AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1299
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.... considering the factual aspect of the case that the expenses to the tune of Rs. 542644/- has been claimed as deduction against income chargeable to tax under the "income from business and profession". 3. The Learned Assessing Officer as well as Learned CIT (Appeals) has erred in appreciating the fact that claim of deduction of Rs. 542644/- has not been claimed in the hands of the partnership firms therefore the question of double deduction does not rise." 3. The facts of the case in brief are that the assessee is an individual and is regularly assessed to tax. The assessee filed his return of income on 17.03.2017 declaring total income at Rs. 18,27,070/-. The case was selected for scrutiny through CASS and statutory notice under section 143(2) of the Act was issued on 18.09.2017 and duly served upon the assessee. Subsequently, the notices under section 142(1) of the Act were issued on various dates and duly served upon the assessee through e-filing portal in response to which the assessee has submitted his replies. The Assessing Officer has duly considered the replies by the Assessing Officer. The assessee is a partner in two firms namely, M/s Shivam Alums & Chemicals ....
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....e name of partnership firm. In response to this, the assessee could not substantiate the claim with supporting evidences as required by Assessing Officer. As there was no cogent response from the assessee, Assessing Officer made disallowance of expenses claimed out of interest on capital and salary received from the partnership firm. Before the Ld. CIT(A), the assessee claimed that the expenses are not personal or capital in nature and were incurred only for the purpose of the business activities. To support his claim before the Ld. CIT(A), the assessee relied on various decisions viz. (i) CIT vs. Smt. Jiviben, 69 ITR 219 (Guj. HC), (ii) CIT vs. Ramniklal Kothari, 74 ITR 57 (SC), (iii) CIT vs K. G. Sadgopan, 5 CTR 342 (Mad. HC), (iv) Aman Tandon vs. ACIT, (2019 ITL 9164 (Del - Trib.), (v) Virendra K. Mehta vs. ACIT, 106 ITD 437 (Mum - Trib.). During the appellate proceedings, the Assessing Officer was asked to submit Remand Report which was submitted on 03.03.2023. In the Remand Report, the Assessing Officer stated that the assessee has not only received the interest on capital and remuneration from the partnership firm but also received share of profit which were exempted under se....
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....ng used for the purpose of business. The genuineness of the expenses was not disputed by the Assessing Officer. The Assessing Officer has disallowed the expenses only on the ground that the same is inadmissible in view of the provisions of section 37(1) of the Act. The observation of the Ld. CIT(A) about evidence of expenditure would tantamount to alter the nature of expenses which was not permissible. The Ld. AR of the assessee submitted that the payment was not disputed but the legality of the claim was disputed. It was the mutual agreement between the partners that no partner shall claim deduction of car and its related expenses in the partnership firm. Therefore, the claim of car has not been made by any of the partners in any of the financial years. He submits that it cannot be said that there was a double deduction i.e. one by the partnership firm and the other by the assessee. The financial statement of both the partnership firm proves the fact beyond any doubt and therefore, the addition deserved to be deleted in the interest of justice. The Ld. AR of the assessee also submitted that it is common that the partners of the partnership firm would use cars for the purpose of bu....
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.... submitted that the assessee was earning profit from the firm which was exempted under section 10(2A) of the Act. 10. We have heard both the parties and perused the material available on record. We have also deliberated on the decisions relied on by the parties. The limited issue is whether the expenses claimed by the assessee towards interest on car loan, depreciation on the car, fuel expenses and salary of the driver of the car can be allowed as deduction from the remuneration and interest received by the assessee as partner of the firm. It is seen that assessee has received Rs. 48,94,014/- and Rs. 1,14,328/- as share profit from M/s. Shivam Alums & Chemicals and M/s. Rang Surgen Chemicals respectively. These shares profits were claimed as exempt income u/s 10(2A) of the Act. He has also received remuneration and interest on capital totalling to Rs. 27,81,952/- from the firm. From the above income, he has claimed car expenses of Rs. 3,07,700/- and depreciation of Rs. 2,34,944/- u/s 32(1) of the Act. The provisions relating to income chargeable under the head "profits and gains of business or profession" have been provided under section 28 of the Act. The general provisions of ....