 would be applicable where neither the amount has been quantified nor the limit of total remuneration has been specified in the deed, but the same has been left to be determined by the partners at the end of the accounting year. Only in such cases, the payment of remuneration cannot be allowed as deduction. It further held that when the manner of computation of remuneration is provided in the partnership deed and the same is in accordance with the provisions of section 40(b) then no disallowance of remuneration could be made. In the instant case, as stated supra, the partnership deed clearly mentions the manner of computation of remuneration. Hence respectfully following the ratio laid down in the said decision, we direct the ld AO to allow deduction towards partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed investment in the Nature View Hotel to the tune of ₹ 34,20,000/- ( 69,79,093 35,59,093) as amounts invested outside the books of the assessee firm. This addition was further corroborated with the disclosure made by the assessee at the time of survey to the tune of ₹ 25 lacs towards undisclosed investment in Nature View Hotel. 3.2. Before the ld CITA, it was pointed out that even in the assessment of partnership firm M/s Nature View Restaurant for the Asst Year 2008-09 completed u/s 143(3) of the Act, no such discrepancy was founded and no addition was made in this respect. The assessee submitted the audited balance sheet of assessee firm for the financial year 2007-08 relevant to Asst Year 2008-09. Similarly it filed the audited financial statements for the year ended 31.3.2008 of M/s Nature View Restaurant together with the copy of assessment order u/s 143(3) of the Act framed on Nature View Restaurant for Asst Year 2008-09. The ld CITA observed that assessee is partner in Nature View Restaurant alongwith others M/s Dutta Trading Co., Arun Kumar Datta, Subhal Chandra Datta. Arun Kumar Datta and Subhal Chandra Datta are partners in assessee firm and Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide pages 4 to 5 of Paper Book) ; Statement of Sri A Dutta in Survey (enclosed vide pages 6 to 7 of Paper Book) ; Statement of Sri S Dutta in Survey (enclosed vide pages 8 to 12 of Paper Book); Statement of Sri S Dutta in assessment proceedings (enclosed vide pages 13 to 16 of Paper Book) ; Documents received from ITO of Nature View Restaurant (enclosed vide pages 17 to 22 of Paper Book) ; Partnership Deed of A.S.A. Co (enclosed vide pages 23 to 28 of Paper Book) and Assessment Order u/s 143(3) of Nature View Restaurant for Asst Year 2008- 09 (enclosed vide pages 29 to 35 of Paper Book). For the sake of convenience, the relevant operative portion of disclosure statement (which is relied heavily by the revenue) is reproduced hereinbelow from statement of Sri A Dutta on 24.8.2007 taken during survey:- Q. You have already stated in the deposition under oath on 23.08.2007, that you have invested about ₹ 50 lakhs in Nature View Hotel. Do you accept this? A. Yes, I accept that I have disclosed ₹ 50 lakhs on 23.08.2007 and I on behalf of all the partners of M/s A.S.A. Co M/s Dutta Trading Co. are ready to pay the tax liability for this disclosure of ₹ 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from I.T.O. Ward -1(3) Hooghly that the firm ASA Company invested during the year ₹ 51,75,000/- . As per the Balance Sheet submitted by you the closing balance of Investment made in Nature View Hotel was ₹ 35,59,093/- only whereas the closing balance as per statement filed before the I.T.O. Wd. 1(3) the same is ₹ 69,79,093/-. What is the reason behind it? A. I am unable to reconcile or can throw any light on it. 3.4.3. From the aforesaid statements, what transpires is only the partners in their individual capacity had made the disclosure at the time of survey and thereafter. They have never said that the assessee firm had made investment of ₹ 25 lacs in Nature View Restaurant. Infact the partners had even mentioned the modus operandi of generation of undisclosed income of ₹ 50 lacs by stating that the same has been generated from ASA Co and Dutta Trading Co. businesses. There is no evidence to the fact as to how much was generated from ASA Co and from Dutta Trading Co. We find that the ld AO had made addition only on account of unexplained investment in Nature View Restaurant in the instant case. Hence we confine our opinion only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act,1961. It was also submitted that no addition on this account was made in the earlier years eventhough assessments were completed u/s 143(3) of the Act. The ld CITA without giving any findings in this regard simply upheld the disallowance made by the ld AO. Aggrieved, the assessee is in appeal before us on the following ground:- 3. For that the Ld. CIT(A)-XXXVI/Kol is erred in confirming the Assessing Officer s action in addition of ₹ 1,57,735/- paid as Partners Salary is complete contravention of the provisions of the Act and therefore is bad and illegal and such addition should not be made. 4.3. We have heard the ld AR. We find that the partnership deed contain the following clause on partners remuneration which is reproduced below for the sake of convenience:- Clause 9 . The working partners of the firm would be paid remuneration within the overall ceiling fixed u/s 40(b) of the Income Tax Act, 1961 including any statutory modification from time to time. The amount of remuneration to be paid to the working partners each year shall be Fixed with reference to the Book profits of the firm as defined in explanation 3 to section 40(b) of the said Act and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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