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TMI Blog2021 (7) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... y the maximum permissible amount of partners remuneration. 4. In any case and without prejudice to above, the appellant maintains paper books of accounts as required under Rule 6 of the Income Tax Rides, 1962, hence, there was absolutely no justification to interfere in disallowance of the remuneration of the partners. 5. Because even the part disallowances of remuneration under the impugned head was not called for under any of the provisions of Income Tax Act. when the assessing officer himself recognized the status of the two lady partners (i) Smt. Meera Gupta and (ii) Smt. Sita Gupta as "active partners" of the appellant firm. 6. Because the authorities below were not justified in mis-interpreting the statement of the lady partners and draw an adverse inference regarding their statements as recorded by the AO. 7. Because the Ld. CIT(A) was not justified in confirming the disallowance to the extent of 20% (Rs. 13,890/-) of total expenses claimed at Rs. 42,892/-. Whereas the appellant was never asked to produce any vouchers before the AO. 8. Because the disallowances are too high and excessive and deserves to be reduced suitably. 9. Because the order appealed agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that once there is provision for payment of remuneration to the partners in the partnership deed and the amount of remuneration is within the limit prescribed u/s 40(b) (v) of the I. T. Act the Assessing Officer is not justified in re-working the remuneration of the partners and making disallowance. Hence, the Ld. AR has submitted that the issue is covered by judgment of Hon'ble Jurisdictional High Court. 6. On the other hand, Ld. DR has submitted that in the statement of partners recorded by Assessing Officer, she admitted the receipt of remuneration @ of Rs. 5,000/- per month and not Rs. 10,000/- as claimed by assessee. Therefore, the Assessing Officer allowed the remuneration to the extent of actual amount received by partners of the assessee firm. He has relied upon the orders of the authorities below. 7. I have considered the rival submissions as well as relevant material on record. The assessee has claimed payment of remuneration to its partners namely Smt. Suneeta Gupta and Smt. Meera Gupta @ Rs. 10,000/- per month each. The said amount of remuneration @ Rs. 10,000/- per month is duly credited in the capital account of the partners and the Assessing Officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of remuneration to the working partners and the quantum of such remuneration was agreed to be in accordance with the provisions of Section 40(b)(v). The remuneration paid by the assessee firm to its working partners for the year under consideration amounting to Rs. 3931165/- was within the ceiling prescribed in the provisions of Section 40(b) and it is not the case of the department that the said remuneration was in excess of such ceiling. The only contention raised by the learned DR before us has been that the remuneration paid by the asssssee firm to its working partners aggregating to Rs. 3931165/- was highly excessive and unreasonable having regard to all the facts of the case as highlighted by the AO and such excessive portion of the said remuneration worked out by the AO at Rs. 2731965/- was rightly disallowed by him invoking the provisions of Section 40A(2). In this regard, the learned counsel for :he assessee has cited before us the decision of Ahmedabad Bench of ITAT in the case of Chhajed Steel Corporation Vs. AClT-77 ITD 419 wherein it was held that the provisions of Section 40(b) and 40A(2) operate in different fields and the provisions of Section 40A have no app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration which can be allowed to its partner as deduction while computing the business income. It is not in dispute that the remuneration paid 1o the working partners was within the provision of clause (v) of sub-section (b) of Section 40 of the Act. The Parliament in Us wisdom had fixed a limit on allowing the remuneration to the working partners and if the remuneration are within the ceiling limit provided then recourse to provision of Section 40A(2)(a) of the Act cannot be taken. The assessing officer is only required to see as to whether the partners are the working partners mentioned in the partnership deed, the terms and conditions of tie partnership deed provide for payment of remuneration to the working partners and whether the remuneration provided is within the limits prescribed under Section 40(b)(v) or not. If all the aforementioned conditions are fulfilled then he cannot disallow any part of the remuneration on the ground that it is excessive. Since in the present case, all the conditions required has been fulfilled the question of disallowance does not arise. In tile present case, we find that the Tribunal has found all the three conditions are fulfilled and we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dismissing the appellants grounds on the issue of jurisdiction. 2. Because the appellant's ground that the authorities below could not travel beyond the "reasons recorded" was illegally and unjustifiably dismissed without considering the legal aspects as has been brought by the appellant in the course of hearing of Appeal. 3. Because the Id. CIT(A) unjustifiably disallowed part of the remuneration of the appellant's partner Smt. Meera Gupta and Smt. Sita Gupta without invoking the provisions of section 40(b) of the Income Tax Act, 1961 which specify the maximum permissible amount of partners remuneration. 4. In any case and without prejudice to above, the appellant maintains proper books of accounts as required under Rule 6 of the Income Tax Rules, 1962, hence, there was absolutely no justification to interfere in disallowance of the remuneration of the partners. 5. Because even the part disallowances of remuneration under the impugned head was not called for under any of the provisions of Income Tax Act when the assessing officer himself recognized the status of the two lady partners (i) Smt. Meera Gupta and (ii) Smt. Sita Gupta as "active partners" of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be regarded as expenditure incurred wholly and exclusively for the purpose of the business assessee. Even otherwise, the assessee has not produced any supporting vouchers to prove that the expenditure was incurred for the purpose of the business of the assessee. The CIT(A) has considered this issue for the A.Y. 2012-13 as under.:- "I have gone through the facts and the order of AO and submissions made by appellant. AO disallowed these advertisement expenses because there is no clause mentioned in the agreement made between Reliance Media Works Ltd. with regard to such nature of expenditure. The firm has no relation with that of running of film. No proof in support of his contention regarding that expenditure has been furnished during the course of assessment proceedings. Appellant has not been able to give any evidence in support of its contention, hence this addition made by AO is confirmed." 18. Thus, an identical addition was confirmed by the CIT(A) for and A.Y.2012-13 the assessee has not challenged the said decision for the A.Y.2012-13. Even otherwise, once the assessee has let out the theatre to Reliance Media Works Ltd then the claim of the assessee cannot be accepted b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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