TaxTMI 
TaxTMI 
2024 (6) TMI 1138
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....ents and service tax/ GST return: 1:1 The National Faceless Appeal Centre ["NFAC"]/ the Commissioner of Income-tax (Appeals) ["CIT (A)"] has erred in confirming the addition of Rs. 147,22,44,468/- being the alleged difference between the turnover/ receipts as per the ITR Form/ Financial Statements and the service tax/ GST returns even though the Assessing Officer has analysed and found the explanation provided by the Appellant satisfactory. 1:2 The Appellant submits that it has furnished detailed explanation including the reconciliation between the receipts as per the ITR Form/ Financial Statements and the service tax/ GST returns and hence considering the facts and circumstances of its case, no addition in respect thereof is called for and NFAC/ CIT(A) ought to have held as such. 1:3 The Appellant submits that the NFAC/ CIT(A) has passed the impugned Order merely on the basis of a selective reading of the statement of facts and has merely confirmed the position of the Assessing Officer without even realising that the facts of the case were misinterpreted/ misunderstood by the Assessing Officer. 1:4 The Appellant submits that the Assessing Office....
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....er be directed to grant full credit for tax deducted at source as claimed by it and to re-compute its tax liability accordingly. 4:0 Re.: Levy of interest u/s. 234A of the Act: 4:1 The NFAC/ CIT(A) has erred in confirming the stand taken by the Assessing Officer of levying interest u/s. / 234A of the Act. 4:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, no interest u/s. 234A is leviable as the Appellant has filed its return of income within the stipulated due date as prescribed under the Act and the Assessing Officer ought to have held as such. 4:3 The Appellant submits that the Assessing Officer be directed to delete the levy of interest u/s. 234A of the Act and to re-compute its tax liability accordingly. 5:0 Re.: Levy of interest u/s. 234C of the Act: 5:1 The NFAC/ CIT(A) has erred in confirming the stand taken by the Assessing Officer in levying excessive interest u/s. 234C of the Act. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, interest u/s. 234C of the Act ought to ....
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....; i. Out of pocket expenses subject to Service Tax/GST 49,79,37,371 ii. Invoice rendered in FY 17-18 but not paid by client till 31 March 2018 160,42,16,076 iii. Intra firm invoices 41,47,6 1,648 Total (B) 251,69,15,095 Less: Invoice issued in the earlier years but payment received during the FY 17-18 (115,96,1 1,402) Total (C) (115,96, 1 1,402) Total Output Supply as per GST and Service Tax (A+B-C) 1314,13,42,937 i. Out of pocket expenses subject to S Tax/ GST - Rs. 49,79,37,371 Many clients is required to reimburse expenses incurred by appellant in providing services e.g. travel expenses, hotel stay, etc. Since the expenses are reimbursable by the client, the expense so incurred are not debited to the profit and loss account. Further, when invoice rendered on client for out of pocket expense (OPE') is received, such receipt is credited to the such expense account. Thus, incurrence of expenses and recovery of the same has no impact on the profit and loss account of the appe....
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....the gross receipts in the reconciliation. 3.3. Considering the above submissions of the assessee, ld. Assessing Officer observed and accepted that the gross receipt/turn over from professional services is Rs. 1314,13,42,937/- only. He analysed the submissions and found it satisfactory. Accordingly, the difference initially computed by the ld. Assessing Officer of Rs. 2294,40,98,802/- was recomputed by him at an amount of Rs. 147,22,44,468/-. Before concluding to make this addition, ld. Assessing Officer noted that assessee firm has explained this difference. After noting that since the assessee has accepted this difference, he proceeded to make the addition to the total income of the assessee as income from business and profession. 3.4. The ld. Assessing Officer observed from the profit and loss account that an amount of Rs. 11,49,40,775/- has been reduced under the head 'Payments to retired persons' for which explanations were called for. Assessee furnished its details along with documentary evidences and stated that this amount diverted to retired partners and spouses of deceased partners (hereinafter referred as 'retired partners') is in accordance with clauses 11.7, 16.13....
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....he profession of the firm. Further, these payments made by the assessee to the retired partners has been included in the income of the respective retired partners, who have offered the same to tax in their return of income for the year under consideration. However, ld. Assessing Officer did not find favour with the submissions made by the assessee and concluded to disallow the payments so made to the retired partners. 3.8. While completing the assessment, TDS credit to the assessee was restricted to Rs. 64,22,11,577/- by ld. Assessing Officer resulting into a short credit of Rs. 18,62,08,841/-. 3.9. Aggrieved, assessee went in appeal before the ld. CIT(A). 4. On the first issue relating to difference between the professional receipts as per ITR and service tax return, ld. CIT(A) justified the addition made by the ld. Assessing Officer. On the second issue relating to addition for payments made to retired partners, ld. CIT(A) did not find favour with the assessee by observing that this expenditure has no direct nexus to its profession and therefore justified the addition made by the ld. Assessing Officer. On the third issue relating to short credit of TDS, ld. CIT(A) direct....
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.... purpose of service tax and GST, the gross receipts/turnover is based on invoices issued and not on the basis of fees collected. Considering all these facts on record supported by documentary evidences, we find the reconciliation furnished by the assessee is justified. Accordingly, the difference between the gross receipts/turnover as per the ITR and service tax added by the ld. Assessing Officer is deleted. Ground no.1 alongwith with its sub grounds are allowed. 7. Taking up second issue in respect of addition made for payments made to retired partners of Rs. 11,49,40,775/-, ld. Counsel for the assessee submitted that professional fees of the said amount was diverted by overriding title to the retired partners as per clause 11.7, 16.3 and 16.14 of the partnership deed, dated 01.04.2017. This amount was reduced from the gross receipts of the assessee for the year under consideration duly reflected in the profit and loss account in schedule 9 placed at page 209 of the paper book. "Schedule 9: Fees Professional fees 11,78,40,39,244 Less: Payments under clause 10 of the Partnership Deed 11,49,40,7 75 11,66,90,98,469" 7.1. Ld. Counsel re....
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....petitiveness on their own and not to join a new firm which is a threat to the existing firm as well as to settle the pending bills relating to income earned by them as a partner during their tenure in the assessee firm. On a specific query by the bench, Ld. Counsel for the assessee made a statement and gave the assurance that there is no change in the terms of the Partnership Deed in respect of payments to retired partners, in the case of the assessee. Ld. Counsel, by summarising various clauses of the partnership deed submitted the following: i. "Under the deed a partner who has served the firm for a qualifying period exceeding 20 years as defined in the deed, is entitled to certain payment for a specified period after the retirement. ii. such payment is in respect of amounts billed but not received & Work-in Progress as at the date of retirement having regard to the fact that the Partnership follows the cash system of accounting; in consideration of the Retiring Partner permitting the continuing Partners the use of the Firm name & to carry on the profession, along with the clientele and the attendant rights of the Firm and the contribution made by the surviving ....
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....ion made by Assessing Officer disallowing payment of Rs. 32,85,000/- made to 3partner/spouses of deceased partners, by holding that payment has been paid on account of overriding title on the profits and allowing claim of the Assessee?" 7.6. Hon'ble High Court gave its decision by referring to its own earlier decision in the case of CIT vs. C.C. Chokshi & Co. in ITA No.209 of 2008 and 193 of 2008, dated 25.07.2008 wherein the similar question raised by the Revenue was rejected. 8. Per contra, ld. CIT, DR submitted that payments made to retired partners cannot be regarded as diversion but is an application of income since it is made from the income of the firm. Ld. DR placed reliance on the orders of the authorities below. In the course of arguments, she placed reliance on the decision of Co-ordinate Bench of ITAT, Mumbai in the case of S.B. Billimoria & Co. Vs. ACIT [2010]125 ITD 122(Mum) to buttress her contention. 9. We have heard the rival contentions and given our thoughtful considerations on the submissions made before us. We have also perused the judicial precedents referred before us by both the parties and also the partnership deed and its relevant clauses. Fro....
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....ry to the ld. Counsel of the assessee in respect to the findings given in the case of Mulla & Mulla & Craigie Blunt & Caroe (Supra), ld. Counsel took the Bench through the decision and pointed out that Hon'ble' Court has dealt with the issue on identical set of facts by referring to the substantial questions of law. While answering the substantial questions of law, the Hon'ble Court noted that there was a legal obligation in terms of the deed of retirement to pay in a particular manner to the erstwhile partner in respect of realisation fees after their retirement. It was held to be an instance of the source of income being subject to an obligation. Thus, the outstanding fees paid to the retiring partners as per the terms of the deed of retirement were held not assessable as income of the firm. The Hon'ble Court by relying on the decision of Hon'ble Supreme Court in the case of Sital Das Thirath Das [1961] 41 ITR 367 (SC) noted that the true test for the application of the rule of diversion of income by overriding charge was whether the amount deducted in truth never reached the assessee as income. According to it, there is a difference between the amount which a per....
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....as per Para 20 of the said decision, whereas, in C.C.Chokshi & Co. case, it was not possible and there is no such enabling covenant which allows the remaining partners to carry on business without making payment to retired partners. These two clinching distinguishing features advances the case of the assessee. We find from the perusal of the partnership agreement of the assessee herein, the continuing partners cannot carry on business without making the payment to retired partners. Similarly there is no clause in the partnership agreement of the assessee Which enables the continuing partners to carry on the business with majority partners consent. Hence it could be safely concluded that the decision of S.B.Billimoria is factually distinguishable. We hold that the issue under dispute is now settled by the two decisions of Hon'ble Bombay High Court Supra and respectfully following the same, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed." 10.1. Thus, the reliance placed by the ld. DR on the case of S.B. Billimoria & Co. (Supra) is of no support to her. 11. In conclusion, the undisputed fa....