TaxTMI 
TaxTMI 
2015 (3) TMI 1135
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....the Assessing Officer without considering the facts of assessee's case appreciating the submissions made/case laws sited. 2. The assessee is a partnership firm engaged in the business of manufacturing and trading of textile goods in the export market. During the course of assessment proceedings, the Assessing Officer noted that the assessee received substantial dividend income which was exempt from tax and accordingly asked the assessee to explain as to why the disallowance u/s 14A of the Income Tax Act should not be made. The assessee contended before the Assessing Officer that no expenditure has been incurred by the assessee for earning the dividend income. The Assessing Officer made the disallowance u/s 14A r.w. Rule 8D on account of in....
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....on, therefore, the salary paid to the partner is part of the profit of the firm taxable as such. Thus the Ld. Authorized Representative has submitted that the interest on the capital account of partnership cannot be treated as an expenditure incurred for earning the dividend income for the purpose of section 14A of the Act. 6. On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that the assessee used the capital employed by the partners for earning the dividend income in question and, therefore, the cost of capital contributed by the partners is an expenditure attributable for earning the income which is exempt from tax, consequently, the interest on capital of the partner is liable to be disallowed ....
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..... The Assessing Officer has made a disallowance of Rs. 49,31,888/- on account of foreign commission payment u/s 40(a)(i) of the Income Tax Act for want of TDS. On appeal, the CIT(A) has deleted the said the disallowance by taking note of the fact that as per CBDT circular no. 786 of 7.02.2000, the assessee was not required to make the deduction of tax at source. However, the said circular was withdrawn w.e.f 12.10.2009. The withdrawal of the circular is not retrospective, therefore, for the year under consideration, the assessee was not required to deduct the tax before the circular was withdrawn. The findings of CIT(A)on this issue are relevant in para 3.4 and 3.5 of the impugned order as under:- "3.4 The AO in para 6.15 of the assessment....
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....for AY. 1998- 99 in which it is held as under:- "Accordingly we hold that issuance of circular NO.7 of 2009 withdrawing the circular NO.23 of 1969 No. 163 of 1975 and 786 of 2000 will be operative only from 22.10.2009 and not prior to that date". Thus the withdrawal of earlier circular w. e.f 22.10.2009 has no bearing in A. Y. 1998-99." 3.5 In view of the categorical findings given by the Hon.ble ITAT Mumbai 'L' Bench in the aforesaid decision coupled with the fact that no tax was deductible in the case of the appellant I direct the AO to delete the addition of Rs. 49,31,888/-. This ground of appeal is allowed" 10. Thus it is clear that the CIT(A) has deleted the disallowance by following the decision of this Tribunal in the cas....
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....s well. lt is axiomatic that a Circular in operation through the assessment year 1998*99 cannot be held to be in operational simply by reason of the filet that it has been withdrawn in the year 2009. The withdrawal of such Circulars will be effective only after the said date of 22nd October. 2009 by which these Circulars have been withdrawn 'with immediate effect. Accordingly we bold that issuance of Circular no.7 of 2009 withdrawing the Circular no.23 of 1969. 163 of 1975 and 786 of 2000 will be operative only from 22.10.2009 and not prior to that date. Thus the withdrawal of earlier Circular with effect from 22.10.2009 has no bearing in assessment year 1998-99." 6. We are reminded of the Full Bench judgment of the Hon'ble Kerala ....