TaxTMI 
TaxTMI 
2010 (8) TMI 1003
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....- "1. The CIT (A) erred in confirming the order of the JCIT with reference to the addition made to your appellant's income on account of sundry creditors as on 31st March, 2003. 2. The CIT (A) erred in confirming the addition of ₹ 32,85,000 made by the JCIT on account of the income diverted to the retired partners under the partnership deed. 3. The CIT (A) erred in rejecting your appellants ground where a direction for granting credit for tax of ₹ 8,83,383/- deducted at source was sought by your appellants as and when the certificates are made available. 4. The CIT (A) erred in not adjudicating on the ground raised by your appellant on levy of interest under section 234C(1) of the I.T.Act." 5. Apropos Ground No.1, facts are that the Assessing Officer noted that the assessee was following cash system of accounting and yet it was showing certain amounts as its liabilities. He observed that in cash system of accounting, these expenses could be allowed only in the year of payment. The assessee pointed out that these items are typically in the nature of adjustments to the revenue accounts on the basis of timing or give and take. In the alternate, it was s....
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....rti Shama 22,500 i. Anubhabh Rastogi 20,328 j. SheetalMittal 10,422 k.Rajesh Surana 18,351 l. Sameer Wadhwa 32,836 m. Rohit Sachdev 12,055 n. Excel Marketing 1,855 44,697 Legal case. Paid/W.Back in F.Y.07-08 Salary cheques of Employees. Subsequently paid/W.back in F.Y. 03-04 and F.Y. 04-05 Paid/w.back in F.Y. 2003-04 3. Unpaid balance a. Ankit Agarwal 2,800 b. Rajesh Dua 18,578 c. Manish Gupta 11,735 d. Nikhil Kumar Jain 11,584 44,697 Salary cheques of employees. Subsequently paid in June, 2003 i.e. in F.Y.2003-04 4. Suspense 3,507 Travel Exp. Of Mr J.M Seth. Paid in F.Y. 03-04 5. Others a. NEA 129,450 b. NEA 15,000 c. Richard OP.Slater (DFIDstudy) 192,400 d. Market Links Field services(CII study) 5,526 e. Raman 1,480 f. Boopathy(Electrical worked at new premises) 7,026 350,882 Adjusted in Y. 03-04 against bills raised on NEA of .81,745 and balane of .62,705 adjusted against unbilled exp. Paidw/w.back in F.Y. 03-04, 05-06 Ld Counsel also filed a statement of addition on account of sundry creditors for the financial year 2002-03 as under: Sr.No. Particulars Opening balance as on 1.4.2002 Closing balance as on 31.3.2003 1. Unpa....
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....t on account of foreign exchange fluctuation had been neutralized by way of reversal of the entry on 1.4.2001 or not. In case if it is found so, the same should be allowed. As far as the other remaining amount of .2,40,070/- is concerned, the ld A.R. of the assessee has submitted that this amount was written back in the F.Yrs 2000-2001, 2001-02 and 2003-04. However, he has not substantiated by any documentary evidence. Accordingly, the AO is directed to verify the stand taken by the ld A.R,. of the assessee and decide this issue afresh as per law after providing adequate hearing to the assessee." As regards to stale cheques, no details have been furnished and, therefore, no interference is called for with the order of the CIT(A). Ground No.1 is partly allowed for statistical purposes. 8. Apropos Ground No.2, the Assessing Officer noticed the following note No.2 forming part of the accounts:- "Fees credited in the accounts are net of ₹ 32.85 lakhs being payment to retired partners by way of an overriding title on the fees collected by the Firm together with a charge thereon." The assessee had, inter alia, pointed out that the retired partners had an overridi....
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....e decision of the Hon'ble Supreme Court in the case of Prince Khandelrao Gaikwar v CIT, 16 ITR 294 at page 373, wherein, it was held as under:- "There is no distinction between a charge created by a decree of court and one created by agreement of parties, provided that by that charge the income from property can be said to be diverted so as to bring the matter within section 9(1)(iv) of the Act." Therefore, as per partnership deed, if some charge has been created then the same has to be discharged by the firm and to that extent, it cannot be said that income has reached the firm's hand. The deed dt.1.4.98 was necessitated on account of retirement of certain partners and agreement had been entered into in respect of uncollected bills etc, which reads as under:- "Clause-25 (i) Sub-clause (bb) of clause 25 shall be deleted and be substituted by the following: The widow or heirs, executors and administrators of an Active Partner who dies after being a Partner, for not less than five years shall have an overriding title on 4% of the gross fees collected by the Firm from the date of his death for payment to them over a period of five years as consideration fo....
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....dministrators would be paid the same amount as was payable to him pursuant to clause 24(2) for a period of 10 years from the date of his death or upto the time the partner would have attained the age of 62 years whichever is lesser. (iii) The following shall be added as sub-clause (cc) to clause 25. If at the date of his death he was a sleeping partner, there shall be payable to his widow or heirs, executors and administrators, in consideration of uncollected bills rendered for fees and unbilled work as at the date he became a sleeping partner, for the period from the date of his death to the end of the accounting year and in the subsequent year (if he should die in the first year after he becomes a sleeping partner) or from the date of his death to the end of the accounting year if he should die in the second year after becoming a sleeping partner, the same or balance of amounts that would have been payable to him in each of the years if he had not died. (iv) Sub-clause(d) shall be deleted and be substituted by the following: (i) If, at the date of his death, he was an active partner, there shall be payable until the expiration of 10 years only from the date of his death to his....
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....s also, under similar circumstances, it has been held that an overriding title has been created in favour of outgoing partners: 1) CIT v. Mulla and Mulla and Craigie, Blunt and Caroe, 190 ITR 198 (Bom) 2) CIT v. Nariman L. Bharucha and Sons, 130 ITR 863 (Bom). 3. CIT v. Sitaldas Tirathdas, 41 ITR 367 (SC). 4) CIT v. Crawfort Bayley and Co., 106 ITR 884 (Bom) 5) RSM and Co v. ACIT (ITA No.3269/M/07) In view of the above discussion, this ground is allowed. 13. Apropos Ground No.3, we are of the opinion that the AO while giving effect to this order will examine the assessee's claim regarding TDS and give credit in accordance with law. 14. Ground No.4 is consequential. The AO is directed accordingly. 15. In the result, appeal of the assessee is partly allowed for statistical purposes. ITA No.325/M/2007: Revenue's appeal 16. The only ground raised by the revenue is that the CIT (A) erred in deleting the addition of Rs..7,41,262/- made on account of difference between the book value and actual value of amount lying in EEFC account of the assessee as on 31.3.2003. 17. Facts in brief are that the AO noticed that the assessee had stated the following in Note 3 of the ac....