2016 (6) TMI 372 - AT - Income Tax

ITAT Appeal Outcome: AMC & Printing Expenses Allowed, Electricity Expenses Disallowed, Partner Remuneration Upheld

The ITAT partly allowed the appeal by deleting additions for AMC charges and printing expenses due to compliance with relevant provisions. However, the ... TDS u/s 194C - payment of AMC charges - Held that:- It is undisputed fact that the assessee had paid the whole amount of ₹ 75,000/- during the year under consideration but as claimed by the AR that it is below the prescribed limit but the year under consideration, the limit was ₹ 50,000/- U/s 194C of the Act. The case law cited by the assessee is squarely applicable, therefore, additions confirmed by the ld CIT(A) under both the heads is deleted. - Decided in favour of assessee Disallowance of electricity expenses - Held that:- The assessee has not been able to establish that these expenses were incurred wholly or exclusively for the business purposes, therefore, we uphold the order of the ld CIT(A) on this ground - Decided against assessee Disallowance of remuneration paid to the partner U/s 40(b) - Held that:- CBDT cannot issue a circular which goes against the provisions of IT Act by applying this circular No. 739 dated 25/3/1996, both the authorities had not allowed the remuneration computed on the basis of Section 40(b)(v) of the Act but it is fact that the assessee had quantified remuneration on the basis of partnership when CIT have coterminous power with A.O. and the assessee has submitted modified partnership before him and Hon’ble Himachal Pradesh High Court decision on this issue in the case of Durga Dass Devki Nandan Vs. ITO (2011 (3) TMI 20 - HIMACHAL PRADESH HIGH COURT) was relied upon by the AR of the assessee, which is squarely applicable on the facts of the case. He was not justified to confirm the addition on account of remuneration of partner. The documents produced by the assessee before the Assessing Officer did not have any room to drawing presumption and reaching conclusion that such a document was produced was not genuine. Therefore, amended partnership deed cannot be doubted by the ld CIT(A) in the case of assessee. By following the decision of Hon’ble Jurisdictional High Court on this issue, we have considered view that the assessee is rightly entitled for deduction of remuneration paid to the partners. Accordingly, we reverse the order of the ld CIT(A) on this ground - Decided in favour of assessee Issues:1. Disallowance of AMC charges2. Disallowance of printing expenses3. Disallowance of electricity expenses4. Disallowance of remuneration paid to partnersIssue 1: Disallowance of AMC chargesThe Assessing Officer (AO) disallowed the payment of AMC charges of Rs. 70,000 as no TDS was deducted and necessary details were not furnished. The CIT(A) confirmed the disallowance under Sec. 40(a)(ia). The appellant argued that the payment was below the prescribed limit and cited relevant case law. The ITAT held that the payment was within the limit specified under Sec. 194C, thus deleting the addition.Issue 2: Disallowance of printing expensesThe AO disallowed printing expenses of Rs. 79,000 under Sec. 40(a)(ia) due to non-deduction of TDS. The CIT(A) upheld the disallowance. The appellant argued based on case law and subsequent court decisions. The ITAT found the disallowance unjustified as the payment was below the prescribed limit, deleting the addition.Issue 3: Disallowance of electricity expensesThe AO disallowed electricity expenses of Rs. 5,556 as it was for a residential connection. The CIT(A) concurred, stating it was not incurred exclusively for business. The appellant argued that the residence was used for business purposes. The ITAT upheld the CIT(A)'s decision, finding no evidence to support the expenses being solely for business.Issue 4: Disallowance of remuneration paid to partnersThe AO disallowed remuneration of Rs. 26,40,000 to partners, citing lack of quantification in the partnership deed. The CIT(A) confirmed the disallowance, considering the amendment an afterthought. The appellant submitted a modified partnership deed clarifying remuneration. The ITAT, relying on relevant case law, allowed the deduction, stating the remuneration was computed as per Sec. 40(b)(v) and the amended deed was genuine.In conclusion, the ITAT partly allowed the appeal, deleting the additions related to AMC charges and printing expenses, but upholding the disallowance of electricity expenses. The ITAT reversed the disallowance of remuneration paid to partners, emphasizing the genuineness of the modified partnership deed and compliance with relevant provisions.