Appellate Tribunal affirms CIT(A) decision on partner's remuneration & service tax, emphasizing compliance.

The Appellate Tribunal upheld the CIT(A)'s decision to delete additions of remuneration to a working partner and service tax amount, emphasizing the legitimacy of the partner's remuneration and compliance with Service Tax Rules. The Revenue's appeal was dismissed, confirming the CIT(A)'s order.

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Issues:
1. Addition of remuneration to working partner.
2. Addition of service tax amount.

Analysis:

Issue 1: Addition of remuneration to working partner
The appellant, Revenue, challenged the deletion of an addition of Rs.24,00,000 claimed to have been paid as remuneration to a working partner. The AO disallowed this amount citing that the partner was engaged in competitive businesses without consent. The AO's contention was that the partner should have obtained a no objection paper from the other partner as per the partnership deed. However, the CIT(A) deleted the addition after verifying documents proving the partner's involvement and consent from the other partner. The CIT(A) found that the partner had indeed worked as a managing partner and attended to the firm's work, thus justifying the deletion of the addition.

Issue 2: Addition of service tax amount
The Revenue also contested the deletion of an addition of service tax amounting to Rs.1,42,62,100. The AO disallowed this amount as he believed the reimbursement of service tax by the assessee was not valid in law. However, the CIT(A) found a valid contract between the appellant and the company from which the service tax was deducted. The CIT(A) noted that the appellant credited the entire gross commission and debited the service tax in its books, following the Service Tax Rules. The CIT(A) directed the AO to delete the addition as no discrepancies were found. The Revenue's appeal was dismissed as the partnership deed, Service Tax rules, and relevant accounts supported the CIT(A)'s decision.

In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision to delete both additions, emphasizing the legitimacy of the partner's remuneration and the compliance with Service Tax Rules regarding the service tax amount. The Revenue's appeal was dismissed, confirming the CIT(A)'s order.

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