TaxTMI 
TaxTMI 
2019 (11) TMI 1174
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....oresaid amount. The solitary issue raised by the assessee is that the Ld. CIT (A) erred in confirming the disallowance of the expenditure of Rs. 5,66,925/- claimed against the business income received from the partnership firms. 2. The facts in brief are that the assessee in the present case is an individual and is a partner in 7 partnership firms. The assessee from such partnership firms is earning income by way of share of profit, remuneration and interest on the capital invested by him in the firms. The assessee during the assessment proceedings claimed that he has incurred an expense of Rs. 5,66,925/- against the income received from the partnership firm. As per the assessee, he has employed two persons, one is looking after managerial work and the other one is doing petty work in the capacity of the peon. Accordingly the assessee claimed that he is eligible for claiming the deduction of such expenses against the income received from the partnership firms. 2.1 However, the AO was of the view that such expenses as claimed by the assessee are incurred to meet his personal requirement. Therefore the same cannot be allowed as deduction against such income. Thus the AO disa....
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....under:- "With reference to this contention, it must be borne in mind that before the Income-tax Officer as also before the Appellate Assistant Commissioner and the Tribunal it was nowhere contended on behalf of the department that the burden of showing that the amount was expensed wholly and exclusively for the purpose of the business had not been discharged by the assessee. On the contrary, the order of the Tribunal goes to show that it has found as a fact that the amount actually represented the expenses incurred for the business of the firm". On verification of records, it is observed that the appellant has not made any submissions even before the A.O or before the undersigned as to how the expenses incurred by the appellant and claimed under the head 'profits and gains of business or profession' have been expended for earning business income. The appellant has completely failed in discharging the burden casts on his by the statute. 9. In order to verify the claim of the appellant whether it has received remuneration/salary from the partnership firm, the computation of income filed by the appellant was perused. On going through the computation ....
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....not. This also proves that these are nothing but the personal expenses of the appellant which have been debited in the books of account with the sole intention of reducing the income of the appellant from business and profession. 9.2 In view of the aforesaid discussion, it is held that there is no force in the argument of the appellant and therefore, the ground of appeal taken by the appellant is dismissed and the order of the A.O is confirmed. Being aggrieved by the order of the Ld.CIT (A) the assessee is in appeal before us. 4. The Ld. AR before us filed a paper book running from page 1 to 40 and submitted that the reasonable disallowance can be made for the expenses incurred by the assessee. 5. On the other hand the Ld. DR supported the order of the authorities below. 6. We have heard the rival contentions of both the parties and perused the materials available on record. In the instant case, the AO has disallowed the expenses claimed by the assessee against the income earned by him from the partnership firms on the ground that such expenses are personal in nature. The Ld.CIT (A) subsequently confirmed the view of the AO. 6.1 Indeed, the amount received b....
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....al owners of the assets of the partnership firm. Actually the firm name is only a compendious name given to the partnership for the sake of convenience. The assets of the partnership belong to and are owned by the partners of the firm. So long as the partnership continues, each partner is interested in all the assets of the partnership firm as each partner is owner of the assets to the extent of his share in the partnership. On dissolution of the partnership firm, accounts are settled amongst the partners and the assets of the partnership are distributed amongst the partners as per their respective shares in the partnership firm. From the above judgment it is clear that the partners are not separate from the partnership firms. Therefore the income of the partner from the firm is treated as business income. 6.6 Without prejudice to the above, we also note that the assessee can claim the expenses against the impugned income if it has been incurred to generate such income. For example, if the assessee has invested money in the partnership firm out of the borrowed fund, then the interest cost incurred by the assessee against interest income from the firm is eligible for deduction....
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....Hon'ble Gujarat High Court after taking the note of this finding of the tribunal has decided the issue in favour of the assessee. 7.4 However in the case on hand, there is no mention/plea from the side of the assessee that he has incurred the expenses on behalf of the firm. Therefore, we are of the view that the assessee cannot get the benefit of the Hon'ble Gujarat High Court judgment as discussed above. 7.5 We are also conscious to the fact that the assessee has claimed the deduction against such income in the earlier years as evident from the income tax returns available on record. But the question arises whether the principle of consistency will be applied in the given facts and circumstances as held by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT reported in 60 Taxman 248 wherein it was held as under: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one w....